Motley Fool Money - The Motley Fool Investment Guide

Episode Date: September 1, 2017

Businesses deal with Hurricane Harvey's impact. Wells Fargo reports more fake accounts. Lululemon reports surprising earnings. Gilead Sciences makes a big buy. And Match hits a new high as Tinder heats up. Plus, Motley Fool co-founder Tom Gardner talks small caps and shares some insights from the brand-new edition of The Motley Fool Investment Guide. Thanks to Casper for supporting The Motley Fool. Save $50 on a mattress at http://www.casper.com/fool and use the promo code "fool".      Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's a Motley Full Money radio show. I'm Chris Hill. Joining me in studio this week from Million Dollar Portfolio, Matt Argusinger, from Supernova, David Kretzman, and from Motley Fool Pro and Options. Fisher. Good to see you, as always, gentlemen. Hey, hey. Hey. Hey. We've got the latest headlines from Wall Street. Motley Fool CEO, Tom Gardner is our guest. And as always, we'll give you an inside look

at the stocks on our radar. But we begin this week with Hurricane Harvey. The financial impact is still being assessed. But some estimates are putting the economic toll at upwards of $200 billion. And, Maddie, given the size of Houston and the outlying areas, maybe we shouldn't be surprised by that. It is on track to be the most costly natural disaster in America. in history, much bigger than Katrina, about three times the cost of Hurricane Sandy, which we know hit New Jersey in the lot of the East Coast. It's incredible. And by the way, the majority of that, especially on the residential side, is going to be in uninsured losses. Because as

we know, 95% of the damage was caused by flooding, which is just an extra devastation to the cost of this storm. Silver lining to this, if there's anything, is that I think the government's probably going to kick in some aid. There's probably going to be years of rebuilding, which is going to boost the economy in the medium to long term. And of course, tens of thousands of households around Houston are probably going to be buying a car in the next few months, just because those cars tend to be fully insured, obviously. And there was somewhere on the order of 500,000 cars, I believe, that were destroyed in the storm. On the flip side, though, David, you look at sort of those day-to-day businesses. You

think about restaurants, all of those. That's business. That's not coming back. Yeah, certainly going to be a dent for at least several months this year, and potentially longer, just depending what the aftermath of this storm looks like. And kudos to Texas Roadhouse, which is one, I think, of many restaurants that are opening their doors and giving people food, giving them a place to be and get a hot meal. And to Matt's point, talking about cars, CarMax, which is the nation's largest used car retailer, they're already saying, yeah, we're definitely trying to get a lot of extra inventory to our stores in that Houston area. To name just two other names, Starbucks has Houston as a top 10 or so city. It's one of their

most populated locations for stores, store numbers. And as you said, Chris, the sales that they lost this week and for weeks to come will not come back. It's a hit. So we're going to hear a lot of companies. O'Reilly Automotive is another one with a lot of locations in Houston. Next quarter on their conference calls, they're going to be saying, and very legitimately, that this affected business. All right. Let's move on to the other headlines of the week. And we'll start with the big deal in the biotech industry. Gilead Sciences bought kite pharma for For $12 billion in cash, that was a 29% premium on where Kite had been. Jeff, I have to assume investors like this deal because Gilliard Sciences wrote a $12 billion check,

and their stock is still up 10% on this deal. Yeah, it was a good week, Chris. For several quarters, maybe even a few years, investors have been waiting for Gilliard to make an acquisition. The company even slowed down its share buybacks and conserved cash. We knew something big was coming, and $12 billion is pretty big, although it will not add to earnings. It'll be neutral to the company's earnings for at least three years. And then they hope for it to add to earnings. The reason is Kite Pharma, ticker was K-I-T-E, still is right now,

is only an experimental stage company. It has more than 20 trials going, but they're all early-stage trials. And they are pioneering immunotherapy to treat cancer patients. And that's where you use the patient's own immune cells to fight the cancer. In one instance, you remove a patient's T cells and alter them and then put them back into the body to fight the cancer. So it's fascinating technology that we all should hope does very well. Now this week as well, Chris Novartis had the first U.S. approved immunotherapy cancer treatment approved by the FDA just this week. And that's when Gilead shares really took off because they just made this acquisition in a leading company of that same sort of technology.

I was going to say because Gilead science is And Christine Harges, who's one of the hosts of our industry-focused podcast, made this point. You talked about how they've been conserving cash. Christine made the point that there'd kind of been a pretty steady and growing drumbeat from analysts saying to them, like, when are you going to buy someone? When are you going to buy another company? Definitely. It reminded me in the conference calls the past many quarters of Apple for years, like,

hey, where's your watch? Where's your wearable? And every quarter, Tim Cook, is like, we're working on it. They did a good job, I think. Gilead as well, looks like they made a smart acquisition, a deep pipeline for not an outrageous price. But Chris, still what's going to drive the stock the next three years is going to be the hepatitis market and the HIV market.

That's still where Gilead's hat is hanging. Last year, Wells Fargo was discovered to have created 2 million fake checking accounts for customers. Upon further review by an outside auditor, Wells Fargo raised that number to 3.5 million fake accounts. And Matt, Wall Street was completely unfazed by this. Stock didn't drop it all. I know. It's disappointing. And I think Josh Brown, who is a popular financial blogger, he's on CNBC, he's a money manager, a great analyst. I think he put it best on Twitter. Yesterday, he said, if Wells Fargo was a community bank or any other small business, they'd be driven out

and their executives jailed. I absolutely believe that. But because it's Wells Fargo, because it's a major bank, a major financial center, and because of the number of accounts, if you think about it, and the fees that were taken in are so tiny relative to the bank's total accounts and the bank's overall revenue, I do expect this issue to get swept away. And even the $185 million fine that was imposed last year, if that gets doubled, it's still a slap on the wrist. That's pocket change. This company, Wells Fargo made 22 billion in profits last year.

I think what's fascinating to me, and we talked about this before the show, is that, You know, Wells Fargo, 10 years ago, certainly during and even after the financial crisis, we looked at Wells Fargo as sort of this bastion of a quality, good, safe bank compared to all the DREC that was out there. And it's amazing to see that the reputation has totally been sold. Wells Fargo is now sort of the bad actor among the big banks. Fascinating. So true.

We owned it in Motley Fool Pro for that reason. The same reason Warren Buffett owns it as the reputation. It's solid. It's clean. And when this broke last year, we sold the stock on the... argument that more roaches would come to light. That's certainly been true not only this week, but in prior weeks as well with other scandals, and yet the stock is holding up just fine. This week, Best Buy reported better than expected second quarter profits in revenue and enthusiasm

for those great results. Got doused by a bucket of cold water from an unexpected source. Best Buy's CEO, Hubert Jolie said on the conference call that Best Buy's better than expected same store sales were not a new normal. And shares quickly went south, David. Deflating his own bubble there. He really did. Yeah, his five minutes in the limelight. That was in his prepared remarks, too.

He closed it out. He was trying to pull in Elon Musk. Musk is always talking down Tesla's stock, and it doesn't work. Right. Yeah. So maybe it's a good thing for Best Buy going forward. But I mean, there are some things to like here with Best Buy, even though he was basically saying that we're not expecting to have mid-single-digit same-store sales going forward. forward. That was an outlier with this quarter. But their domestic online comparable sales

were up 31%. They're on track to bring in over $5 billion online this year. And they still control close to a third of the U.S. Consumer Electronics market. So they are still the top dog in terms of market share. And what will be interesting to watch going forward is that they're in the process of rolling out. Their in-home advisor, basically an in-home consultation service nationwide. So, they're rolling that out this month, actually, in basically every major U.S. city. This is where people, for free, will go into your home and basically evaluate your home for any smart electronic devices, TVs, upcoming electronic installations. So certainly a bit of a business model shift there for Best Buy, but I think to stay relevant

in the age of Amazon, that's probably the type of thing they need to be doing. Well, it's the age of Amazon, and it's the age of the increasingly complex home. If you think about not just devices that we have, but also the advent of the smart home, I don't know. I kind of feel like if Best Buy can get the service part of this right, that could be a great opportunity because a lot of people, in the same way that a lot of people don't want to do their own taxes, a lot of people don't want to deal with super complex devices. Yeah, and Amazon itself is also testing that in-home consultation, I think in Seattle

in just a couple other cities. So I think best by getting out in front of that, getting it in front of Amazon with that same service, that's probably a smart move. Yeah, and it'll definitely be a long-term trend because you're going to want to tie together your security, your thermostat, your sound system, everything in your smart home. And that's going to be a long process. Do you think there was any conversation between Joe Lee and the head of investor relations before they put out that state? Do you think there was, at any point, do you think another executive said, no, no, no, no. This has been a really good quarter. Please don't ruin this

with honesty. Enjoy our moment in the limelight. Yeah. Yeah, who knows. Next quarter, hopefully he's deep briefed beforehand. It could just be, look, really underpromised and over-deliver in the course ahead. You know, maybe. Coming up, if you're looking for the worst performing part of the retail industry,

we think we may have found it. Details next. This is Motley Full Money. No shopping. Just window shopping. You're only looking. Welcome back to Motley Full Money, Chris Hill here in studio with Matt Argusinger, Jeff Fisher, and David Kretzman. Lululemon Athletica, getting it done on Friday. Second quarter of profits and revenue came in higher than expected.

And the company raised guidance. Shares rising, Maddie, and with good reason. Well, I'm not so sure, Chris. Really? I'm not so sure. On the surface, this looks great. This checks all the boxes. I'm a human being. I dug in a little bit.

And I said, if you look at the total comparable store sales of 7% of the surface, you know, sales of 7%, which in this environment, great number. But that includes, a lot of companies don't do this, but Lutl Lemon includes e-commerce in that number. So if you strip out the 29% increase in e-commerce, comparable stores are up just 2%. And by that 29% online number, most of that was propelled by a one-time online warehouse sale they did in July. You take that out, e-commerce was up about 15%. So I'm pouring a little cold water here on Lul-Lum. I don't mean to. But look, you can't dismiss the positive comps, especially. when you're talking about apparel retailing, and especially when you're talking about the

athletic category, which has just been decimated. So, I think there's a uniqueness to Little Lemon. They have that direct customer relationship to a lot of these sports retailing outfits don't have. You can find Nike, Under Armour Adidas, really every major sports retailer in department store. That's not the same for Little Lemon. That said, they're targeting $4 billion in revenue by 2020. Stock today trades, after this rise, trades about two times that and about 30 times earnings. I think investors are pricing quite a rebound, and I'm not sure it's actually quite there yet. You mentioned athletic apparel, and let's stick with that for a second, because on Tuesday,

finish line, which is a sports retailer, shares fell nearly 30 percent after they cut guidance. Last month, we had the CEO of Dick's sporting goods coming out and saying that the sports part of the retail industry is in panic mode. His words, panic mode? I'm sensing a theme here. Can't anybody here play this game? How is it that there's an industry where there are no winners whatsoever? That's the mystifying part to me. It's not that they are any of them struggling. It's that it appears that all of them appear to be losing. And I can't figure out how there's not one sports retailer out there that's doing a halfway decent job of operating.

Yeah, I think the challenge for any of these specialty retailers and especially these sports retailers is you need a reason to get people into the store. A lot of this stuff is just easily purchased online. You probably don't need someone to come to your home and give a consultation on what baseball glove to buy or what shirt to buy. So I think that's one headwin. When you have a base of stores, that really starts to bog you down, I will say that I think finish line and Dix are, there's certainly in a better position than Sports Authority was a year or two ago when Sports Authority was loading up on debt. They had over a billion dollars in debt and they just got to a point where they had to go into bankruptcy to move forward. And compared to some

other specialty retailers or department stores like Macy's and Coals, which have over $4 billion in net debt total, the finish line and Dix, they do have a little bit more flexibility because they are still producing positive free cash flow. They generally have a pretty healthy balance sheets. So they have some flexibility to navigate these waters and try to find something that sticks, but they need to find a reason to get people into those stores. Sports apparel makes up so much of their sales. You only need a basketball every once in a while, but you need new shirts frequently. And so many of those sales are going direct online, as you guys talked about with Nike going direct to the consumer. And then so many traditional

apparel retailers are adding sports apparel as well. So you're getting squeezed on two sides. Match Group is the parent company of Match.com, Tinder, and a host of other dating businesses. Shares of Match hitting a record high this week after it unveiled a month. monthly subscription service called Tinder Gold. They're charging $5 a month, Jeff. I'm assuming either a lot of people signed up immediately or there is a lot of enthusiasm for the prospects of Tinder Gold. Yeah, I'm a little surprised how much the stock did rise this week just on that news, because it's pretty minor. I'm not a matched user. I don't know that any of us here are, but you

know, when Facebook about a year before... Well, you're married. I'm married. And Maddie is married. So, I mean, maybe David should be the one way. I've dabbled, but not currently. A year before Facebook came public, I joined Facebook to research it and have been a happy user since, and I couldn't make that same argument with Match. So I don't know the service that well. But Tinder Gold is an add-on to Tinder Plus, where you already subscribe and pay for benefits,

such as getting to issue more likes of people each day, getting to rewind and change your mind on decisions, getting a passport so you can look in other geographies for matches. Tinder Gold for five bucks a month, you get more control of your profile. You get to see who likes you, which I never realized. They keep you from seeing that unless there's a match. But with Tinder Plus, you can see who likes you. So that sounds kind of compelling. All kinds of benefits.

The stock really did run on this news, but it's not that expensive. It trades it 30 times earnings, 25 times forward estimates. It's an interesting story, but not a real game changer. I think it's time to ring in our man behind the glass. Steve Brewery. Steve, any thoughts whatsoever on Tinder Gold? Because you're an investor. I am.

I'm also a happily married man, so I have no thoughts at all. None. Fair enough. We'll move on. The NFL season kicks off next Thursday when the Super Bowl champion New England Patriots. Yes! Once again, the Super Bowl champion, New England Patriots, host the Kansas City Chiefs. in time for the new season, Electronic Arts, announced a partnership with the NFL to create an

online tournament of its popular Madden NFL game. David, I feel like the line between e-sports and actual sports is getting blurrier and blurrier. Definitely. There's been a lot of news, especially this year with NBA 2K, with Take 2 Interactive, the NBA forming an e-sports league. But I really like the approach electronic arts is taking to e-sports. They're really taking a mass market approach where everyone can play regardless of your skill level, as long as you're over 16, you can compete in this tournament. You can compete against other players in the world, and eventually it'll get to essentially a playoff bracket where the top 32 players will represent each of the 32 NFL teams and eventually compete for a $400,000 prize pool around the

same time as a Super Bowl. But this approach with electronic arts where everyone can play, Everyone can essentially create their own fantasy team and then play that team against other players. I think that just drives engagement for the game. Those players will probably purchase different add-ons and other ways to experience the game. So I really like this approach for electronic arts. It's different than what Activision and Take 2 are doing where they're really focusing on those pro-elite players. Well, and this is the first partnership of this type that we've seen before where you have a major U.S. Sports League involved to this level. And as you said, 32 players will emerge one representing each team.

Am I the only one who really hopes the winner in all this is some person from Cleveland? Because I just feel like the Cleveland Browns have just had such a rough go of it for so long. I don't know. I feel like any win is a win, right? Throw my bone. Why not? All right. David Cretzman, Jeff Fisher, Matt Argusinger, guys. We'll see you a little bit later in the show. It's Labor Day weekend. But what do you? you doing on Tuesday, September 5th? Join us on Facebook for a live Q&A with Motley Fool co-founders,

David and Tom Gardner. It's at 12 noon Eastern. They're going to be taking your questions in a Facebook live video event. Just go to Facebook.com slash the motley fool. That's Facebook.com slash the motley fool. Up next, Tom Gardner talks international investing, small cap investing, and gives a preview of the brand new Motley Fool Investment Guide. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Tom Gardner is the co-founder, co-chairman of the board and the CEO here at the Motley Fool, and he joins me now in studio. Thanks for being here.

That's a lot of titles. It is a lot of titles. But what does it really mean to be CEO of the Motley Fool? I mean, the playful fun that is the Motley Fool. We don't really have a traditional CEO role at our company. Then what are we paying you for? I have no idea. I was going to say you've been busy, not just with your role as CEO, but also you've been

traveling a lot lately, and that's where I want to start this conversation, because you and a team of fools recently, you were in Tokyo, Hong Kong. You gave the keynote address at the Invest Fair Conference in Singapore, which was standing room only. Is it fair to say that the appetite for stock investing is growing around the world? I think that's true. It's easier to invest than ever before. There's so much information available to us. If you're researching a small-cap company when we started the Motley Fool in 1993, maybe you're going to the card catalog in a library, in a public library, honestly. And now you're just inundated with so much information about your business, and we think that's

a great thing. So, yeah, I think there's an increasing enthusiasm for investing. A lot of that is about passive indexing, which we think is a great thing. But certainly, And there are a lot of entrepreneurs and people who love to buy individual stocks around the world. So that made it fun. Was there anything you saw on your trip that tickled your investing brain? Was there anything that got you thinking about industries or companies in a different way? Or something that confirmed what you already think about a given industry or company in a way

that you thought, oh, this is even bigger than I expected? Well, certainly the most obvious thing to me is that markets across Asia. are very interesting for investment, for innovation. There's a lot of change in those societies. I think if you look at Japan, it's kind of upside down on population. It has a huge percentage relative to other countries of people over the age of 60. So I think that the 20-year-olds and 30-year-olds are starting to drive change in Japan now and bringing in the idea that you can be an entrepreneur, start a company and have it fail, and you're not humiliated because of that. So these cultures are changing. The markets are dynamic, and in a lot of cases, they're more attractively valued

than the U.S. market now. There's an investor we really love named Joel Tillinghast at Fidelity, and we were talking to some investors in Japan. They were saying, if you look at his small-cap portfolio, he has bought a lot of Japanese small-caps because they're really undervalued relative to the rest of the world or to the U.S. But I think the biggest thing is, wow, these are such dynamic places. They're changing, and I'm really excited that we're opening up Motley Fool businesses in Hong Kong and Japan to go with our existing business in Singapore because there's still too much short-term thinking everywhere. It's obviously not cultural. It's wired into our brains to think that we should be able to track the performance of an allocation of

our capital a week later or a month later or two months later when really the best way to make money is in businesses over years. And that's really what we're trying to teach people around the world. I was talking with our colleague Brian Richards, who was with you on the trip. And that It was one of the things that I think is sort of notable about the audience that you accumulated for your keynote address because one of the things Brian said about the trip, and in particular in Singapore, is the day trading mentality is still far more powerful than it should be. And of course, it changes country to country, but I would say Hong Kong and Singapore, there's a lot of day trading.

Now, in both those countries, there is no capital gains tax. And there's no dividend tax, I think, in both countries. So in a funny way, there's not the same level of downside that there is to engaging the markets that way as people do in the U.S. and the data just shows they lose, they lose, they lose again here in the U.S. when they actively trade like that. But in Japan, it's not day trading, actually. It's just getting people to take the money out of the walls of their house and start putting it into the market or getting it past the bank and into the market.

And that's, you know, that market was burned very badly in the 19-19. 1990s, and so it's understandable. But actually, if you compare the rates of returns of equities in Japan, you still want to be in that zone versus all the other category, asset categories. So long-term investment in businesses that have great leadership, that are innovating, that have excellent underlying economics, and just letting them ride 5, 10, 15, 20 years, whether it's Netflix or Mercado Libre or Arista networks or Shopify and all these great companies out there, just becoming a long-term owner anywhere in the world of great companies. is so superior to what we naturally tend to seem to do, which is either day trade or be too fearful to actually invest.

When we first met 20-some-odd years ago... You had the same head of hair, Chris. As did you. That is so true. Yeah. Your approach to investing was very much focused on large-cap companies. Cash is King, that approach. Lately in particular, you've been focused on smaller companies.

And I'm wondering if part of the attraction for that is that... that institutional investors really can't get into smaller companies in the way that individuals can. That's certainly part of it. David has always been passionate about rule breakers and companies changing the world and high insider ownership and high growth rates. And those tend to be truer of smaller companies. And we certainly learned this from William O'Neill at Investors Business Daily early on. and Peter Lynch, and Buffett has said it himself. Gosh, the best way to make the most money

investing is to be invested in small companies for the long term. So I think there's a lot that's happening in the world now with passive indexing that's flowing money into the Amazon's, Apple's, Facebooks, Netflix, Google, Microsofts. And why not? Those are five, six of the most incredible businesses in the history of the world. But they're also now capitalized, you know, $400, $500, $700 billion. The chances that they'll double, triple, quadruple is very relatively low over the next five to seven years. But that's not true for small caps, many of which have been left behind. So, yeah, institutions aren't really probing those companies and looking around for where to invest. That leaves a great opportunity for us.

It was back in 1996 that you and your brother David. You've done your research here. I try to. Every once in a while. 1996. Ninety-six. Twenty-one years ago, you and David wrote your first book, Motley Full Investment Guide. Next Tuesday, September 5th, the third edition of the book,

is being released. First, does that give you pause at all that a book you wrote 21 years ago has that kind of staying power? That's a great question. I mean, the only humble way to answer it would be, I'm constantly surprised and delighted by what's happened. On the other side of it, just as a business thinker, looking at the world, we have a very unique name. The year is 1996. There's a lot of day trading in the U.S. Mutual funds are considered the safe place to invest, even though they're charging 2 percent a year in fees. We come into the middle of that and teach the world what our dad taught us about investing in stocks and are kind of one of the first entities out there to talk about indexing as a great

low-cost, very tax-efficient way to get exposure to the stock market. So the mix of indexing in stocks and the Motley Fool brand, it was pretty unique in 1996, And obviously, it's a delight 21 years later to have the third edition coming out. And I think this is the best edition. A lot of work has been done by David Mead, but by people at the Motley Fool as well, really deepening the research and upgrading that book and making it relevant with company examples that are here and now. So yeah, I'm excited and excited about the way it can serve investors and help them invest better.

Obviously, there are so many changes to the investing world that have happened since 1996. have so much more information at their fingertips. Where do you see the balance of power now? Because certainly in the mid-90s, individuals were really challenged to do it themselves. It seems though, like despite the increase in transparency, despite all the advantages now relative to then, there are still some significant challenges for individual investors. I have mixed feelings on it. I think overall, so much progress has been made, so I feel very, very pleased with that. Something that's just happened recently in some of our services that Bill Mann and Andy Cross, our chief investment officer and I and others have been advocating

is for people to begin negotiating their discount brokerage fees lower. I forgot to mention when we were talking earlier about traveling outside the U.S., but I learned in Singapore in Hong Kong that its tables is absolutely essential that you negotiate your brokerage fee. No one would pay the listed price of brokerage fees. So then we came back and started to test it among our membership base, and we found out we started getting notes back for people. Somebody said, hey, I just want to let you know, my broker gave me 150 free trades. You know, that's hundreds and hundreds of dollars. They just get, well, it turns out that broker's transactions are essentially free for the broker to process.

I mean, we're in a digital age where, and so I think that the information flow online, getting in the right community, feeling comfortable, asking questions, it puts the advantage so much in the hands of the individual now. It's very easy to beat the vast majority of mutual funds. They have a lot of restrictions to how they have to manage that money. So I'd say the combination of passive indexing and getting into a great online community and basically looking at everyone in the world of finance as the person who is here to serve you. So you should challenge the prices, challenge what they're offering. And I'll close by saying, I love Nassim Teleb's comments about skin in the game. And one of the most important questions you can ask anyone.

one in finances, the advice that you're giving me, are you taking that advice yourself? And what you'll find, unfortunately, still, is that it's not true throughout a lot of the Wall Street firms and larger financial services firms. But I think it's favoring the individual now who's willing to get online and ask questions. You mentioned your dad a few moments ago. And look, there are a lot of investment books out there. But I think one of the things that makes the Motleyful Investment Guide unique is the fun factor, because that was so much, of what your father did in teaching you and David about investing was essentially saying, look, this doesn't have to be boring math. This doesn't have to be homework. You can actually

have fun doing this. The world of business and the challenge of investing, they're actually both games. They have very serious consequences. If you do something wrong at a business as a leader, it's going to impact the people that are working at that company. If you make bad decisions in your investment life, it will impact the choices that you have in your later years. So they're very serious and consequential, but they're games, and there are a lot of players playing every day throughout the day. It's the one game that's really 24-7 around the world and with a tremendous amount of information that you can study, just looking through the financial

filings of small-cap companies in the U.S. over the last six months. I've spent a lot of time because this is an area of the market that is not performing as well as the largest of the companies. And historically, that should be reversed. So I think small cap companies are really attractive right now. And just reading through all of the businesses out there, it's just completely fascinating. It's such a fun game and it's a competitive game. And I'm happy that we get to play it every single day. Over the past 20 years, certainly e-commerce and consumer tech have been so big in our

lives and so big for investors when you think about Amazon, Google, Facebook, three companies, by the way, which were, two of them weren't even around. And the third one, Amazon wasn't a public company when you wrote your first book. When you think about the next two decades, where do you find you focusing your investing attention when it comes to industries? Well, in the U.S., 70 percent of the economy is driven by consumer spending. And that should mean that 70 percent, something in that, you know, approximate range. of businesses that are great investments should be consumer-facing. And so it starts with the consumer, and then it jumps to technology again because that's

disappearing as a word. It's like brand. Well, everyone has a brand. Is it a good brand? Is it a good technology or bad technology? I don't know, but it's all technology at this point. But if you think, what are the trends that are now emerging in technology? And we all know one of them is automation.

So, you know, a company that I've been recommending and investing in myself is a company that irobot. I think this is really their time. They've been flat as a company from 2005 to 2016 as a public company, 11 years of zero returns. And now the business is really performing. The stock is really performing. So I think automation is a very big trend and artificial intelligence, of course. And then the second one I think is that I'm interested in is genetics, medical diagnostics, personalized medicine. I think a lot of the breakthroughs, of social media are kind of out there. I'm not saying that augmented reality and virtual reality can't be transformed. I think they can. But I think the next stage, particularly with the age

of the population in the U.S., is toward health care advancement and innovative technological breakthroughs there. And I think there will be a lot of great winners in Motley Fool services over the next 15 years there. It doesn't hit bookstores until September 5th. But pre-orders online already have the Motley Fool Investment Guide on Amazon's bestseller list. You can get even more of a pre- view from Tom and David Gardner. You can just go to book.fool.com. That's book. dot fool.com. Tom Gardner. Thanks for being here. Chris, what are your largest two holdings in the Hill portfolio? One is Amazon and the other is Starbucks. Got it. And which one are you more

optimistic about over the next five years? Starbucks, because I don't see how the delivery system of coffee is going to change in the next 25 years. Awesome. Thank you. Up next, we'll give you an inside Look at the stocks on our radar. You're listening to Motley Fool Money. All right. Before we go on, I want to say thanks to Casper. Casper is an online retailer of premium mattresses for a fraction of the cost. It's made of supportive memory foams for a sleep surface with just the right sink and just the right bounce. Plus, it's breathable design sleeps cool to help you regulate your temperature through the night. Buying Casper is easy. You order online. It's delivered right to your door in a compact box.

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Terms and conditions apply. 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 yourself stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill, here in studio. Once again with David Kretzman, Matt Argusinger, and Jeff Fisher. You can check out past episodes of Motley Fool Money and all of our podcasts. Just go to Podcast.com.

You can subscribe on Apple Podcast, Stitcher, Spotify, Google Play. Take the Motley Fool podcast anywhere you go. And hey, this weekend, we've got a bonus episode of our daily industry focus podcast, all five hosts of Industry Focus in the studio doing a preview of the fall. You definitely want to check that out. Before we get to the stocks on our radar, we're, of course, going to go to our man behind the glass, Steve Broido, to hit you guys with a question. But first, Steve, coming up in the month of September,

You've got some surgery ahead of you. You're getting your tonsils out? I'm getting my tonsils removed. It's been 42 years coming, but I'm getting my tonsils taken out. Our email address here is Radio at Fool.com, and we always welcome your questions about stocks. But in advance of Steve's tonsill surgery, we'd love it if you have. Tonsillectomy for the record. Tonselectomy. Any advice you have for Steve on the recovery process, if any listeners have been through this as an adult, getting their tonsils out, Radio at Fool.com. any help you can provide Steve Brodo. We'd greatly appreciate it.

We too. Maybe. All right. David Kretzman, you're up first. What are you looking at this week? Well, we've been talking about retailers. One retailer that I'm looking at is Ulta Beauty, ticker ULTA. Stock is down over 25 percent over the past few months. And even though this has been an incredible performer in terms of the business and the stock over the past several years, the market has really turned pessimistic with the company all of a sudden. After its latest report, the stock got hit once again, but I'm looking at this report, and I think

there's so much to like here. Sales were up over 20%. Same store sales up nearly 12%. Earnings per share up 28%. And in this age of Amazon, I think Ulta can hold up on its own and continue to expand and thrive. They have, they basically combine a wide selection of cosmetics. They also have a lot of exclusive and private labels within that grouping of cosmetics. They also have in-store services like their salon, which saw same store sales up nearly 8% this quarter. They have over 25 million rewards members, their e-commerce grew over 70% this latest quarter. So now with the stock hit and below 30 times trailing earnings, I think this is an attractive time to take a look. Steve Roedho, question about Alta Beauty?

So if a stock like Alta Beauty drops so significantly, so quickly, what should my first reaction be and what should I do or not do? Well, I think a lot of it has to do with expectations. So try to figure out if the market is onto something or if this company can hold up and continue to to thrive. And I think that's ultimately, no pun intended there, the question with Ulta or any other company that has seen its stock get hit significantly pretty quickly. Jeff Fisher, what are you looking at? Lowe's Home Improvement tickers, LOWW. The company has about 8% of its store base in Texas, and a lot of those stores in Houston, they're already sending 500 truckloads of supplies

to the area. Almost all of their stores in Houston have reopened. And in the past, hurricanes have been a consistent contributor to same store sales growth for the company for several quarters to go forward. So the stock trades it only 15 times forward estimates after having kind of a rough summer. And so this may, through tragedy, help the company a little bit. Steve, question about Lowe's? I feel like Lowe's is always sort of playing second fiddle to Home Depot. How can they change that? I think that's true. Home Depot is a famously efficient operator.

Lowe's hasn't really taken their best practices yet, but they have improved considerably the last couple years, and the stock has actually done better than Home Depot in recent times. Matt Argusinger? What are you looking at this week? Being a bit of a homer on this one, but I like Duncan Brands right now. Tickers DNKN. It's the, of course, the owner of Dunkin Donuts, but also the Baskin Robbins chains. Mike Olson, who runs our Income Investor Service here at the Fool. It's one of his favorite dividend stocks right now. Look, America runs on Duncan. We all know that. But I think there's lots of room still for Dunkin' Donuts to expand across the U.S. It's only

entirely a franchised business. So it comes with high margins. Sells two addicted products, coffee and sugar, which I love. Trading for about 22 times earnings, not cheap, but not expensive either, and you get a 2.5% dividend yield that I think they can grow double digits going forward. Steve, question about Duncan Brands? When you have these stores that are connected, like Dunkin' Donuts, you'll see them connected to a Baskin-Robins. There's like a pass-through secret route. How does that work? How does that work at the same time? It seems like a dessert and a breakfast. That doesn't work well for you. They usually are. I honestly don't like the donut ice cream.

connection, and so I never buy ice cream at the same time as buying donuts. So I kind of hope they modify that and just focus on Dunkin' Donuts going forward. What do you like, Steve? I'd probably go lows. All right, David Krasnman, Jeff Fisher, Matt Argusinger. Guys, thanks for being here. Thanks, Chris. Thank you. Our engineer, Steve Broido, our producer's Matt Greer. I'm Chris Hill. We'll see you next week.