Motley Fool Money - Disney's Divorce and Snap's Slump

Episode Date: August 11, 2017

Walt Disney is breaking up with Netflix. Priceline loses altitude. Snap plummets. And Blue Apron delivers bad news. Plus, amusement park industry analyst Martin Lewison talks theme parks and must-ride rollercoasters. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. But you can give them to the best money. From Fool Global Headquarters, this is Motley Fool Money Radio show. I'm Chris Hill, joining me in studio this week. From Million Dollar portfolio, Jason Moser and Matt Argosinger, and from Total Income, Ron Gross. Good to see you, as always, gentlemen. Hey, hey, hey. We've got the latest headlines from Wall Street. We will dig into the business of amusement parks, and as always, we're giving an inside look at the stocks on our radar. But we start with the Magic Kingdom this week. Walt Disney's third quarter results were overshadowed by the announcement of two new streaming service.

services that Disney will launch. One early next year for ESPN and the other involves pulling the company's movies from Netflix in 2019. Maddie, both Disney and Netflix shares down this week. The two companies are in active discussions to keep Marvel and Star Wars films in the Netflix universe. So some of this is very much in flux. But this was kind of a big move by Disney. This was a big move. I think all of us probably had a sense that this was inevitable to a certain degree. Disney has been for decades a creator of wonderful content, but outside its theme parks, it's mostly relied on others to distribute that content. And I think Bob Eiger, as a very smart CEO knows, the viewer behavior has changed. We are in the internet TV age, linear TV,

even with sports, is changing. I think the surprising thing to me was the timing. Because making this very public, that you're booting Netflix off in 2019, that you're buying a majority stake in Bamtech, that you're making this big move now, The Netflix contract was already set to sort of expire at the end of 2018. So it's just, I think this is Byger making this public. And I'm wondering if it's the fact that he sees the accelerating decline in ESPN and the network. And he knows, I've got two years left in my contract. This is what I'm going to be doing for the next two years.

I'm going to set this company up, at least I think, to be in the digital internet TV age. And let's be bold and aggressive about it for the next two years. And Jason, 5% of this decision may have been Bob Eager saying, you know what? I'm really sick of going on the quarterly conference call and having the first 10 questions be about ESPN and court cutting. Sure. I mean, I think those questions are all very fairly warranted. I mean, I think at the end of the day, this is a move that is about taking control of

your own destiny. I mean, Disney could very well just sit back and let Netflix continue to license that content in perpetuity. Right? I mean, they could do that and probably earn a handsome sum of money year in and year out doing it. But I think Iger is very clever. to recognize that this is not just sort of a short-term event. I mean, this is a long-term trend, the internet streaming sort of age, so to speak. And so it is taking one of their

biggest strengths in that IP and just a vast amount of it, and really developing an offering for not only consumers of this generation, but for many generations to come. I think the tough part for them is going to be nailing the tech side, the experience side, because, yeah, getting that BAM tech backbone is important. But let's say, not forget, really, Netflix brought this space to where it is today because they developed such a good experience. We've seen Amazon kind of copy that experience. I think that's why they're doing well. So Disney's going to have to really nail the experience side of this. I think it's an interesting lesson for investors, because for years, one of the most

exciting things about owning Disney stock was ESPN. And then it turned into the linchpin of owning the stock, and that became the problem. And so it's interesting, and that's why you've got to keep an eye on your companies and understand how companies make money. and what drives earnings and what drives stock prices. This is an attempt to stem that tide and to stop the bleeding, let's call it, of ESPN. I'm not sure it actually gets it done from what I'm hearing that the ESPN streaming offer will be. I think we have to wait to see what the pricing is and what the actual content that they will offer, what they will have. But it is the first step in trying to right-size that business.

Well, and I think, Maddie, that goes to your point about how far in advance of these things being rolled out that Iger announced this. And oh, by the way, the theme parks division up 12% year over year. Just completely lost in all of this. But let's not talk about that. Right. And Disney has so many moving parts to it. And all those parts are doing just fine. And even the network's business. Okay, it was down 5% year over year. This is not a business that's imploding. But I think the fact that they're getting ahead of it, and I think Ron's point is a good one. It's unclear right now if these rollout of these apps is

really going to replace, to a large degree, the amount of revenue and especially operating profits they get from their network's business. It's going to take some time and a lot of investment. Let's move on to online travel. Priceline and TripAdvisor, both reporting strong second quarter profits this week. Ron, price line stock taking a hit, though. It took a hit, but it's a really strong report. If you were, if this was a private company, if you were the owner of 100% of this company, you'd be awfully happy with the performance here, with revenue up 18 percent and net income up 20 percent. You'd be thrilled, but that's not how it works in the public markets game. It's all

about expectations as we like to talk about. And guidance going forward was just a bit too weak for investors, and they decided to sell off the stock. And that's what happens when you get a company that's trading at 40 times, 50 times earnings. The growth expectations have to move into the future, into the future years. Otherwise, investors say, well, now it's no longer worth it. So gross bookings guidance was weak. Hotel room nights. booking was weak, and that led to net income guidance being weak. And people said, well, okay, I'm out here. But in a vacuum, forgetting about the stock for a second, I think the company put up a really solid quarter.

And over the past year, price line shares up 30 percent, even with the drop this week. Not the same story, Jason, with TripAdvisor. That stock has really taken a hit over the last year. And it was interesting because immediately after the report, TripAdvisor shares were down as well. I think it took Wall Street a couple hours to figure out that things might actually be a little brighter for TripAdvisor once they really dug into their latest report. Yeah, I mean, this to me was the most interesting earnings reaction of earning season so far, because right after the report hit, just after the market closed, I mean, the stock was up like 8, 8.5%.

The following day, the bottom fell out. It was down 8.5%. But by the end of trading that day, the stock finished up 2.5%. And it's had another wonderful Friday. So really finished the week on a bright note. And I think that makes a lot of sense, because when I initially looked at this release when it came out, everything actually looked really good. I mean, all of the engagement numbers lead us to believe that this is a platform that continues

to become more engaging, not less. And really, that's the crux of why you would invest in TripAdvisor to begin with. It is a platform that offers a lot of value for travelers. And so I think perhaps there was some cautious guidance here for the rest of the year, but that wasn't a secret. They got that out there last quarter as well. The move to mobile, it's going well, but it doesn't monetize quite as well. So I think there's going to be a little bit more time before we see that sort of trickle down on the bottom line.

But again, I mean, this is a good business. And if you look at the non-hotel segment that focuses on attractions, restaurants, and vacation rentals, that was up 31 percent for the quarter. So to me, that represents a tremendous opportunity for Trip Advisor, because I think that's really where this platform offers the most value. Speaking as a user, the non-hotel segment is just a really great part of that platform. So plenty to be optimistic about. It's going to take them a little while to kind of get through this instant booking blunder, I think, so to speak, but still a bright future, I think, for this company. Interesting to see the company took advantage of the relatively weak stock to buy back

$100 million worth of stock during the quarter to complete their whole repurchase program of $250 million. We'll see if that ends up being a good capital allocation decision, but I think perhaps it might. They finished that authorization in, I think, record time, which was impressive. I think CEO, Steve Koffer, realized that, yeah, the stock has been the subject of a lot of pessimism lately. And, yeah, I hope that does prove to be a good use of those dollars. Rough week for general retail, Macy's, Coles, and Nordstrom falling 5 to 10 percent this week after their latest reports. But that pales in comparison to J.C. Penny, whose stock fell 30 percent.

Where do you want to start with this, Rob? It's across the board pretty bad, right? JCPenney is actually worse than the rest, largely because of liquidating inventory of stores that were closing. And why investors and analysts didn't anticipate that happening is beyond May that it wasn't a secret. And that hits margins when you start liquidating inventory. So numbers were bad, but in my mind, not necessarily worse than one should have expected. But again, overall, retail continues to be a very tough industry. All of these companies except Nordstrom's reported negative same store sales, that's not good for a retailer. That's one of the metrics you need to see going the other way. And the fact that Nordstrom is the only company that can do it is tough. A lot of these companies focusing on the more discounted segments of their brands. Nordstrom rack, for example, Macy's has a new backstage concept that they're going to be focusing on. That's where they see the consumer going. That's how they think they can compete with Amazon.

and other online entities. And, of course, they need to be their digital channel as well. From an investing perspective, I have to say at some point, there's going to be some opportunities here within this space. But I'm starting to see some arguments that I don't like. One of those is that a lot of these companies own great real estate or have long-term leases that are very compelling. And I have to say, as soon as you start making arguments like that, I think you're going in the wrong direction, only because the trends are not there. So you can say that this real estate's worth something today. But if customer traffic trends continue downward, and a lot of these, companies, Macy's in particular, Dillards, aren't still attached to malls where we know we're seeing

less traffic. And so that real estate asset values not probably as valuable as a lot of investors. Mattie, I think they call that the Sears thesis and that has not worked out so well. The Eddie Lampert approach. Yeah. And I think, you know, with JCPenney, they have really been throwing so many things at the wall here, trying to see if anything sticks. A lot of investment here recently in selling appliances, it doesn't look like that investment's really paying off. So I think Ron said it probably a couple of years ago. Does the world really need JCPenney? It appears Ron that no, it does not.

I feel a little bit bad for Nordstrom just because they had a good quarter. And in this environment, the fact that Nordstrom's same store sales were 2% higher than Wall Street analysts were expecting, that's a huge beat in this environment. Huge beat. Online sales growth of 20% for Nordstrom's.com. 27% growth in their Nordstromrack.com and their hotluck, if I'm pronouncing that right. The numbers do look pretty strong. They're just, I think, getting wrapped up in kind of this general retail and malaise. You're definitely pronouncing that, right?

Thank you. Coming up, a reminder that some public companies probably should have just stayed in the private markets. Stay right here. This is Motley Fool Money. Welcome back to Motley Full Money, Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Wayfair's second quarter loss was small. smaller than expected and revenue grew nearly 50% from a year ago. This is what we've seen for a bunch of quarters now, Jason. Why did the stock take a hit?

I think it had a nice run into this year. And so the market, I think it makes sense to pullback a little bit, just because this is still a growth company that is yet to be profitable. But I think the story with Wayfair is still pretty simple. I mean, it's a matter of how much slack the market's going to give these guys as they continue to grow. And it does seem all in all, they are going to continue to get that slack. When you look at the metrics, it seems that all of them really are pointing in the right direction. I mean, there are more users buying more things. They're making more money. And it seems like the big metric that we always focus on the percentage of orders from repeat customers, that grew from 57.6% a year ago

to 61.3% in this most recent quarter, that means that they are not having to pay so much to acquire new customers as when you get those repeat customers. They take. to reward you with more business later on as the business grows. And so gross margin held steady, another encouraging sign, because gross margin also incorporates all of the shipping and fulfillment expenses that Wayfair has to pay. And we know those are very expensive. They offer the $49 free shipping for orders of $49 or more. So they are really keying on the things that customers care about the most.

It's a good business. I think we've always kind of wondered how long the market will tolerate the story. It seems that they're going to give it a little bit longer because those metrics continue to show that businesses is doing the right things. Blue Apron has been a public company for six weeks, and every one of them has been bad. The meal kit delivery service issued its first quarterly report and said, among other things, the blue apron will be cutting a quarter of its workforce. That wasn't the only bad number in that report, but I mean, this is such a train wreck, man.

It is. And speaking of bad numbers, you know it's bad when the price of your stock is lower than the cost of one of your meals? I got to get Bloomberg credit for that one. I read that. The big deal here, though, is that they lost customers last quarter. And I'm stunned by that. The number of customers was down 9% from the previous quarter. And that's despite them, you know, spending tens of millions of dollars on marketing now, and especially all the cash they got from the IPO to do that.

Revenue was up 18% in the quarter year-over-year, but SG&A expenses, most of which was in advertising, of 49% year-over-year, yet they lost customers. I have to say, it's going to be a very, very tough road for them, and you almost wonder why they went public. Well, and to your point about the spending on marketing, I mean, one of the things they said in this report was they're going to be cutting back on marketing even further, which begs the question, Ron, where are they going to get new customers? They will not be getting new customers.

I think that's the problem. I think you've got two things going on here. You've got a business model problem, which, quite frankly, you don't really want to be an owner of a stock that has a business model problem. And exacerbating the mess is that they're a business model problem. actually had an operational problem with a new facility they're trying to open. So they're getting hit on both sides. Their overall business is struggling. And now they have extra costs because they can't get their act together on their operational side.

It's a storm of badness. Yeah. I mean, you're burning cash. And Wall Street hates that. But the same time you have to spend that cash to bring in customers, and they're not. So I just, this is a downward spiral. A year from now, is Blue Apron a standalone public company? I'd have to, you know, I don't have to.

I don't think they'll go bankrupt within a year. So whether they could take them private by someone who just wants to take a risk, maybe, but I don't think so. Snap's second quarter results were weaker by pretty much every measure. And when it came time for the conference call, SNAP's management, Jason, didn't exactly help things. Nope. Speaking of business model problems, Ron, I think we have one here with SNAP as well. I think if you're a SNAP investor, then you're going to want to pack a lunch, because this is going to be a while. Can you come hoping? Yeah. I think we're hoping. We're hoping, at least going to this quarter, that perhaps management would have learned from their first call last quarter of how to maybe communicate a little bit better with investors.

And really, the cadence of this call was such that it just sounded like they couldn't get out of there fast enough. So, I mean, user growth is slowing down. This is not going to be a platform for the masses. I think we all knew that. That's okay. You can still exist as a business. The problem is, though, they're not really very good at articulating what they want to be. I mean, we know Snapchat the app, but Snap the company is supposed to be a camera company. And, well, I mean, that could very well be fine and dandy, but typically hardware, cameras, those are kind of a race to the bottom. And so, it just, Evan Spiegel is notorious for wanting to play his cards close to his vest. And I think that's fine.

But if he wants to do that, there's going to be a tradeoff and it's going to be reflected in the stock price until they can actually demonstrate some resilience and show us there is a light at the end of the tunnel, because this is going to be a business that will not hit profitability for a long time to come. And, I mean, listen, man, it was the first, I know this is the first earnings call I ever heard dancing hot dog, okay? And I mean, that really kind of set the tone for the entire thing, because he used it like right in the first three minutes of the call. So this is a new little video emoji? Yeah, what a filter that they have or something. And so this little dancing hot dog just took

the world by storm, apparently. But I don't know that you really monetized dancing hot dogs unless you're having your ass on the outside of the box, Jason. I mean, it's not to say they can't be a successful business. They certainly can. But I think you can make the argument that they went public too early. You definitely make the argument that is not a shareholder-friendly company with the share class. And you could definitely make the argument that management at this point is clearly in over their heads. So, it's going to be a long time here before I think we really see meaningful opportunity for SNAP. But hopefully next quarter, they take some lessons and improve.

After seeing SNAP, you see Blue Apron. And I wonder if you're a company like Airbnb or Uber even at this point, or Lyft, where you have this enormous private market valuation, do you want to go public at all? Especially if private venture capitalists and private investors are willing to give you tens of millions, hundreds of millions of dollars in cash to run the business? Why go public? I mean, I think it's worth noting. Evan Spiegel was given the opportunity at a major bonus to take the company public. So there was obviously a self-serving dynamic there.

I can't necessarily say I blame him. I mean, it was something like $800 million. But again, I think these guys went public probably before they should have, because there's not really any clear sense as to what this business is or what it wants to be. Or you can almost say they went public too late with a lot of these companies, too. I mean, if Snap was five years ago when it had 50 million users, I'd say, it could have been a situation where it was still growing, but now it's at this point where it's not growing. I'm sure there will be better days, but even today's valuation with that sell-off, this

stock is still just looks way too optimistic. All right, Jason Moser, Matt Argusinger, Ryan Gross, guys. We'll see you a little bit later in the show. Buckle up. We're heading for the amusement park industry. Stay right here. This is Motley Full Money. All right, before we talk amusement parks, I've got to say thanks to our friends at Rocket Mortgage by Quicken Loans. Chances are you're confident when it comes to your work, your hobbies, your life. Unlike me, you may actually be confident when you're stepping onto a roller coaster. But Rocket Mortgage gives you that same level of confidence when it comes to buying a home or refinancing your existing home loan. Rocket Mortgage is simple. It allows you to fully understand all the details so you can be confident you're getting the right mortgage for you.

To get started, go to rocketmortgage.com slash fool. Equal housing lender licensed in all 50 states, NMLS Consumer Access.org, number 3030. Let's take your car and do Amusement Park USA. Welcome back to Motley Fool Money. I'm Chris Hill. Summer may be winding down, but business at amusement parks is still going strong. More than 2 million jobs in the United States are tied to the amusement park industry. and here to dig in a little deeper is Martin Lewis, and he is a business professor at Farmingdale State College in New York and an industry expert, and he joins me now. Martin, thanks for being here.

It's my pleasure. Thanks for the invitation. We talked about the Walt Disney Company earlier in the show. Their theme parks are going strong, up 12% over the past year. Disney aside, is this a good time to be in the amusement park business? I think so. It's certainly not a bad time to be in the amusement park business. music park in the music park business all of the big regional chains cedar fair six flags and of course uh disney's most direct competitor um comcast uh the universal parks uh are all showing positive results um they're all growing in attendance um they're all uh everybody's ebita is up um and earnings are up

uh the only exception to that rule is um is SeaWorld, which seems just not to be able to catch a break. Yeah, I think SeaWorld, I think we've talked about this on the show before. If you sort of draw a stark chart and you start with the point in time when the documentary Blackfish hit theaters, it's been pretty much downhill since then. In terms of the other ones that you mentioned, Cedar Fair, obviously Universal, Six Flags, Do they all have the type of pricing power that Disney seems to have at its theme parks as well? Well, there are really two strategic groups here.

The destination parks like Disney and Universal, and then the regional parks like Six Flags, Cedar Fair, and to some extent, SeaWorld. In fact, SeaWorld is probably transitioning from one of those premier chains to a regional chain. So I think the answer is yes for universal. Because of the aggressive investment in very popular IP like Harry Potter, they're able to really, they've had a lot of pricing power, and they've essentially matched Disney, certainly in the Orlando market. The introduction of the Hogwarts Express train going back and forth between Islands of Adventure and Universal Studios Orlando, that was genius because they essentially are forcing most people to buy a two-park admission ticket in order to experience that train ride. And that's a premium price, that ticket.

Some of their tickets are actually at a higher price point than Disney. if you, you know, if you take that two-part ticket, which many people are buying, it's actually at a higher price point than the top-tier priced Magic Kingdom, you know, peak ticket. This is not as true for the Cedar Fair and Six Flags parks. You know, their markets are far more regional, and you see a lot of variants in the park ticket price as you go across the country. In fact, I'll admit that, I try to buy my Six Flags season pass when I'm at Six Flags Mexico,

because that's the – it's only about 40 bucks for the whole season, and you can use it anywhere. So they have regional pricing at those parks. Plus, they also are pretty aggressive selling financing terms, so you don't have to shell out the full price for a season pass these days. you can actually get a monthly plan and string your season pass price out, which makes it affordable in terms of cash flow for families. But they're much more sensitive to the local economies in those regions, whereas Disney and Universal, the fact that their demand is so inelastic, and they can keep raising prices. And it seems to not ever backfire on them.

It's true that there's been some slowdown in the attendance growth, as you might expect, with these huge price increases that they've introduced, especially when they introduced the tiered pricing model, where prices are different for walk-up tickets depending on the time of the year. Video games and virtual reality, those are both growing in popularity. To what extent are they? being incorporated in not just Disney and sort of Universal, but even these regional parks. And to what extent are video games and VR competing with the amusement park industry? Well, certainly many of the regional parks, actually to a greater extent than Disney and Universal,

have been introducing the virtual reality goggles on a number of rides, roller coasters, and other, drop towers and so forth. And I kind of poop-pood the trend as a fad when it was first introduced, but it's obviously working, and it's profitable for the parks because it's a lot cheaper to add VR goggles to an existing roller coaster than it is to build a new roller coaster. So it's been a cost-effective model to be able to introduce a quote-unquote new attraction in a particular season. And the truth is it's working because the public likes it. It's actually a lot of fun. I finally got a chance to ride one, you know, ride a roller coaster with VR goggles. The second part of your question is interesting. The theme park industry has to compete with any other form of leisure.

So even though they're indirect competitors, the local six flags is also competing with the local bowling alley because most people have a limited part of their budget that they can spend on entertainment and leisure. And many families are going to make, you know, hard considerations before they decide where to spend that leisure dollar. So your Nintendo at home is certainly a competitor against going out to the theme park. You've ridden over 1,600 different roller coasters. So I want to focus on roller coasters for just a second here. Sure. What are a couple that everyone should ride?

That's a great question. There are so many amazing roller coasters out there these days. and the technology keeps getting better and parks are willing to dump a lot of money into building amazing rides. So one ride that I don't think should be ever should be missed is Phoenix. Phoenix is a wooden roller coaster at Knobles Resort, which is this tiny little park in Elysburg, Pennsylvania,

in the middle of coal country. And lots of people haven't heard of Knobils, but if you're a theme park enthusiast, you know Knobos. They have an amazing collection of rides. There's actually free parking and free entry into the park. You know, you buy tickets to ride the rides, just like the old days. And Phoenix is one of those just old-timey wooden roller coasters.

It's an airtime machine. I mean, ejector airtime. I've never had more fun in my life. It's amazing. Let me just stop here. right there for a second because call me old-fashioned, but I'm someone who likes to air on the side of safety. So when you tell me that the roller coaster is made of wood, that's not doing much to boost my confidence. Like wood, like, oh, that material that NASA uses for space shuttles?

If you're really old-fashioned, then you like your roller coasters made of wood. Of course, the first roller coasters from Coney Island you know back at the turn of the last century were wooden roller coasters and steel roller coasters didn't really come around until the 1950s

when in the early 1960s you know I think the Matterhorn at Disneyland in Anaheim that was the first tubular steel roller coaster of course now there are many many more steel roller coasters than there are wooden coasters I tend to be kind of old-fashioned and a purist, so I love wooden roller coasters. And many of the,

many of the designed features that made a wooden roller coaster safe in the 1920s are the same features used today. In fact, if anything, they've improved on the design. So I love a good wooden roller coaster. They're generally not as big as steel roller coasters. Some people, you know, There aren't many wooden roller coasters that can invert, you know, take you upside down. But they're starting to stretch that technology also. So I think if you love roller coasters, then you've got to love wooden roller coasters. So roller coasters aside, what is an amusement park ride that you think is underrated and one that you think is overrated? I think a rated ride, steel roller coaster at SeaWorld in San Antonio, Texas.

And it's very old-fashioned. It's an old-fashioned. The design is basically the layout is out and back. You know, it goes down a big hill out, and then it comes back over some smaller hills. And I just love that ride. It doesn't get a lot of love from the roller coaster community. It was built by a company called Morgan. and it's just a ton of fun. I love that feeling of being thrown out of my seat,

and it's one of those rides that I think is unrecognized by the larger community, but I love it. Now, let's see, overrated, boy, one hates to cast shade on anyone, but... Come on, they can all be great. Fair enough. One thing about theme park rides is that, that the experience is entirely subjective.

You may ride on a roller coaster next to the person, and, you know, next to somebody who's sitting in the same seat with you, and one of them gets off and says, that was terrible, and the other person gets off and says, let's ride that again. So I can say from my point of view that I am not a big fan of flat rides. So basically all of those rides that spin you around from carousels to tilt a whirls to those crazy rides where you look at it and you just can't figure out what direction the bodies are going. I'm not a big fan of flat rides.

I don't love going upside down and I don't love being spun around in circles. So that's just not my cup of tea. but some people love that stuff. And there are some amazing rides out there. And when I find one that's very unique, I'm happy to go on one. I do love a classic carousel. In fact, the carousel at Knobles is amazing. It's one of the few left in the United States where you actually have to grab the ring.

As it's going around, they have a ring dispenser. And, you know, that carousel goes pretty fast, and you've got to get your finger inside the ring and pull it down. And, of course, whoever gets the brass ring gets a free ride. Last question, then I'll let you go. As I mentioned, you've ridden over 1,600 roller coasters without being too graphic because this is a family show. What's your track record in terms of your stomach? Basically, I'm asking, have you ever lost it? Great question.

I think the last time was, I think I was about nine years old. Oh, wow. I've made it about 40 years without losing it. Not that I haven't had my moments of discomfort, but, you know, the dramamine non-drowsy formula, it actually works wonders. Great tips from an industry expert, Martin Lewis, and thanks so much for being here. It's my pleasure. Coming up next, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Full Money, Chris Hill here in studio. Once again with Jason Moser, Matt Argusinger, and Ron Gross. Our email address is Radio at Fool.com from Rod Nixon in Albuquerque, New Mexico. I discovered your show earlier this year and really enjoy your discussions on the topics you cover. Specifically, you've covered several industries that all shows. show positive trends heading into the future. Among them are driverless cars, augmented

and virtual reality, the war on cash, renewable energy, and healthcare. All of these industries have strong tailwinds, but if you could only invest in one of these areas, which would it be and why? Ron Gross? This is tough for me because I am admittedly not great at looking into the future and thinking about stocks that really may not even exist yet and looking at trends. So, I would I'd have to say I'll probably pick the most boring of the ones on the list and go for war on cash. Why? Because I think I can more readily see that.

I have no idea where renewable energy is going or how to place a bet there or driverless cars, for that matter. Jason? See, I don't think that's boring. I say war on cash, too. But for me, it's because I think it's so plain to see sort of what all comes of that, right? I mean, we're sort of going through that now as we shop as consumers. So, I mean, we talked about this, I think, a couple of weeks ago.

a lot of different businesses out there that will win. This is clearly something that is happening. But to Ron's point, the other ones are happening. It's very difficult to see how they're going to get there and who ultimately is going to win right now. Maddie? Yeah, without picking winners and losers, I just think if I'm betting on two trends, I'd say war on cash, I agree, and I'd say renewable energy. I think those are the two that are inevitable. With war on cash, it's all about customer behavior. With renewable energy, it's just because costs have come down so much. They're going to continue to come

down, and there's going to be, that's a trend that's going to win. All right, let's get to the stocks on our radar this week. We'll bring in our man, Steve Broido from the other side of the glass to hit you with a question. Ron, Gross, you're up first. What are you looking at? I am going to go back to Rollins, R-O-L, which is a pest and termite control company. Most people probably know some of their brands. Orkin, Western. They're really rolling up the industry, making many, many acquisitions of smaller companies. Really impressive, steady performer has increased revenue in earnings for 45 consecutive quarters. More than 80% of sales are recurring. They've raised their dividend every year for the past 15%.

years. Return on equity is greater than 30%. Really, really strong company. The stock isn't dirt cheap, but it's a very, you know, you're paying a little bit of a premium for a solid company. Forty five straight quarters? Not too shabby, huh? Steve? Ron, have you ever hired a pest company? And for what? If so? We actually have an annual contract. We had it with Western. Then Western was purchased by Rollins. And I think now somehow we've switched to Orkin, which is also owned by Rollins. What's going on at your house, Ron? You got to keep things tidy. You know, my wife's realtor. She's always thinking about, you know, keep...

Are you talking raccoons? What are we got? No, I just lit a little vermin's. Jason Moser, what are you looking at this week? Yeah, more along the lines of the retail discussion, taking a look at Home Depot, Tigger is HD. Earnings hit next Tuesday. And we have this on the watch list in MDP. And given the state of retail today, it seems like you're either doing well or you are planning your own funeral. And certainly Home Depot isn't a former. They reiterated sales guidance for the year in last quarter's call, actually boosted earnings guidance a little bit on some

cost efficiencies there. And the neat thing is, like, weather doesn't really come into play for these guys. If it's raining, that's okay. They've got what you need. If it's snowing, hey, they've got what you need. And if it's sunny, get out in the garden and plant some azaleas. Just a lot of different ways for Home Depot to perform well, and it has their growing earnings at an annualized pace of 20 percent over the last five years, which would explain the multiple, but this is a very good business. Steve Brodo? If you were betting on their HDX sub-brand, which is sort of their branded products, so they

have their own brand of Home Depot stuff. You can buy scrub brush. You can buy that. Would you double down there, or would you steer clear if you're Home Depot? I don't know that I would double down on it, but I do think they see that as another opportunity to bring a perhaps better price point to their customers. We see Amazon doing the same thing with Amazon Basics. So all in all, I applaud that move.

Well, and we've seen that forever with Costco and Kirkland. and how they offer the Kirkland brand, but they're not going to let it get too big. Exactly. And it's quality stuff, though. Matt Argusinger? I am short. Frontier Communications, take your FTR, and I think everyone should be. It's a regional wireline, let me repeat that, wireline phone company that actually makes most of its money from DSL, which is rapidly becoming obsolete.

They lost $900 million of the last 12 months. They have $18 billion in debt. The Better Business Bureau has given FTR a customer service rating of F. They just did a 51 reverse split. Never a good sign. And I gave the coming less than two years before they're bankrupt. So short FTR. 50 to one reverse stock flow? Sorry, 15 to one. I'm probably missed it. That's still not good. Steve, Rodo, question about frontier? Is there any way they could regain your trust in law? No. Frontier communications, Home Depot, Rollins, three pretty interesting choices there, Steve. You want to go rogue and add a short to your watch list?

No, I would go Home Depot because I think you're a lot. absolutely right. I've said this before, but I've never gone there without spending over $100. You just walk in and just cash just flies out of your wallet. It's impossible. You just need stuff, and it's there. Did Ron's stock pick kind of freak you out a little bit? I'm not going to his house for dinner. All right, Ryan Gross, Jason Moser, Matt Argusinger. Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Pool Money. Our engineer is Steve Broido. Our producer is Matt Greo. I'm Chris Hill. Thanks for listening. We'll see you next week.