Motley Fool Money - Is Bigger Better for Disney?

Episode Date: March 22, 2019

  Disney completes the Fox deal. Levi’s makes a successful return to the public markets. Biogen suffers a big setback. And Nike slips on earnings. Analysts Emily Flippen, Jim Mueller, and Jason Moser discuss those stories and dig into news from CVS Health and Papa John’s. Plus, Lakehouse Capital Chief Investment Officer Joe Magyer talks about Google’s new game and shares some Australian stock ideas. Get $50 off your first job post at www.LinkedIn.com/Fool.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone, I'm Charlie Cox. Join us on Disney Plus as we talk with the cast and crew of Marvel Television's Daredevil Born Again. What haven't you gotten to do as Daredevil? Being the Avengers. Charlie and Vincent came to play. I get emotional when I think about it. One of the great finalies of any episode we've ever done. We are going to play Truth or Daredevil.

What? Oh, boy. Fantastic. You guys go hard. Man. Daredevil Born Again official podcast Tuesdays, and stream Season 2 of Marvel Television's Daredevil Born Again on Disney Plus. Thanks to LinkedIn for supporting this week's Motley Fool Money.

LinkedIn Jobs makes it easy to get matched with quality candidates who make the most sense for your role. Post a job today on LinkedIn.com slash Fool and get $50 off your first job post. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Full Money Radio Show. I'm Chris Hill, joining me in studio. This week, Senior analyst Jason Moser, Emily Flippen, and Jim Mueller. Good to see you, folks.

As always, we've got the latest headlines from Wall Street. We will dip into the full mailbag, and as always, we'll give an inside look at the stocks on our radar. But we begin with a big deal, finally closing. This week, Disney finalized the $71 billion deal buying the television and film assets held by 21st Century Fox. In addition to owning The Simpsons, the X-Men franchise, and a whole lot more intellectual property. Disney also now has the controlling stake in Hulu Jim. I should also point out that the ink was barely dry when the layoffs began. Yeah. Disney CEO, Bob Eiger, sent out a memo trying to set this up in a nice way, and then the layoffs began. But Disney had said before the deal closed that they're looking

for about $2 billion in savings. And the only way that, an efficient way to do that is to do that by shutting studios and laying off people. So they got several studios in the deal. They got 20th Century Fox, which made the Martian and Avatar really big properties. They got Fox Searchlight, which made the shape of water. And I think that won an award recently. Is that right?

Oh, yeah. That won some awards. And the super movie, Super Troopers. And then they also got Fox 2000, which made Devil Wears Prada and Hidden Figures, that awesome movie. So they decided they're going to keep the first two, 20th Century Fox in Searchlight, and they're closing off Fox 2000. They'll finish the production of the movies currently in production and release them and then say goodbye. Jason, it does seem like

Iger is very much sticking to the plan that we've talked about before that, look, let's get a lot of intellectual property so that eventually when the Disney streaming service is available, they've got even more in the pipeline. Yeah, I mean, I think you really hit on something there now that they have the content, and we've seen the distribution of all of this content. really evolve, particularly over the last decade, really, as over the top as has taken over. I think fewer people are really interested in going to the movies if you're going to be able to deliver that stuff to their home. You're seeing Netflix really take advantage of that.

I suspect Disney will do so as well. But, I mean, they're going to have a lot of different ways to win with ESPN Plus, Disney Plus, Hulu. I mean, I think you have this landscape or the standard services. I mean, Netflix, I think, is always going to be a given. I think Amazon is probably there by virtue of public. Prime. But then you have those hybrids like Hulu and YouTube Live. And it's going to be interesting to see how all of those other legacy properties like CBS and NBC fit their way into that landscape. Because I can't help to think that maybe they're better off figuring out ways to partner

with those hybrids like Hulu and YouTube as opposed to going it on their own. But we shall see. I think you're right there, Jason. There's a lot of these streaming companies around and more coming. I mean, Disney Plus, of course, and that should do all right, but you've got also NBC, CBS, HBO, they're doing their own thing. Apple is doing its bundling thing. It's getting very overwhelming. Exactly. And that's my point. How soon our consumer is going to reach saturation? Oh, I have to sign up for yet another service. I'm going to get that.

And so the producers, the studios might actually come out and say, hey, we're going to do, instead of trying to launch our own streaming service, we're just going to sell the content. And I think Fox 2000 is going to survive just fine, doing that kind of thing. And I think you're right, because really, it's the size of the audience that matters the most. And we've seen a couple of situations where Netflix, for example, has one bidding rights to content, not by offering up the highest bid, but by the fact that they have really the largest audience. So there's a lot to be said for that. I know we're focused on the streaming here, and that seems like the most obvious needle mover. But doesn't it also stand to reason that with this additional intellectual process,

property, it should also flow through to other parts of the Disney Empire. And I'm thinking about consumer products and more things in the parks. Oh, sure. Yeah. Disney's a past master at monetizing IP like that, whether it's in the parks or t-shirts and pillowcases or what have you. I suspect we'll have another report sooner or later from our very own Matt Greer on Disney Cruise where they've incorporated some of this latest IP. Mac, I insist that you follow up with that, please.

The latest hot IPO on Wall Street comes from a company that started in the 1850s. On Thursday, Levi Strauss went public and shares rose more than 30 percent. Emily, I expect this kind of enthusiasm when it's a young tech startup. This is, and I'm not knocking them here, this is a jeans company. Wait, Levi isn't a young tech startup? Well, that's news to investors. I mean, this has a huge market valuation. $9 billion is what it's valued at right now.

That's virtually entirely from US operations. I mean, international sales of Levi's are relatively small and they haven't even penetrated some important markets. So to justify that sort of valuation, I mean, it's going to take a lot from them in the future. But this is not their first rodeo. There's a lot of excitement here. You know, for me, where I have a hard time just wrapping my head around this company and this

IPO is how anybody feels comfortable investing in and giving a valuation of $9 billion to a company that's run by a man who has not washed his jeans in 10 years. That's crazy. Yeah, we were talking about this during the production meeting. I was unfamiliar with this whole idea that genes are a product that don't have to be washed. Hey, it's news to me. Well, so beyond that, it strikes me. I'm starting to draw the parallel here. This makes me think of those mattress companies, right?

I mean, you buy a pair of jeans and the idea is they're probably going to last for a pretty long time, right? How many times are you going out there and buying new jeans? I don't know. I mean, I've kind of been wearing the same ones for a while now. That's a little secret. Well, as long as you're washing them. Well, yeah. Okay. And I admittedly do wash them. But, I mean, I feel like you buy jeans about as often as you buy mattresses. And I don't know if that makes for necessarily the best business model. Shares of Biogen fell more than 30 percent this week after the company ended the trial for an Alzheimer's drug that it was developing. Biogen's been around since the 1970s, Jim. This is still a $43 billion company, but this was a gut punch, not just for shareholders,

but for the patients and families who are dealing with Alzheimer's and were hoping for some type of treatment. It's bad news all around. I mean, investors got hurt when they saw the dollar signs. $10 to $12 billion of expected annual revenue if this drug came through. And they failed to keep the risks in mind. Because science, to put it truthfully, and as a former scientist myself, science is hard, especially when you're dealing with a disease such as Alzheimer's, where the cause of it is not quite really known yet.

And the drug, I know I'm going to mess this up, a dukanamab. You notice I didn't even attempt to say the name of the drug. No, you left that for me. It's going after one potential cause, the amyloid plaques, and it's the latest in several drugs that have been halted that do not show the efficacy that has needed. Pfizer and Johnson Johnson stopped trials on their drug a while back, AstraZeneca, Eli Lilly, just a couple of years ago.

They stopped. And so this might turn out to be a, failure, but a good kind of failure in the sense that science needs failures in order to learn what doesn't work so that they can figure out what does work. And if amyloid plaques are not the way to treat Alzheimer's, then drunk companies will hopefully rotate to something else. Biogen does have three drugs working on another potential issue with Alzheimer's, the tau protein. And so So those might do better. We'll just have to wait and see. Normally, when we see a stock drop this much in a single week, it's natural to ask, well, is this

a buying opportunity? Do you think that's the case with Biogen or do you want to see what their next move is? I would want to see what their next move is or wait for it to drop further, I think. Shares of Nike falling a bit this week after third quarter profits came in higher than expected with revenue up 7 percent compared to a year ago. Jason, help me out. I mean, this is a you were talking about, this is a good quarter. Maybe I missed it, but I didn't hear CEO Mark Parker giving any kind of big warning in the guidance. So why the sell-off? No, I think the headlines about slowing growth here are a bit misleading. If you go through

the release and that call, I mean, the only thing that's really playing in form of headwinds are currency effects. So to your point, I mean, this was a good quarter. I think they've laid out pretty good guidance for the coming 2020 fiscal year as well. I mean, listen, we were talking about this over the last year, year and a half. Every quarter, North America was just brutal. Sales were falling. Then they kind of got back to flat. Then all of a sudden, you know, growing 1% was just the picture of perfect success. I mean, they grew North American sales 7% this past quarter, which was really impressive, particularly when you consider that we were talking about that silly Zion Williamson incident. And speaking of basketball, Chris,

I mean, let's just take a minute here to just doff the cat there to my Wofford Terrier. Now, they're an Adidas crew, and let's be clear here, Adidas's head wins notwithstanding. That would make probably a better situation for Nike anyway. But congratulations, Woff, for getting out there and taking it to Seton Hall this past evening. I was thrilled to see that. Now, back to Nike. I do think this is honestly a bit misleading as an analyst that covers the stock. This is a wonderful business.

They continue to do all of the right things. Like I said, laid out good guidance for 2020. Gross margin is up again on some pricing power there. They're repurchasing shares, bringing that share account down. Currency effects are just part and parcel of being a global business. A reminder for those who are forgotten, and I have to admit from time to time, I forget this myself, that Nike owns Converse. They do.

And one of the things I read was that Converse sales this quarter really weren't all that great. I never thought of Converse as being a significant point. part of the Nike business. Is it really enough where if Converse has a bad quarter, then that's going to really have a ripple effect for the overall company? It's not. I mean, the Nike brand itself is really the powerhouse. If you see weakness in Converse, they can sit there and play out that headline that Vans is taking share from Converse and Nike's in trouble. I mean, let's see the forest for the trees here and really recognize this is a company with a lot of power in the brands that it owns. And again, I did

mention, I mean, Adidas is running into some North American headwind, some supply chain issues. Under Armour, we know, is still trying to kind of get their house in order as well. This all puts Nike in a very good position for the upcoming year. As an investor, I'd be very encouraged. Normally, we're not big fans of celebrities joining boards of directors, but in this one case, we're going to make an exception. Details coming up. Stay right here.

You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Mozer, Emily Flippen, and Jim Mueller. Reports this week that CBS Health has started selling cannabis-based products in eight states. These are topical products like lotions and sprays. They're being sold in Alabama, California, Colorado, Illinois, Indiana, Kentucky, Maryland, and Tennessee. Emily, you're one of the advisors on the Motley Fool's Marijuana Investing Service. Is this a good move by CVS Health?

Undoubtedly, a good move by CVS Health. And this is going to mean great things for those 10 states that have access to these products now through their local CVS's. And it brings much-needed legitimacy, I think, to the CBD market in general. So, I think it means great things, not just for CVS, not just for Cureleaf, who is the brand of CBD products they will be stocking, but for any producer of CBD, honestly. What's really exciting is the fact that CVS is testing this, and that means that if there is success in these 10 markets, I think it's likely that we see this continue to expand.

Currently, you can only sell CBD in these types of forms, and it's a pretty new thing. CBD comes from the marijuana plant. And up until December last year, the passage of the hemp bill, it was actually illegal because it was part of that same plant. So, CBD does not get you high like THC does. But it does, to the people who use it, many say that it provides some medicinal benefits. So those statements obviously need to be inquired upon. But for the time being, it's an exciting move in the industry.

But it's really important not to forget just how over- overweight this sector is in general. There's a lot of companies flying high on really high valuations. Kira Leaf, the brand that CVS is stocking. I mean, just for reference, we talked about Levi with a $9 billion valuation. Kira Leaf, on the other hand, has a $5 billion valuation on sales of $77 million versus $5.5 billion for Levi's. So just to give you a perspective about how high that stock is valued, I mean, there's a lot of really strong expectations built into these companies. This is a step in the right direction, but it's a small step.

Our email address is Radio at Fool.com. Question from Nate Smith at Virginia Tech class of 2020. Nate writes, last August, I started investing. I began by reading the Motley Fool Investment Guidebook by Tom and David Gardner. I've seen a 17% gain in value from my picks in the first seven months. Well done, sir. My investment strategy has been based on industry. and companies, I understand solid financials, future markets, and my timeline goals that I have for the stocks that I buy. The one aspect that I'm not familiar with is what to look for in the company's management. Any advice you could give me would be helpful. Thanks for your time

and the amazing investment advice I've gained from The Motley Fool. Let's just go around the table real quick. Jason, you're up first. How do you like to evaluate management? Yeah, that's a little bit more squishy, right? A little bit more subjective. But there are good ways to do it. He mentioned a key word in reading. I think that you look to the things that management is writing, and this time of year is a great one, because a lot of the businesses that we really like, Markell, Amazon, Boston, Omaha, Berkshire, Hathaway, they're putting out their letters to shareholders. Go read those letter to shareholders.

The neat thing is they have a library that dates all the way back to when they started them, which means there are a lot of letters to shareholders read out there. But they give you an idea of management's narrative, the things that they're saying they want to do. Then you can hold them to their actions. I think that's one easy way to do it. Jim? I would agree with the, you read the annual letters because you do get a sense of how management talks. And while you're doing so and while you're going through the management and discussion part of the 10K, the annual report, pay attention to how they handle adversity. Do they blame the weather or do they blame something else?

Or do they say, yeah, we messed up and we're going to fix this. Emily? Everyone's so focused on reading. The thing that I like to do the most is listen. I mean, look, annual letters, they're great. I agree. They're important for getting an idea about how management views the business. But they spend a lot of time planning those out and spending time thinking about how they say certain things. So, whenever I like to look at management, I like to actually physically listen to their earnings calls. You know, granted, the first statements are pre-prepared, but the way that they handle questions is interesting. You can tell

when management is passionate and excited about the business based off the way that they talk. So, for me, I mean, the first step is just feeling like I'm getting to know them as a management team, as people, and that involves physically listening to their earnings calls to me. Shares of Papa John's have fallen 40 percent in the past two years, but the stock move higher on Friday when the company announced its newest member of the board of directors Shaquille O'Neal. The seven-foot NBA Hall of Famer is also investing in some Papa Johns franchise locations and has signed on to be a brand ambassador. Jason, I think this This is brilliant. We were talking about it this morning. I agree. I'm calling it. The

worst is over for Papa Johns. This is officially a comeback story now, and they are coming back. One of the cool things about this deal, and I'll tell you this, the stock component to his compensation. He's going to make something like $8.5 million off this, but half of that is coming from stock that he'll get in the company over the next three years. So Shaq himself is telling you that Papa Johns is a strong buy. Are you going to go against what Shaq is telling you? I don't think so. I mean, they don't have a pizza problem, Jim. They have a brand problem, and this helps solve it. I can't help think of what else Shaquille O'Neal has been doing advertising for. Most recently I'm seeing on TV a lot is the general insurance. And those are kind of cheesy,

and the insurance is for those who really, really need insurance and can't get it elsewhere. So maybe, maybe not. But does that tie into the Papadjohn story of needing help? All I know is nobody beat Shaq. And this is, I mean, great things, I think, for their international locations. They don't really see, I guess, maybe the general commercials Jim's talking about. But they do know Shaq. So I'm going to be looking at the international sales. I would imagine some people at Dominoes are having a bad day today, probably scrambling.

Who can compete with Shaq? Now, I'm going to leave you with this. And Shaquille O'Neal said it himself, the Shaq brand is all about fun. Now, I mean, fun, pizza, they go hand in hand. Look for good things from this partnership. All right, well, guys, we'll see you later in the show. Up next, we're talking investing in Australia and more with our friend Joe Mager. Stay right here.

This is Motley Fullmother. I need the dollar, dollar, that's what I need. Dollar, dollar, that's what I need. Hey, before we get to Uncle Joe Mager, quick word about LinkedIn. When it's time to make a hire for your small business, naturally, you want to find the best person for the job. Odds are that person is on LinkedIn. LinkedIn jobs makes it easy to get matched with quality candidates who make the most sense for your role. People come to LinkedIn every day to learn and advance their careers, so LinkedIn understands what they're interested in and what they're looking for. And that means when you use LinkedIn jobs to hire someone, your matches are based on so much more than just a resume.

Of course, your LinkedIn jobs matches are based on skills and background, but it's also based on someone's interest, their activity. their passions. So post a job today on LinkedIn.com slash Fool and get $50 off your first job post. That's LinkedIn.com slash Fool. Terms and conditions apply. Welcome back to Motley Fool Money. I'm Chris Hill. Joe Mager joins me in studio now. He is the chief investment officer at Lakehouse Capital and asset management business based in Sydney, Australia. Good to see you, my old friend. You too. A bunch of things I want to talk to you about. Let's start with a company I know you follow closely, and that's Google, aka Alphabet. I'm still clearly getting used to calling it Alphabet. It came out with a new gaming system, Stadia. You and I were

talking during the break. You think this has potential, not just for Google, but sort of ramifications throughout the industry. Yeah, it's fascinating. So, they're turning the traditional gaming model on its head. And instead of trying to sell a console with, you know, the typical thing is you just spend a few hundred bucks by a console. You use that to connect and play with other people. The games are expensive. This model is using Chrome as the console, essentially. In any device that uses Chrome, you can use this wireless controller to play games through Chrome. I think it's brilliant. There are a lot of things about it that are really interesting. One is it more than a billion

people use Chrome. So that's a lot of potential gamers just right out of the gate. Another is that Google is running this through GCP, which is their version of Amazon Web Services. What's interesting about that is traditionally game developers are somewhat limited by the computational power of what's in the console. But with GCP, they can scale that as much as they want and make the game just incredibly computationally heavy. If they want to, which is attractive for developers, because it's like, all right, well, you're not limited, essentially, in terms of what you want to design. You can just go to town. They also think that running in on GCP will make for less latency, so the game's faster. And then a really interesting thing is that they're feeding a lot of this into YouTube.

So a lot of people, I'm not really into this, but a whole lot of people are watching other people play games. I mean, we watch sports. There are a lot of people who like to watch elite players play video games. and plugging this into YouTube, which is such a huge platform, is interesting, but they also speaking, kind of playing to the elite players and a little bit to their, you could say, vanity. The pitch is, hey, you can play, people can watch, we have a big audience. We're also trying to make you look great, so we can stream an up to 4K with surround sound, and you're like, okay.

And the appeal of this is really players, like, okay, so this basically makes my dad. gaming look the best. It's the best platform for it. It'll be interesting to see how this plays out for Google, but I'm curious about, you think of the biggest game makers, electronic arts, Tick2 Interactive, Activision, Blizzard. Is this something that they have to adjust to, or is this not really a concern for them just yet? Well, I think they'd view it as an opportunity. It's another platform to work off up. The big challenge for Google, they've already got all the distribution. We'll be getting games

that people are excited about and finding designers and developers to produce games that take advantage of those advantages that GCP can offer that's unique to that. If they can, it's easy to picture of being very, very big. So obviously, this is one more industry that Google, given their deep pockets, given their size and scale, one more industry, they have the opportunity to not only disrupt, but possibly dominate, which leads to this. They, along with Apple, Amazon, Facebook, increasingly getting scrutinized. Where are you when you watch the conversation about, quote, unquote, big tech and the possibility

of the government looking to either break up monopolies or the companies themselves possibly saying, you know what? We're going to try and head this off and maybe spin off some of our own assets. Yeah. Well, I think big tech deserves. a lot of the blowback that a lot of those companies have gotten. It's gotten very political, and I'm not sure that it's all entirely rational. If we're talking about breaking up big tech, you kind of need to drill into it a little bit, though, to see whether or not it makes sense.

So a good example. Typically, antitrust is centered around consumer harm. Well, it's really hard to argue that Amazon is causing consumer harm when it's widely considered the most loved brand by different surveys in America. Google, all their products are, almost all their products, are free for consumers, and how much utility do we get out of things like Chrome, Maps? I mean, think about how much you would pay just to have access to Google Maps, right? Facebook, there's a study done recently, a bunch of students. The average one would have to take $1,300 to not use Facebook for the next year. That's about 17 times the ad revenue that Facebook gets in North America for each monthly active user. So the point being, people get huge utility from these products.

Then you look at the merchant side. You might say, well, they're bad for competition. And certainly there's creative destruction. There are people who, you know, Amazon's handed their butt to them. That's true, though, of, you know, most industry leaders. And I would also say that some of these platforms have enabled small businesses to be built on them. So, for example, 2017, there were 300. over 300,000 small businesses that started selling on Amazon's platform.

So it's not entirely obvious to me that there's actually a strong case for this. It's easy to score political points talking about it. Then you're like, okay, well, let's say that there is a strong case and this stuff gets broken up. That must be bad for them. Well, not necessarily. So there are some examples. I think if you split Facebook and Instagram, that is full on bad because they use the same backend. for advertisers trying to sell onto the platform.

However, there are other platforms where I actually think splitting them off would be value-enhancing, and not just from a financial engineering sense of, well, it's worth more because the market would unpack the two, and you'd put a higher multiple on the two separately. You look at Amazon Web Services and YouTube. So both monsters, you look at YouTube, that's a business that Google bought it, and their ownership made it vastly more valuable. However, there are undoubtedly a lot of partnerships and business that YouTube is missing out on because they are owned by Google. If YouTube was independent, it's hard to imagine not having, for example, a better relationship with Apple,

which could be beneficial to both sides of that. Amazon Web Services, that's one where there are people who compete with Amazon who actively don't use AWS because they're owned by Amazon. view that as a competitor. If AWS was independent, that problem goes away. So, you know, I think people, there are a lot of headlines. I don't think there will be a lot of action. And if there is, it may not all be bad. Could be good. So one of the things we talk about from time to time on this show is the war on cash. From where you sit in Sydney, Australia, what is the state of the global payment industry? Yeah, so Australia is interesting because it's one of the fastest countries to adopt new forms of digital commerce.

An example, particularly with payments. So, tap and go has radically expanded in Australia. It's not so much a thing here that's changing because of a rollout with chips in the States and the terminals where people will actually be able to do this. But I think some of the big trends are, I mean, I think it's pretty well known and understood that cash is still around 85% of the world's transactions. So there's still a long, long room to run for digital. What I don't think people appreciate necessarily are the length of that runway,

that the runway itself, the market, it's 85% of transactions, but the number of transactions are growing overall, and that the network effects around some of these business models are really incredible. Also, an interesting thing that we're seeing is, Even though you would think that the network effects around payments would box out competition, I think we're actually seeing more innovation in payments than people had originally assumed, which is pretty interesting. And there are more ways to pay than there were before.

And a lot of those are flops. And I'm not talking about crypto. I'm talking about things like Mercado Pago, which is owned by Mercado Libre. Talking about afterpay touch, which is based in Australia, payment forms that didn't exist all that long ago, and now they're growing like crazy and have huge adoption rates. I want to get to stocks in Australia in a second, but first, I'm curious in your role at Lakehouse Capital. I know you can crunch the numbers, but I'm curious what you look for when you are evaluating leadership at a company.

Sure. So it's difficult. And that's one of the of the things that we value it highly and the importance of quality leadership, aligned, honest, transparent leadership, particularly if you're investing in growth companies, because the more companies investing or reinvesting in the business, the more important it is that the CEO and the leadership team aren't screwing up that capital allocation. I mean, I think, you know, no offense, but I'm pretty sure Visa could be run by a ham sandwich for a while before anybody would notice because it just gusses cash. But if you're, you know, growing 50, 60 percent a year, reinvesting everything, well, that's a bottle rocket. And where you point that, you

make a small change and where you're pointing it, you're going to end up in a very different place. We look for things like ownership. So sounds very straightforward, but nothing aligns like equity ownership. We like to see founders in place where we can. You're not always going to get that. But founders have an energy and passion for a business that you're usually not going to get from anyone else. We'll also look at historical capital allocation. So, Have they done big acquisitions? How have they done? Have they done big projects that flopped? Did they learn from that? What were the economics of that? Those are typically what we'll look for. And then the direct incentive. So this is one that, you know, anybody can go and look and

see how executives are compensated. I'm perfectly fine with executives getting paid a lot so long as it's aligned with long-term value creation. Unfortunately, that's not always the case. example of what we look for is something like long-term growth and free cash flow per share. Something that turns us off is an incentive around growing revenue or growing EBITDA. And I know that may sound funny because you're like, well, those are directionally positive. But when you don't put it in per share terms, what ends up happening is acquisitions start happening. And you can have a situation where if your goal is to grow EBITDA, well, invariable, you people will lever up to buy companies because you're avoiding hitting the interest line,

you're growing the top line, you're growing EBITDA, but it doesn't necessarily add value. So those are things that we look for, and I'd say they're all important. So for anyone who's looking to impress their friends at a happy hour or a backyard barbecue, what's an Australian stock that you're excited about that you think most Americans don't know about this? after pay touch. It's an interesting one because it's based in Australia. It's growing very quickly there, but they launched into the U.S. less than a year ago, and they now have more than a million users in the U.S. So if you go pay, if you go to buy something on urban outfitters, they accept after pay. And the premise is you pay at the point of sale online, but instead

of you get the buy now, pay later, is basically the premise. And you pay, afterpay back in three or four fortnightly installments. Fortnightly, not a word used in America very often. I was just going to say, every two weeks for everybody who's not quite used to that. It has grown like crazy in Australia. People view it as a handy, essentially debit budgeting tool. About 85% of people that use it, plug it into debit carts. So it's not typically used as a credit option.

I think that you're going to hear a lot more about the business, even if not necessarily the stock, but the business, because they are growing so quickly here in the U.S., and I bet you're going to be hearing. If you read conference calls with payment companies, over the next year, you're going to see some questions starting to pop up about that. For anyone who's thinking about either moving to Australia or just thinking about doing business in or with Australia, besides the use of the word fortnightly, What are some of the biggest differences in terms of the business culture?

You know, overall, it's very similar. Australians are, they're big on underpromising and over-delivering. So, culturally, that's something that's important in them. They're very relationship-driven. Americans, this is kind of a common thing you'll hear, that Americans can be pretty quick to make a decision in terms of business and large financial purchases. Australians are much more interested in getting to know you, having a personal relationship.

So those are things that I'd keep in mind. Last thing before we wrap up, just what should we be watching? What is something that you're watching, whether it's a trend, an industry, either in Australia or in emerging markets somewhere? Well, I'm watching home prices in Australia. They have finally started coming off. And for a long time, people have commented, including me, about high levels of how household debt in Australia, and that's disconcerting. Home prices are high by any measure

that you could come up with. And that has started to pull back. Banks are tightening their standards. We'll see what happens, but I'm not in the business of trying to predict market crashes. I think it's a beautiful waste of time. I think I'm much better at evaluating businesses, and so that's what I try to stick to. That said, I think I'd kind of have to have my head in the sand to not notice or care that home prices in Sydney are down about 10% year on year. You know, there are wealth effects around that. There's a lot of leverage in the economy and something that's different about Australia versus the U.S. that a lot of people talk about in favorable ways, but I actually think it's negative in some, is that in the U.S.,

it's much easier for someone to be absolved of debts through personal bankruptcy. In Australia, it's much more difficult to shake off debt. So if there is a huge housing crash, the people that are in that situation, there's not strategic default is not really in the cards if you're over there. So instead, you're just buried under a giant mortgage. So we'll see. Joe Magar from Lakehouse Capital. Great to see you. You too. Safe travels. Thank you. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Monters. As always, people on the program may have interest in the stocks they talk about

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 Fool Money, Chris Hill, here in studio once again with Jason Moser, Emily Flippin and Jim Mueller. If you're looking for a little Motley Fool swag, you can head to our podcast Swag Shop. Just go to shop.fool.com. We've got coffee mugs, t-shirts, hoodies. Check it out.

If you're looking for a little swag, shop.fool.com. Let's get to the stocks on our radar this week. Our man behind the glass, Steve Broido, is going to hit you with a question. Emily Flippin, you're up first. What are you looking at? Right now, I think most of my time spent looking at a company called Stoneco. Terrible name. If you hear it, you probably think they're in manufacturing. But it's actually Brazilian payment processing.

So if you like a square here in the U.S., if you like Buffett, then you'll like this Buffett-backed Brazilian payment processor. They reported earnings earlier this week, and the stock shot up really just surpassed anyone's expectation. So I'm excited about this company moving forward. They have a unique business model and an expanding area. So, definitely something to keep your eye on. And the ticker symbol? ST-E-S-T-N-E. Steve, question about Stoneco.

So what are some challenges when we're evaluating financials in non-U-S countries? Well, the main challenge is the fact that oftentimes these companies are unprofitable. And if you look at their financials, you're getting a snapshot of something that looks really bad. And they don't necessarily have the same reporting requirements that you have here in the U.S. So it goes back to what we were saying earlier about management. And I love listening to these guys on their recent earnings call. So go back, see how they talk about the company, see if they view any optionality there. And it's clear that this is a well-run company with great optionality.

Jason Moser? Yeah, going with Amalgamated Bank, ticker AM-A-L, speaking recently at our Austin member event with Neil Grayson, a member and fellow Wofford alumnus, by the way, because we just keep winning. I mean, what can I say? He got this one on my radar, actually. It's a small camp bank up in New York, total deposits of $4.1 billion, assets of $4.7 billion. So this is an interesting story because it is a bank. They're trying to build America's socially responsible bank.

And I am going to have the good fortune to interview CEO Keith Mestrich next week. And we're going to talk more about how they're doing that. Looking forward to that. So this is on my radar. Steve, question about amalgamated bank? So how does a bank define themselves as being more socially responsible? See, I'm going to turn this back on him. I am going to include that in the questions that I ask Keith next week, Steve.

How about that? You're going to get the answer straight from the horse's mouth. That's a deft way of passing off the question. Jim Mueller, what are you looking at? I'm looking at Select Medical, ticker symbol, S-E-M. They operate to critical illness recovery hospitals, rehab hospitals, and outpatient clinics, and occupational health centers. The most exciting company you could imagine.

They're a slow grower, about 2 to 3 percent on top line, but they throw off a decent amount of free cash. They don't pay a dividend. They stopped that a few years ago to reinvest into the growth, but they're down about 30 percent from their highs last August, which is why I'm looking at them now. Steve, question about Select Medical? Sure. What's the biggest challenge facing this company? Growth, really. They're already the biggest provider for many of the services they do, and so how are they going to grow reasonably well to reward investors? Select Medical, Stonecoe, Amalgamated Bank, three very boring-named company, Steve. You got one you want to add to your watch list?

I think I'm going to Brazil. Let's go with Stoneco. All right, Emily Flippin, Jason Moser, Jim Mueller. Thanks for being here. Thank you. Thanks. That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Dan Boyd.

Our engineer is Steve Broido. Our producer is Mack Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.