Motley Fool Money - Retail’s New Record and the Business of RVs

Episode Date: May 15, 2020

Retail sales fall more than 16% in April. Uber and GrubHub explore a possible merger. Marriott and Under Armour tumble on disappointing earnings. Diagnostics company Quidel gets a big boost from the FDA. And DraftKings hits a new high. Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on the best way to build a portfolio. Our analysts share a couple of stocks on their radar: Intellia Therapeutics and Axon Enterprise. Plus, Camping World CEO Marcus Lemonis talks about the business of RVs and shares some insights from his CNBC show, The Profit. Thanks to Molekule for supporting our show.   Get 10% off your first air purifier at http://www.molekule.com with code “fool10”.     Learn more about your ad choices. Visit megaphone.fm/adchoices

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and use the promo code Fool 10 at checkout. Thanks also to TD Ameritrade. Everything's customizable these days. Your trading platform can be too. With Think or Swim, you can customize screeners, charting, and stock forecasts, so the market is always tailored to you. You can get started at Tdemertrade.com slash think or swim. All right, let's do the show. 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 this week, Jason Moser and Ron Gross. Good to see you as always, gentlemen. Hey, hey, Chris. We've got the latest headlines from Wall Street.

Marcus Limonis, host of the profit, is our guest. As always, we've got some stocks on our radar. We begin once again with the big macro. Retail sales in April fell more than 16 percent, the worst drop on record. Ron, we're going to get to a few of the ripple effects in a minute, but consumer spending typically drives about 70 percent of America's economy. I don't know how many more months like this we can take. Yeah, brutal, but I mean, perhaps not surprising. We're all under stay-at-home orders, or at least we were until recently, 36 million of us filing claims for unemployment.

This has got to show up in the numbers, and some of the worst hit sectors are ones that we probably could have guessed. Clothing down almost 80 percent, furniture, down 60 percent. Not a lot of people buying furniture nowadays, although I will admit that I did. So I help that number just a little bit. Bars and restaurants, not surprisingly, down 30 percent. The one bright spot, and we probably could have guessed this as well, is non-store retailers up about 8% for the period. Obviously, all of us shopping online, my family certainly doing their part to help the Amazon's and other e-retelers of the world. But this is a brutal number. That's why we're so many states are pushing to reopen. I just hope it's not too soon and we fall back. But the economy certainly needs to get kick started just a bit.

Yeah, Jason, from time to time, when we talk about bricks and mortar retail, we talk about the different tiers for malls and sort of those tier one malls being a little bit safer and more stable than tier two or tier three, I think everything's up for grabs now. Yeah, I think you're right. I mean, I don't think, I mean, this environment really isn't discriminating for the most part. Now, there is an exception there. Ron, I thought that was pretty interesting.

You guys got some furniture. We got some furniture too. We got a nice place, but like a recliner, and we get this big ottoman. So, yeah, maybe, you know, I don't know. Maybe there's something there, but yeah, I mean, it was, it was a bad month for most, but not quite all. I mean, the non-store retailer is up 8.4%. And to that point on furniture, you know, we saw some quarterly reports here with Wayfair and Etsy that were both very encouraging. And I think really shine a light on the opportunity that exist with business models like those where they're just really virtual networks connecting suppliers with buyers. But, I mean, Wayfair stated in their calls starting in mid-March, they saw a pickup in traffic and conversion with increasingly strong

repeat behavior coupled with an acceleration in new customer orders. And that went on into April as well. Etsy noted that April was about so much more than just masks. I mean, interestingly, their platform really have sold a lot of masks during this time for obvious reasons. But they even broke out non-mask sales on the Etsy core marketplace were up 79% from last year. So, you're seeing obviously a lot of trouble everywhere, but there are pockets of opportunity there. And I think it really, you see the way that Wayfair and Etsy stocks have performed this year. It starts to make a little bit more sense when you see how these businesses perform

during the month of April and going on into May. Yeah, and then you counter that with the traditional retailers, whether they're mall-based or department stores that standalone Dillard, for example, reported this week. Listen, all 285 stores were closed for a part of this period. What are you going to do? That's completely devastating. Ninety percent of employees furloughed, salary reductions for executives. Now, the investing community is focused on the future, as typical for stocks on the stock market. And Dillard's stock has reacted pretty well because they reopen 45 stores on May 5th, an additional 80 on May 12th.

116 more will be open next week. Slowly things are starting to reopen. As I said, I hope it's not too soon. But looking towards the future, they think they're going to start to generate some revenue again. So far, about 56% of revenue has been recaptured, and that's even with reduced hours at Dillard's. So, I mean, we haven't talked about Dillard's on this show. forever. Mac earlier said, I can't even believe that's still a company. But it's an example

of a completely, you know, a meshed brick and mortar retailer that, you know, it has just been, you know, had a really tough go of it. You know, Jason, Ron mentioned bars and restaurants. We got some pretty scary data out of open table this week. And when you think about restaurants in particular trying to reopen, they've got to do it at reduced capacity. And a long- term, you have to believe a lot of them aren't going to survive. Yeah, I mean, I think the data that Open Table released, I mean, it was something like one and four restaurants just won't, won't ever come back.

And when you look at that actual industry, I mean, it's $850 billion plus in sales annually. I mean, it's a big market when it comes to our overall economy here. And the restaurant business is really difficult to begin with. I mean, there is just a high failure rate because it's very low barriers to entry. It's very competitive, hard to maintain sustainable success, really. I think that going forward, I mean, it really feels like we are going to see the cost of business go up for restaurants on a sustainable basis. I mean, I think that for many restaurants that are going to have to figure out a way to incorporate

those costs into the operations, whether it's just through hiking prices and food, I wonder if it's not a better idea to just be blatantly obvious about it. And on the bill, note that you've got a P&E. costs or cleaning and sanitization costs, because perhaps if customers see those line items broken out, they feel a little bit more confident that the restaurants there going to are actually looking out for them from that perspective. But yeah, I mean, it does go to show really the scale when it comes to restaurants is a big advantage.

And even that scale doesn't necessarily mean it's going to be easy going. I mean, Starbucks is out there right now negotiating with their landlords to lower rents by up to 40 percent for a year. that Starbucks, one of the most powerful food and beverage operations in the world. Yeah, your point, Chris, on mall real estate is well taken. And the closings of these restaurants are going to obviously exacerbate that outside of the mall space. So, we're going to have a lot of problems in the real estate market. I just saw this morning. Manhattan new rentals down 71 percent. Vacancy rates the highest in 14 years. I'm not sure that abates any time soon.

So it's something to really watch carefully. Well, and you have to figure a business's largest Starbucks probably has some leverage here because if you're in the commercial real estate business guys, whether it's traditional office space or retail and restaurant space, you're looking at a very uncertain future, aren't you? I would think so. I mean, you know, we saw it a little while back with Cheesecake Factory basically drawing the line and saying, hey, we're not going to pay rent because we just can't.

I mean, yeah, they probably could have pulled a few levers to make that work. But, I mean, it is good to note that point that as a tenant, the deck isn't always stacked completely against you, particularly if you've been in a location for a long period of time, if you're seen as kind of an anchor location or one that generates a lot of traffic. I mean, there are, there's more than one entity in that value chain, right? I mean, there are banks that are providing those mortgages and borrowers who are serving as the landlords. I mean, this affects everybody to an extent.

So it probably favors most to be open-minded, perhaps negotiate some lower rates for a specific amount of time, understanding that this will eventually pass. The real question is, what does that new normal look like? Because I think that we have to kind of come to the realization that we're going to be living in an environment where COVID-19 is just part of. our existence, right? I mean, it's not like we're just going to eliminate this thing from existence, but we can't just hunker down and shut everything down for the next year or two years either. When it comes to the restaurants, there are a lot of industries where you look at sort of the higher-end players.

Maybe they've got better margins, that sort of thing. And in rough times, they're in safer condition. When I think about the restaurants, I actually think it could be the reverse because a high-end steakhouse, like the Capitol Grill, which is part of Darden restaurants, they may be in more trouble than a burger place like McDonald's, which has built its business in part on delivery. It's not about the in-restraught experience at McDonald's. I totally agree with you. I mean, I think that the restaurants that are focused less on the in-facility dining experience,

whether that's fast, casual like Chipotle or your quick serve like McDonald's, I mean, I think those restaurants going forward definitely have a leg up here because people, generally speaking, you're not looking for that lovely ambiance that you're going to find in a Chipotle or a McDonald's. Not to say that eating there is a bad thing. Don't get me wrong. But, you know, I mean, there is a difference there. And so I do feel like the quick service restaurants and the fast casual restaurants are going to come out of this. They at least have the opportunity to come out of this in a little bit better shape, particularly when you add that delivery dynamic to the model.

But I do think that restaurants are notoriously known as bad investments because those mom-and-pop ones, They've got a dream and they open up the local Italian restaurant on the corner or the Greek place or the Mediterranean place, what have you. It's a tough business. Competition is unbelievable. Those are the guys that are going to go out and not come back versus the bigger guys who can access the public markets to raise capital, float a debt offering, a bond offering, get them through to the next stage. Maybe they'll have to pare down their square footage and their footprint and maybe close

some stores, but I think they will survive because they will survive. they have access to capital. Speaking of delivery, shares of Grubhub up more than 15% this week on reports that Uber is making a bid to buy Grubhub. Jason, Uber has Uber eats. You throw in Grubhub. They've cornered the market. Is this a good move? It could be. I mean, when you look at the economics of food delivery, I mean, that's a really difficult market. We've seen that just through Grubhubhub's financials and even Uber's financials as well. It's a market that doesn't really, it's a market that doesn't really, it's a market. It doesn't reward exclusive relationships.

And so, I mean, it does make sense for Uber to be looking at it this way. It leverages that network that they already have. And we've talked about that a lot about how they're going to leverage that network into additional offerings in order to ultimately build a sustainably profitable model. I think the bigger question really does come on the regulatory front, because when you think about it, the combined entity here would control well over half the domestic market in delivery. That could be construed as a long-term negative.

But, you know, there's still his competition out there. So who knows? I mean, you could argue that blocking consolidation would actually put smaller competitors out of business because the economics are so tough anyway. But, I mean, we've definitely seen where Uber Eats has gained a lot of traction here. I mean, in their most reported recent reported quarter, they generated $4.7 billion in gross bookings. That was up 54% from a year ago. Net revenue accelerated to 124% growth from a year ago. The take rate has gone up to 11.7. And it is working its way towards contributing more to a profitable model for Uber. I think really the bigger question, it would be on the regulatory front. I don't think it would be blocked. So it's a move that certainly makes sense, I think. Here's a company we've never discussed before. Quidel. Quedel makes diagnostic healthcare products and shares are up more than 20% this week

after the company got emergency approval from the FDA to distribute a new type of COVID-19 antigen test. The test is designed for rapid detection of the virus. virus. Ron, it seems promising. And our own David Gardner once again looks into the future earlier than others. Recommended this back in March, I believe. And it certainly has panned out well so far. Very encouraging. The difference between this test and others is it actually looks for pieces of the virus itself rather than for antibodies of the virus. That allows the test to be done more quickly

in 15 minutes or so with a relatively good accuracy rate of about 85%. And also the exciting part is that the infrastructure is already in place. It uses these machines called Sophia machines, which are produced by Quedal, and there are already 40,000 of them in doctors' offices around the country. So this is very exciting, what I hope will be one of many breakthroughs in testing and diagnostic testing

and then eventually vaccines to get us to the other end of this pandemic. More headlines after this, so stay right here. You're listening to Motley Fool Money. All right, before we get back to the news of the week, quick shout out to molecule, which is reimagining the future of clean air, starting with the air purifier. Their technology has been personally effective and verified by science, but most importantly, it's been tested by real people, including me.

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Shares of Marriott International falling this week after net income in the first quarter fell more than 90% compared to a year ago. Ron, Marriott has a rock solid brand. How's their balance sheet? Because this might take a while. Their balance sheet is okay, but they were smart. And in April, they raised $2.5 billion additional dollars through debt to shore it up because they already had 12 billion of debt and only $1.8 billion. of cash. So a smart move, you know, what can you say? A brutal time for them. Revenue per room, otherwise known as Revpar, down 22.5% for the quarter. But that doesn't even tell the whole

story because this got really bad in April where that plummeted to being down 90%. 25% of their 7,700, 7,400 hotels are closed. One bright spot is they do see China is recovering. Occupancy there hit 25% in April, which sounds horrible, but that actually is an uptick. And shows perhaps some recovery. You mentioned net income. At least there is net income. They're still positive, not losing money. Adjusted EBITDA, $442 million. It was still down 46 percent. But they're not burning through cash in that sense. And as we said earlier, their balance sheet looks okay and they firmed it up through a debt offering. So, you know, obviously they're halting for the sharey purchases, as all folks are, canceled dividend, furlowing lots of folks.

including two-thirds of their 4,000 corporate workers. We'll see what the next quarter brings. Under Armour's first quarter sales fell 23%. And that is about how much the stock fell this week, too. Jason, this is why we diversify, right? So I can look at my portfolio and see that my shares of Under Armour are balanced out by things like Starbucks. Hey, listen, I've got a small position in Under Armour too.

So it's always nice to be able to look at those winners, offset these losers. I mean, speaking of taking a while, Chris, I mean, investors may want to pack a lunch because I think this one is going to take a while. You mentioned sales falling 23 percent. It was 22 excluding currency effects. They attributed 15 percent of that COVID-related impacts. And that really, you know, a quarter ago, they were calling for revenue to fall between 13 and 15 percent.

So it got worse than even they expected. By the end of March, more than 80 percent of their China locations had opened. At this point, substantially, all of them have reopened. Traffic is slow to come back. You know, they've got a lot going on here. They are restructuring, and now they've got to figure out how to restructure and implement a new strategy in the face of a difficult environment for obvious reasons. At least, you know, everybody is kind of going through the same thing right now.

But I will say, I mean, Plank was not on the call. I think that's a positive. It does feel like this business has moved on from him as the CEO. They did name a new chief product officer and Lisa Collier, who has a new. as ample experience in the industry as well. So there is a strong brand here. I mean, I would make the argument that the brand is probably worth more than the entire market cap of the company today at around $3 billion. But there's no question. They've got a lot of work to do. We've just added to the degree of difficulty here. So it's going to take some time.

Draft King's first quarter loss was bigger than expected. So naturally, shares of draft Kings rose 10% on Friday hitting a new all-time high. Ron, there's no sports. How much better is this stock going to be when we actually have sports to bet on? You know, I think investors are focusing on the comment that they do not see a COVID impact on fiscal 21 and beyond. So, again, a short-term impact here. They recently completed a reverse emergers, so they're a public company now. They're well-capitalized, 400, 500 million of cash on the balance sheet right now. Listen, revenue was actually up 30% for the quarter, but it was tracking it being 60% up before

COVID hit. So clearly, still up there. But without sports, they're creating new offerings, everything from E-NASCAR to pool contests covering the Democratic debates, keeping people engaged, keeping people interested. So once sports do come back, things will get moving. Fourteen states right now considering betting legislation, which would certainly help the business. So I could bet on E-NASCAR or I could bet on a political debate? You could have a pool, a fantasy pool of either one. You take your pick, Chris. All right, Ryan Gross, Jason Meuse. Guys, we will see you later in the show.

Up next, a conversation with businessman and TV host Marcus Limonis. Stay right here. You're listening to Motley Fool Money. Well, the Bill Jackson with the pole dud to join the uptown poker club. And he cursed the day he ever told anybody he's going. Well, they didn't money used to go like they'd have wings. When he had queens, somebody else had kings. And every night he'd just sit there donating off all his coin.

He'd say, boy, now I'm going to play it right. Tonight, I'm going to watch them cards, and I'm going to play them tight. And then when I come in there, son, my hand's going to be a peach. Well, he played them tight, but after a while he'd unlost his cell a considerable pie, so he got mad, and he stood up and he made this little. Welcome back to Motley Fool Money. I'm Chris Hill. You may know Marcus Limonis as the host of CNBC's popular primetime show, The Prophet.

He's also the CEO of Camping World, a company that specializes in recreational vehicles. Recently, Motley Fool's senior analyst Bill Mann caught up with Lomonas. They talked about long-term disruptions, the changing demographics of RV buyers, and Lomonas kick things off by explaining the business of Camping World. So Camping World is the world's sort of leader in selling, servicing, financing RVs. We also have an aftermarket business called Camping World that is sort of the accessories for inside and outside your RV. And then we have our third leg on the stool, which is called Good Sam, which is our annuity business,

where we sell insurance, roadside assistance, warranty credit card club to the installed base. And so the best way to think about it is if you took Auto Nation AutoZone, a AAA, and you mushed them all together for the RV space, that's us. And we saw about one out of every five RVs in America. And we do that through 168 dealership locations, dealership retail locations across the country. And then obviously we do it online and through our call center. And so it's been a business that I amalgamated starting in 2001. In 2016, we went public. Kind of an interesting capital structure.

So I own 36 million of the 88 million shares myself. But we also have what's called an upsea structure, which aggravates people. And the upsea structure really gives me the golden share. There's very few companies that actually have the golden share, which means that if there was ever a necessity for a large vote, the golden share actually creates a scenario where there's just one vote. And when we went public,

it was a very controversial thing that somebody that owns, you know, 40% of the business control 100% of the vote. And the answer is, welcome to 2020 COVID. going to be glad that I have it. Absolutely. In this environment, I know the business better than anybody else. And I definitely made some business mistakes in the last two years. I tried an acquisition out of a bankrupt company.

It cost me about $100 million plus or minus. I don't have the exact number. We had to shed ourselves of that. So that was a mistake that I made. We've recently in the last six months gotten back to just our core business. We did not close any of our locations during. this crisis, we were not required to because homes are an essential business. People need to be able to run their water, run their electric, run their heat, run their air conditioning. And so we were

exempted in every single market that we operate. Number two, keep in mind that you have been locked up in your house for a while and you're not going to go to football games. You're not going to go to concerts. You're not going to go on cruise ships. You're not going to go on airplanes. You're not going to go anywhere where there's people. But you want to actually, now that you know who your family members are because you've spent a month with them, you're going to want to go out and see this country. And so we, if I could pick any business in America to own right now, and I didn't own it, I would own our business because of where I know the consumer is going and where I know they've been for the last 30 days. So you did lead into what I thought would be

a very interesting part of our conversation. And one of the things that I think about as an analyst, is that certain things, I fully believe in humankind's ability to beat a semi-sentient being. Like, we are going to beat the virus. Like, we are going to win. It's a question of how long. Certain things, though, are not going to go back to where they were before. What are some of the things that really impact camping world that you think may, may be a permanent change because of changes of habit?

Well, I haven't found anything to be totally candid with you. I haven't found anything that I think is going to be a permanent for the negative. I don't know that I found anything that I think is going to be negative. Other than we need that credit market. We need the credit market to sustain itself. And what happened to us in 2008 and nine wasn't that demand. went away. It was that credit went away. And so our business, boat business, dealership business, hog, all those sort of types of businesses, people think that, oh, it's a missionary thing. Look,

you can buy an RV for a hundred bucks a month. Okay. And so I don't want to hear that, oh, people don't have discretionary dollars. People will find $100 a month if there's no other activity to do. There's literally going to be much to do. And the benefit that we have, well, it's terrible because, you know, the schools are closed and people have their kids running around their house, is that summer is starting months earlier, months earlier than it normally would, and summer could potentially in certain markets last longer than it normally would. You couple that with the fact that people like the freedom to move around. They want to travel.

We've seen more corporations investigate the purchase of RVs as a mode of spaces, transportation, a replacement of whatever it may be. I can't think of anything that's going to permanently affect us other than, unfortunately, in the short term, I don't see people going to Disney Worlds, the equivalent of Disney World, not Disney World specific, excuse me. I don't see people going on cruise ships. I don't see people traveling overseas. I don't see people rushing to go visit their mom on a plane,

but they may take a road trip. they may take a road trip. And so I'm encouraged by by people's resiliency, but I am concerned about how their behavior is going to change, and we think we're positioned pretty well for it. Have there been changes over the last few years in terms of the demographics of people who buy campers? Yeah. So two primary things. We've seen a massive increase in the diversity of the consumer. It was typically in history years and years ago, it was predominantly a more, you know, Anglo-type product. We've seen a massive change in the diversity, which we think is excellent. The second thing is we've seen a big shift in the age buckets. And so historically,

it was like your father's osmobile. It was just an older, it was an older crowd. And part of that shift was that historically the RV business was driven by motorhomes years ago, 20, 30, years ago. It's now driven by tolls. And as the tollables got lighter and smaller, 17 feet with a single axle for 98 bucks a month that you can pull with your Prius, it changed the landscape. And so as the unit got lighter and smaller, the age group got lower, much younger, because the portability of the product, the ability to store it, the ability to drive it, the ability to not have to buy a big truck, it all changed dramatically. It all changed dramatically. So it has widened the funnel. It has definitely widened the funnel. And we think that it's going to continue to do that. And millennials,

by the way, for some crazy reason, they don't want to work. They don't want to show up on time. They want to get paid a lot of money and they want to be the president, but they also love camping. I am on the other side of the whole millennial argument from you. I think that these are the people who are going to save America. They're going to save America, but I'll tell you this. And I'm not that far from it. I'm a young guy. They're going to save America because they're going to bring America to a place where

material things matter less, being nice to people matter more, giving to others matter more, and technology matters more. So those basic tent poles of who they are is fine. But I will tell you, in my experience with millennials, and I love razing and about, it. They do like to not work. You do like to have that work life that you and I aren't used to. And so I end up having to have conversations with a lot of them like, oh, okay, I know you want to work nine to three. And I know you want a two-hour siesta from 11 to 1 to read a book or write a book. But we just can't

do our jobs. I'll let you go at four, but not not 11. I want to shift just a little bit and talk about your, the magnificent show that you've been doing since 2013, the profit on CNBC. Could you talk a little bit about what isn't necessarily seen on the show? Tell me a little bit about your process for evaluating the companies that you end up putting money into. Yeah. So over, on an annual basis, I get about 40,000 applications a year. I'm sure this year it'll be 400,000 applications because of the crisis, right? And most people are stunned the process exactly like what you see on TV.

So I choose not to do any due diligence before I get there. I know about the company to a degree. I don't see any financials. I know nothing that they're sort of in their work other than what industry and who they are, where they're located, et cetera. So you know what lane you're driving in, but that's about it. Kind of. Kind of.

And when I originally started the show, I did it for a couple of reasons. And so I look at that part of my personally. I split my very capitalistic personality in the world and my, sort of my semi-capitalistic educator personality into the profit. And that's really how I bifurcate my personality. And part of the reason that I did the show is to create an educational platform for people to learn how business works. And it really wasn't driven towards.

people like the folks on this was driven towards a younger generation who I wanted to make owning a business cool again. People want to play basketball. They want to be a rock star. They want to be in the NFL. I said, look, the cool factor isn't doing those things. It's being a business owner and it's helping people in their business. And it's making money and doing good at the same thing. And I wanted to build a curriculum that allowed people to understand the different nuances. And I think the single biggest compliment that I've ever been given in the history of the show was I was doing a photo shoot one day after season three. I can't remember season two or three. And my phone rang and I answered the phone and I said, you know, hey, this is Marcus. And you could actually just Google my phone

number, Marcus DeMone. I don't know how the person got it. And on the other end of the phone, this person said to me, hey, I just wanted to call and tell you that I really, really, really enjoy your show. My family and I watch, I have my staff. watch it. We talk about it in our executive meetings. And I said, well, thank you. Who is this? You know, yes, sir, thank you. May I ask who's calling? He said, yeah, this is Jamie. And I said, well, yes, sir, I'm sorry, I apologize. I must have missed your last name. He goes, oh, this is Jamie Diamond. And I said, oh, yeah, no, that's funny. I appreciate it. He said, no, no, this really is Jamie Diamond. You want me to tell you your account number at my bank? And I said,

no, seriously. So he said to me, the reason I'm calling is that we're going to get heavy into the show because we believe that as a big bank, in order for us to have big clients, they have to start as small clients. And they have to have these basic fundamentals about their business. And what you're teaching people applies to a Fortune 100 company applies to a very small business on Main Street. these basic principles about the ethics of business and the the the requirement to no numbers and they're required to do good by people the inquirement and the requirement to hold people accountable yeah it's it's that all these companies want to like treat small businesses they're a charity case and just give them grants and give them money and do this and that why don't we just treat them the same

in a big business accountable invest in them ask for equity put put loan documents in place sophisticated, give them metrics to perform by, hold them accountable for their inventory and their balance sheet, and don't ever let them use, I'm small as an excuse. No. Because really, that would be like your kid saying, I don't want how to ride a bike with training wheels. Say, well, you're not going to ride a bike if you can't learn this way. Coming up, we're going to dip into the fool mailbag, and we've got a couple of stocks on our radar. So stay right here. You're listening to Motley Full Money. When might blow

You don't ever have to mow the yard Just hang a map and throw a dart And pray to God the engine starts and go Water and electric In a place to drain the septic And you care away to say okay As long as I'm with you So come on hit your wagon

To the living room I'm dragging If I can't bring you to my house I'll bring my house to you Before we get to the stocks on our radar, quick shout out to TD Ameritrade. In these unprecedented times, having access to the right information can help you make better informed investing decisions for today and tomorrow. TD Ameritrade is committed to providing you with a range of relevant educational content like timely articles, informative webcasts, and even access to daily live market news

so you can stay on the path to becoming a smarter investor. Learn more about their breadth of resources, just go to TD Ameritrade.com slash market hub. TD Ameritrade, where smart investors get smarter. 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're here. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross once again.

Our email address is Radio at Fool.com. Drop us an email, would you? We're lonely. We got a note from Aaron Burton in Denver, Colorado. He writes, guys, my girlfriend and I love your show, and I have a question. Do you advise placing a cap on the number of companies to own? If so, what is the cap and why? Thanks for the great show and keep up the good work.

Thank you, Aaron. Thank you for listening. Ron, what do you think? Should you cap the number of companies you own? I think that's a good question. It depends on how closely you want to follow your companies. If you intend to just check in every now and then and buy a stock and really just hold it without much interference from yourself, you could probably own upwards of 50 companies.

I know plenty of folks do. If you intend to be more hands-on and review these companies quarterly or even annually, that might be a bit much. It's hard to follow really more than 20 or maybe 30 stocks. So it depends on what your level of participation is. I will add that the more stocks you own, the more you're going to start looking at the more like an index fund and start mimicking the market as a whole. And you can do that much more easily by just buying an index fund. So be careful about not getting too many stocks. Although, Jason,

we talk from time to time about the concept of leash. How much leash do you give a certain company? And let's face it, if you're buying some companies, you can essentially ignore them because you know they're going to be fine for decades. Yeah, you definitely can. I mean, on the one hand, you've got Warren Buffett, who says, diversification is protection against ignorance. It makes a little sense if you know what you're doing. That's a little odd coming from someone like Buffett, who we really look to for a lot of advice. I guess in his case, maybe that makes sense. Most people probably are better served by diversification. The flip side, you look at someone like Shelby Davis, who ended up owning hundreds of positions at the end of his life. And in a lot of that, he just kind of bought, just sort of let him run, right?

And it kind of worked out well. I think Ron's right. You do risk when you start over-difference diversifying, you risk that Peter Lynch diversification in getting underperformers in there and kind of letting them stay in there and that drags a portfolio down. So it is different for everyone. I mean, typically 20 to 30 holdings is probably pretty safe as long as you have an idea of what you're doing. For most people, I do believe that owning an S&P 500 index fund is a must. Even if you're going to be investing in individual companies, have some of that money plunked away

and just an S&P index fund and let that kind of keep on growing so you can ensure yourself market matching. All right. Let's get to the stocks on our radar. Our man, Dan Boyd, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week? How about Intelliatherpeutics, N-TLA? It's part of my eight-company biotech basket. It's one of three gene therapy companies that are focused on the CRISPR-C-Cast-9 gene editing technology, along with the other two companies, Editas and CRISPR. Stock is kind of true. traded in a range ever since it took a beating back in September of 2018. But this week got a nice 20% bump on some really good news about the development of treatments

for two diseases. And that's what I need to dig into a little bit more because I'm not a scientist and understanding these things sometimes takes a bit of time. $250 million cash. So decently capitalized should get them through at least the end of 2021. Dan, question about Intelliatheraputics? Well, much like Ron, I am also not a scientist. and I know nothing about jeans, but I do know a thing or two about jeans, and I'm talking about pants.

So, Ron, do you have a favorite style of jeans? Not the low, the low-wasted kind. Having the kind from like the 80s would suit me fine. A nice pair of gap jeans, which my wife does not like, but I do. Jason Moser, what are you looking at? Taking a look at Axon Enterprise, ticker A-A-X-N. You probably recognize this company if I told you. make tasers. And those are the conducted energy weapons. They substitute themselves for guns,

obviously with police forces everywhere. And the general idea is they're focused on less on killing people, right? They want to preserve life. And that's why their solutions make more sense. So they do make the taser. They also make the software and sensors that go with it. They are the market leader, not only in the conducted energy weapons, but on officer body cameras and in-car cameras, as well as their digital evidence platform called Evidence.com. Something you wouldn't have found in last year's 10K, but that is in this year's talk of their suite of augmented reality and virtual reality training services for law enforcement. I just, that piqued my interest. And this is a really neat business with a pretty unique

competitive advantage, so one I'm digging more into. Dan, question about Axon. Jason, are you finding lots of opportunities for self-defense during the global pandemic? Well, you know, Taser is definitely one of them. And I'm researching a couple of other companies that are in that line of work, but I'm not going to spill the beans, right now, Dan. That'll be revealed at a later time. What do you want to add to your watch list, Dan? I'm thinking Intelliatheraputics, Chris. Nice. All right, Ron Gross, Jason Moser. Thanks for being here, guys. Thanks, Chris. That's going to do it for this week's show. Our engineers, Dan Boyd, our producer's Mac Rear.

I'm Chris Hill. Thanks for listening. We'll see you next week.