Motley Fool Money - The Power of Netflix

Episode Date: January 22, 2021

Netflix hits an all-time high on strong subscriber growth. Bank of America, IBM, Intuitive Surgical, and Procter & Gamble slip on earnings. Intel stays flat despite surprising PC sales. Lumentum joins forces with fellow laser maker Coherent. Google grounds its balloon initiative. And Fiat Chrysler and PSA Group complete their merger and take on a new name: Stellantis. Motley Fool analysts Ron Gross and Jason Moser discuss those stories and share two stocks on their radar: McCormick and Schrodinger. Plus, Professor Erin Meyer talks about her best-selling book, No Rules Rules: Netflix and the Culture of Reinvention. Learn more about your ad choices. Visit megaphone.fm/adchoices

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which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. I'm Chris Hill, joining me this week, senior analyst Jason Moser and Ron Gross. Good to see you, as always, gentlemen. What are you doing, Chris? We've got the latest headlines from Wall Street. Bestselling author, Aaron Meyer is our guest.

And as always, we've got a couple of stocks on our radar. But we begin with another all-time high from Netting. Netflix. The streaming video giant added 8.5 million global subscribers in the fourth quarter. That is 2 million more than Wall Street was expecting. Shares of Netflix up 15% this week, Ron, and hitting a new high. Hello, Queens Gambit, which I loved, by the way. I highly recommend it if you haven't seen it. Definitely exceeded expectations. But interestingly, that 8.5 million subscribers are in line with what we saw in the fourth quarter of 2018 and 2019. which means things are probably returning more to be back to normal versus what we saw happen

in the early stages of the pandemic where they saw a flood of new subscribers come in because we all had really nothing to do but stream and then watch TV. So management is kind of tempering expectations. They said investors should expect just 6 million subscriber additions in the first quarter as it continues to adjust to that pull forward of subscribers earlier in 2020. And I think I should note, you know, there's nothing wrong with pull forward. Sometimes when we discuss pull forward, we talk about it in terms of a negative. But getting money earlier than you expect to get money can be a wonderful thing, especially if you have a sticky business like Netflix with high retention rates. So kudos to them for pulling in money quicker than they anticipated, obviously for a tragic reason.

But it did help their business. They passed the 200 million subscriber mark for the first time. And this is really what I think investors are reacting to. Management said its free cash flow will be close to break even in 2021, and that will allow them to stop relying on debt to fuel its growth. They've got $8.2 billion in cash. They've got an untapped credit line. They will no longer need external financing, and they're actually considering stock buybacks. So their investors are applauding that for sure.

I'm glad you mentioned that last part because that's the question I have. I think it's great that they don't see the need to raise more capital. And I think you're right, that's why the stock reacted the way that it did. They haven't bought back shares since 2011. If you're a shareholder, do you want them buying back shares at this valuation? Well, I certainly wouldn't have wanted them to do it for the last nine or ten years, where reinvesting capital into this business to create content was essential as it will be going forward. So I'm actually not convinced that they're not going to need external financing ever

again. We'll keep an eye on it. You know, stock's been lofty, heftily priced for quite some time. If they want to do selected buybacks, fine. But I, as a shareholder, would probably not want them to use capital that way. Keep your powder dry, invest in content, keep growing the business. It's really not necessary to institute stock buybacks at this point in time. From entertainment to surgical robots, fourth quarter profits and revenue came in higher than expected for intuitive surgical. Shares falling just a little bit, Jason. It's not a cheap stock.

It almost never has been, so I'm assuming at least a little bit of this sell-off we saw had to do with the valuation. Well, I mean, let's be clear here, man. I mean, surgical robots really sounds pretty entertaining. So maybe there's a partnership there. I'm not sure. Intuitive Surgical is a phenomenal business. I mean, this is a wonderful business.

First mover in its space. It's done really well through this current situation. I think that while it's still primarily a U.S.-centric business, we certainly are seeing the benefits of this global reach. The fourth quarter revenue for 2020 was 1.33 billion. That was up 4% from a year ago. Non-gap earnings up incrementally. But the balance sheet is just, this kind of fits in with that.

Jamie Diamond Fortress Principles, right? They have a Fortress balance sheet with just under $7 billion in cash and short-term investments. And so with Intuitive Surgical, it boils down to getting those Da Vinci robots into hospitals and then selling the instruments that go along with it. And so we look at things like procedures. Fourth quarter procedures were up 6 percent worldwide versus the fourth quarter a year ago. They did place 300. 26 more systems. Now, that was down a little bit from a year ago, but they grew overall the Da Vinci System placement to just under 6,000 systems now placed. They are seeing impacts from COVID. It's been very regional, what they've noted in the call. It is not the same everywhere.

In regard to the system placement going forward, and perhaps some of the trepidation in the market today is based on this, they saw a lot of budget exhaustion towards the end of the year. money being spent to sort of exhaust those budgets. But the budget setting for 2021 is a bit more nebulous. The hospitals are just not quite sure exactly how to allocate all that money. So there may be a little bit of holding off towards the back half of the year. And another interesting thing, they did know the average selling price for these robots was down slightly. Part of that was due to a lower mix of systems placed in places like China and Japan. But they've also introduced, and this is really interesting, they've introduced

these extended use instruments, which are really great for customers. It's going to play out on the company's financials a little bit negatively, but ultimately, it is the right thing to do for customers. I mean, it is going to make doing business with intuitive surgical a little bit easier. It's going to extend those relationships. I think it's good long-term thinking for this business, and we remain to really like this company for the long haul. They just continue to innovate and do tremendous things in the space. You know, it's interesting. It's almost opposite of the pull forward we were talking about with Netflix, where folks not only delayed purchasing the Da Vinci system during COVID, but many people delayed elective procedures that's Da Vinci would you typically take care of. So we could actually see a spike, I think, in kind of those delayed or postponed purchases and procedures once we truly get to the other side of the vaccine. It'll be interesting to watch. I think that's very fair to say.

IBM's fourth quarter revenue fell more than Wall Street was expecting. And in retaliation, Wall Street sold off the stock. Shares of Big Blue falling 10% on Friday. You tell me, Ron, how bad is it? You know, revenue clearly disappointed. Earnings in and of themselves weren't so bad, but I think people were really disappointed in what they saw. With sales being down 6.5% overall, that's the fourth straight quarter of declines. All main segments were weak. Software, which is their biggest segment, was down four and a half percent.

But within that segment, the Cloud and Data Platform division grew 9 percent, and that was led by Red Hat, which you'll recall that they acquired back in 2018 for $34 billion. Red Hat was actually up 19 percent. So there was some interesting growth there. Global tech was down 5 percent. Global services, down 3 percent. Their systems business, down 8 percent. So, Red Hat, the only bright, shining spot here. And that's exactly the reason that they're spinning off the managed infrastructure services units so they can focus on cloud. But there's a lot of competition in this space. Perhaps you've heard of Microsoft and Amazon.

So a couple of little companies that kind of dominate there. Perhaps they can differentiate themselves. They're using what they're called a hybrid model, which is a combination of on-premises storage and cloud storage. I'm not sure that actually gets it done. But we are seeing growth in Red Hat, so growth is growth. So if they can continue that, then perhaps they can be an unlocking of value as a result of the spinoff.

Shares of Bank of America falling a bit this week, despite fourth quarter profits coming in higher than expected. Jason, we talked recently about JPMorgan Chase led by Jamie Diamond. You and I were talking earlier this week. It sounds like you think that maybe B of A and Bray and Bray Ryan Moynihan, not quite in that class, but maybe a close second. Yeah, and maybe that's just due to time spent. Jamie Diamond has certainly been in his position with JP Morgan a little bit longer than Mr. Winnihan has with Bank of America.

But yeah, he's in that same class, I think. And it shows. I mean, it's a bit of a trick to really square these results up in the release because they referred to one of the worst economic environments and modern memory, and yet they finished up the year stronger than before the health crisis. And I think that's just fascinating to sort of think about, but we've seen similar trends with Bank of America that other banks have reported deposits were up 23 percent, loans down 2%. They did grow deposits by $361 billion.

And given the stimulus and what they refer to as the velocity of money, or essentially the rate at which money is exchanged here in the economy, they feel very good about the deposits that they have. And it puts them in a good position going forward. able to continue returning capital to shareholders around 4.8 billion slated between buybacks and dividends in the coming quarter. Again, one of the big stories for these banks recently has been reserve releases, and they were putting a lot of money aside in case of loans that were written off.

They were able to release $828 million in reserves here over the quarter, which certainly benefited the bottom line, along with expenses declining. around $474 million from the previous quarter. And so you couple that with a very strong wealth management business, record client balances of more than $3.3 trillion, up 10%. They are really doing a lot of great things. And just a couple of quick notes here on the digital front, too. They now have 39.3 million active digital banking users.

That's up 3%. 30.8 million active mobile banking users. That was up 6%. in Zell. I mean, man, we talk a lot about PayPal and Square, but Zell, 12.9 million active users sent and received 157 million transfers worth $43 billion. Chris, that was up 65% and 79% respectively. So, hey, they're getting it done in all sorts of ways here at Bank of America. Good, good core. Coming up, one of Google's moonshots has officially been grounded. Details coming up. So stay right here. You're listening to Motley Fool Money. Welcome back to

Motley Fool Money, Chris Hill here with Jason Moser and Ron Gross. Intel's fourth quarter report was helped by stronger sales of personal computers than expected, but shares of Intel flat over the past week, Ron, didn't really boost the stock. Yeah, results not great. They did beat relatively low expectations, and they did increase guidance, and they did increase the dividend by 5%. So they're making some moves here to try to appeal to investors, but investors are not impressed. Revenue down 1%. Data Center group, down 16%. But as you mentioned, the PC-based client computing group was the highlight, up 9%. That's by far the biggest segment of this company. So, interestingly, they did put up some growth there, but their operating margins narrowed.

Their earnings fell, but they were significantly higher than expected. As we talk about, it's always an expectations game here. So all the earnings were down. They did beat. As far as the stock selling off. I think the main thing that's going on here is that incoming CEO, Pat Gelsinger, said, Intel would focus on regaining the company's lead in chip manufacturing. He said, I'm confident the majority of our 2023 products will be manufactured internally. Investor did not want to hear that. In fact, some have been calling for that business to be spun off or sold. That was not welcome news for the investor base. And I think, you know, the stock sells off as a result.

We've got a deal in the laser industry. Lumentum is buying coherent in a cash-and-stock deal worth $5.7 billion. Shares of coherent up 35% while shares of Lumentum fell in the wake of this deal. Jason Wall Street thinks Lumentum paid too much, but I get the sense that you don't. Well, I mean, they probably paid a little bit more than they had to, but I do think we are seeing a lot of consolidation in the space these days with these lofty valuations that begets those high prices. And I'll get to that in a second. But in regard to the actual deal, I mean, this, as you mentioned, this is about Lamentum getting coherence laser business. And Lamentum is the

market leader in what we call vertical cavity surface emitting lasers, V-C-SEL. And that's really an important part of the entire 3D sensing market. And as these devices move towards more sensing and whatnot, but they have a small part of their business, which is focused on lasers. This is going to give them a much bigger part of their business that focuses on lasers. Coherence, photonics and laser business focuses on microelectronics, precision manufacturing, aerospace defense markets. It is a big deal, $5.7 billion in cash and stock. That values coherent at around 57 times EV to EBITDA. Now, that's reflective, though, of less than normal results, given the current state of affairs. And for coherent, I mean, this is a business with 75% of

sales done outside of the U.S. And I think that Lumentum, it's an interesting situation there. They make about 26% of their money from Apple, at least as recorded in 2020. And that relationship is going to continue. So it diversifies them away from that relationship a little bit, which is nice. But back to the valuations. I mean, when we look at the consolidation in the space here recently, Nvidia acquiring Arm, AMD acquiring Xilinx, Marvell acquiring N-Fi, now Lumentum acquiring coherent, the interesting commonality in all four of those deals, stock and cash deals. These companies are using their stock prices, their lofty prices as a form of cheap currency. I like that in this case. It expands the balance sheet. It lets them be a little bit more bold on those offers.

And I think long run, this is a complimentary deal that should work out well. Shares of Procter & Gamble down a bit this week, despite the fact that second quarter revenue grew 8%. Ron, help me out. P&G makes products for the home that everybody needs them. They do have some pricing power. I'm a little surprised this stock hasn't done better over the past 12 months. Yeah, strong quarter.

They did increase guidance. Now, it's not a high growth business, so you can't pay up too much for this company. So even when you do see a nice run, it'll tend to pull back if the growth just doesn't present itself. That sales up 8%. That's a good number. It was led by home care, which is up 12%. And health care up 9%, as typically we're all home stuck still because of the pandemic. The rest of the segments did well, too, 5% or 6% growth in each of them. Again, not stellar numbers, not technology kind of numbers, but solid margins widen. And in core EPS is what they call their adjusted EPS number, which adjusts for some things,

up 15%. So all is good. Earlier this month, interestingly, the FTC put a stop to P&G acquiring a women's razor maker named Billy, and that's for competition purposes. P&G already owns Gillette, Venus, Braun. So an interesting thing to note there. But they're going to be buying back stock. They're continuing to return lots of money in dividends.

They're a dividend aristocrat yield at 2.4%. It's a wonderful company. It's just not a gangbuster growth company. Guys, we've talked before about Alphabet's other bets division. This week, Google's parent company cashed in their chips on one of those bets. Loon, the company that provides internet service via hot air balloons is being shut down. The company said in a statement, the road to commercial viability has proven much longer and riskier than hoped for. Jason, if the folks at Google can't make this work, I don't know. think anyone else should even try at this point? Probably not. Probably not. I think this is honestly

what makes the other bet segment in their moonshot. So darn interesting and compelling, though. I mean, they know that most of these ideas aren't going to work out in their original form, but the lessons gleaned, the ideas that are born from these ideas can be compelling. And so if you look at the other bets, let's look at the other bets segment, just big picture. In 2019 brought in $659 million in revenue. That was actually up 11 percent from the previous. previous year, but the operating loss was $4.8 billion. I mean, this is not a part of the business geared towards immediate profitability. I guess one could argue, maybe it's not even geared towards long-term profitability,

but we'll see. I think this Loon concept was interesting. I mean, they launched it back in 2013. Seems like a lifetime ago, and certainly things have changed. But it did open up some iteration, though, in a new project they're working on now called Project which is trying to bring connectivity to underserved places via optical communications or essentially beams of light. They got this optical communications data, these lessons from this loon project. So, you know, maybe this didn't work out, but maybe it gets them to another place where they

can serve the world in a better way. I like that they're trying, Ron. Sounds loony to me. Jason Beaux. Jason Beaux. We'll see you later in the show, guys. Up next, we're going to go inside the offices of next. Netflix with bestselling author Aaron Meyer. Stay right here.

You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Netflix is becoming known not just for great entertainment, but for great corporate culture as well. Aaron Meyer is a professor of organizational behavior at InSiod, one of the largest graduate business schools in the world. Last year, She and Reid Hastings co-authored the New York Times bestselling book, No

Rules Rules. Flicks and the culture of reinvention. Recently, she talked with Motleyful tech analyst Tim Byers about several key topics in the book, including feedback. In the workplace, a lot of us don't enjoy giving feedback. It has to do with a section of the brain called the amygdala. Professor Meyer explains. The amygdala is very focused on making sure that you don't get kicked out of the tribe, right? Because of course, you know, our humanness makes us look for safety in numbers. So when you give someone feedback or if I receive feedback, my natural reaction, like you tell me, you know, like maybe you say, oh, my gosh, Aaron, your answers were way too long on our interview.

Well, then my amygdala starts sending off a siren, right? Saying, oh, my gosh, Tim's going to kick me out of the group, right? And my response is then either fight or flight. Either I defend myself, it's not true. Tim, my answers were very concise. Or I flee. I think I'll never talk to that guy again. Right. So we all know that.

We all know that if we give honest feedback, that there's always that fight or flight reaction that may kick in to the person that we're giving feedback to. Yet we also all know that if we give feedback, honest feedback, that it ups the performance of those around us. One piece of study showed that 72% of employees across the U.S. wish they got more feedback and feel that they would do a better job if they got more feedback. So the question I think is then, okay, if we're bought into that and we're hoping to create an environment of feedback, what can we do in order to actually make it happen?

I saw a couple of very interesting mechanisms at Netflix. The first one is very simple, which is that at Netflix, feedback is often on the agenda. So if you have... First thing on the agenda, right? They're the first or the last. Either it's first or last. Got it. So if you and I meet monthly, Tim,

and that doesn't mean that I'm your boss or you're my boss. Maybe we're just colleagues, right? But if we meet monthly, then likely we put feedback on the agenda ahead of time. And when we get to that, I know you're going to tell me something that I can do to up my performance. And I'm going to tell you something you could do

to up your performance. There's also just feedback meetings that are often randomly on the agenda. So that's a very important mechanism because most of us will choose not to give feedback unless the right moment arises, right? But when it's on the agenda, suddenly I'm like, okay, well, this is that opportunity.

And the other thing they do, which I have to say, I just thought was absolutely crazy when I first heard. I was like, oh my gosh, why would you do that? They do these 316, feedback dinners. This is amazing.

You have to, yeah, let's talk about this because this is like bananas. It's completely bananas. Yeah, I love this. Let's get into this. What they do is on a, on an, no, let me say, there's no rules and process at Netflix, basically. So that doesn't mean that you have to do it, right? It's not a rule.

But most managers on maybe an annual basis or so, set up a 360 feedback dinner where they go out with their team for several hours, usually in the evening over a meal. And during that meal, like, I'm up first, right? So we go around the table and each person at the table tells me what they feel I should do differently, right? And then we move on to the next person. You know, I guess maybe like you, I was like, when I heard that, I thought, well, what's the point? Right? Like, why do you have? to drag my weaknesses out in front of everybody. Feels like a firing squad.

Couldn't you tell me in a quiet corner? Yeah. I actually came to see that this is a very interesting mechanism, and I actually started doing it even with my own teams at INCIAD, because when one person gives you feedback, you never know, is it about that person or is it about me? Right? But when you're together as a group like that,

and you know, you all know, you've come together with you, with the one goal of helping the others succeed. That's my only goal to help you to be more successful, right? So then we go around and we start with you, Tim, and you say, well, Aaron, I think your answers are way too long. Please be more concise. And then we move to the next person. And Sally says, you know what?

I totally disagree with Tim. I love your answers and I wish you'd talk more. And so we learn as we go around, right? what feedback is just about some individual? And then what's the feedback that everybody on the team thinks I need to be doing differently? So I actually found people said that that was the greatest developmental moment of their lives, getting that feedback, having those feedback dinner. So it's crazy, but maybe even some of our listeners will try it out.

It's really interesting. And the thing I just want to double down on what you just said there is that when you have feedback like that in a group, the themes start to emerge. You don't get that unless you have the courage to do something like that. Something else I wanted to highlight, maybe get you to talk about a bit, and then we're going to pivot to some other portions of the book here before we have some questions. It has to be that the person at the top has to be courageous enough to accept the feedback. And there are plenty of stories that you highlight in the book where Reed actually gets feedback, and he's not just accepting of it, he's grateful for it.

There's one in particular I want you to highlight where he was very dismissive in a meeting and he got called out on it. That's right. So this is actually, I think probably the most important thing for any leader who wants to create a culture of candor. You know, don't start by focusing on getting your managers to give feedback to their employees. Focus on getting people to give feedback to you. to your managers.

Because once the feedback goes up, then the rest is easy. And of course, the upward feedback is the most important, right? I mean, if a lower level person has a blind spot, it's likely the manager or someone else is going to tell them. But when you get to the top of the organization, there's no one telling that person anymore about those serious blind spots that they have. So Reed solicits feedback frequently. and when he receives it, he acts gleeful.

He really, he celebrates it. And I think every time I met with him, he was showing me an email of some courageous individual in the company who dared to tell him something that he should be doing differently, right? And they also, I mean, all managers at Netflix, from my perspective, seem to share their 360s openly with their employees, especially what they need to work on so that employees can see, you know,

this isn't something to be ashamed of, right? We all have things that we're working on and if we're courageous to give that feedback, that'll be really appreciative. So the story that you're talking about, but I actually, you know, there's many, many stories like that. There are, yeah.

With lead was one employee who was, I think, five levels below him, who felt that he was being dismissive and sarcastic with the head of human resources Patty McCourt at the time in a meeting. And she went home that evening and she remembered what you said earlier, Tim, you know, at Netflix, it's disloyal to not get to have feedback that you could give to somebody that could help them or help the organization and to choose not to give it.

So she sat down and she wrote an email to this CEO saying, dear Reed, I hope you don't mind, but I had some feedback for you. And I know you're really trying to encourage people at lower levels to speak up. But the way you spoke to Patty today, that made me feel like I don't think I want to speak up in future meetings. So then, you know, he immediately sent an email back. Thank you so much for your courage. And, you know, then talked about it to a lot of people. So as managers, we really need to start there.

Yeah. Modeling that behavior is really important. Let's pivot to quickly on transparency because one of the other values you talk about in the book, is essentially opening the books and being really transparent with people. So the themes are, as I've sort of, we're pulling this together here, so you have talent density, really amazing people. To keep them amazing, you have to have a culture of candor. And if, you know, you have to demonstrate, it seems to me, as we're talking about opening the books, there's this feeling that from read on down, you have to demonstrate trust with employees consistently.

Is that fair to say? Talk a little bit about the principle of opening the books at Netflix. Yeah, well, I love this. This is actually, I think, my favorite learning from all of the research that I've done, because I've never met a manager who didn't say that he believed in organizational transparency. Right. I mean, everyone thinks that's like a no-brainer. But I can tell you if you really take it to, you really mean it, it's not a no-brainer. And a lot of the things that Reed is doing at his organization, you know, just speak volumes to that. So, for example, Netflix is the only company that is publicly traded, that I'm aware of, that is publicly traded on the stock exchange where they tell their employees before the financial data is released what their financial data is for the. Yeah, what their earnings are going to be, right, right. And that's considered, of course, reckless at most companies to do something like that.

but Reid feels that anyone who works at the company should feel like that's my company. So I know before others know, right? And then he did all sorts of crazy things. I told that story in the book about how early on Reid and I were working on a chapter. And I wrote like just a draft. And I sent it to him for feedback. And the next week I was in Amsterdam interviewing one of the Netflix employees. and he said, oh, that point you made in that chapter.

And I was like, what? And he saw my puzzle and he said, oh, yeah, Reed sent that chapter out to all of us. Yeah, all 700 managers. I said, to all employees? He said, no, no, just to the top 700 managers. Yeah. But that's the kind of thing he does.

He just makes these like kind of knee jerk symbols of I'm an open book, right? I just open up and I show you everything that we have. going on here. And then employees feel flooded with these feelings of, wow, my manager, my boss, my company, they trust me. And that leads me to really try to behave as responsibly as possible, right? So that transparency leading to responsibility. The book is No Rules Rules, Netflix and the culture of reinvention. Check it out when you get a chance. You're not going anywhere, are you? Andy Cross and Ron Gross are coming back with a couple of stocks you just might want to put on your watch list. Stay right here. This is Motley Fool Money.

Leaves a falling much of light. Stay for me to go. 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 once again with Jason Moser and Ron Gross. Guys, last year, a few years. Fiat Chrysler announced it was merging with PSA Group, the parent company of Pugé. And this week, the combined automaker got a new ticker symbol to go with the new company name, Stalantis.

The company says the word Stalantis is derived from the Latin term, meaning to brighten with stars. It started trading this week under the ticker symbol, STLA. Jason Moser, ask your doctor if Stalantis is right for you. This is a business that has icon. iconic brands under the umbrella of the parent company, Fiat, Maserati, Alpha Romeo, Jeep. Why are they going with something like Stalantis? You know, Latin is such, it's a root for so many beautiful languages.

Sometimes you really just got to know when to pivot and go the other direction. I just want to be one time in the room where the company, the advertising company is pitching the names and they're like, we've got three choices for you guys. I just want to see how that meeting goes. And again, they should have just stuck with some version of Fiat Chrysler, PSA. But anyway, our email address is Radio at Fool.com. Got a question from Ronald in Arizona. He writes, I'm 40 years old with probably 30 plus years till retirement.

I'm in the growth part of my investing life. But with millions of other people retiring or planning to retire soon, would using part of my portfolio to invest in strong dividend-paying companies be smart? I assume that as the retired and soon-to-be retired people start moving their money into these safer investments, that would cause more demand for the stocks. Am I thinking too much or not enough? I love the way he framed it at the end there, Ron. I wouldn't buy these companies based on the thesis that future retirees are going to bid these

these stock prices up, which actually may occur. But I don't like to think about that. Again, I like to think of individual companies that you're happy to own for the long term. For a 30-year time horizon investor, owning some dividend stocks and some growth stocks, the combination of both is fine. Don't just focus on yield, though. Remember, it's always about total return, how much an appreciation plus yield is a company going to give you? And I think a bias towards growth for a 30-year time horizon probably makes sense, as long as you can handle the relative risk associated with growth. Too many dividend stocks might be a little conservative

for someone with that time horizon. Would it be a bad idea to start with a list of dividend aristocrats and go from there? It would not. Those are typically wonderful companies with 25-year track records of increasing dividends, and it's a great pond to fish on. Let's get to the stocks on our radar. Our man behind the glass, Dan Boyd is going to hit you with a question. Jason Moser, you're up first.

What are you looking at this week? Well, Chris, you know, I spend much of my time on the road towards Flavortown. Shout out Guy Fiatty, Triple D Nation. Listen, next week, McCormick earnings will be out, Ticker, MKC. And I really just want to get an update on what they see coming up here for 2021. And we look back to the last quarter. They reported the third quarter. There's a passage on the call that really summed it up.

This significant shift to consumers eating more at home. They feel that shift is persisting long enough that it's become a habit. That's great for McCormick shareholders. There has been some slight weakness and flavor solutions to be expected with restaurants in their current state. They are making some investments in capacity. This year, we should see margins in the fourth quarter a little bit crimped because of that. But I also want to make note that that quarter ago, they said they were in business, open for business in the acquisition department. Lo and behold, they have acquired Chalula, Chris. Our favorite,

one of our favorite ha sauce sauces out there, $800 million all-cash deal, value the company in around 25 times adjusted to EBITDA. So I'll be interested in to see how enthusiastic they are for bringing that brand into their portfolio. Dan Boyd, question about McCormick? Not this time, Chris. More of a comment. It's the least spicy take in a Motley Fool universe when Jason Moser is getting hyped about McCormick's stock. But you're someone who likes his food spicy, aren't you, Dan? Absolutely. I, listen, I'm all for flavor and spice. I just wish

Jason would pick a new favorite stock. Ron Gross, what are you looking at this week? How about Schrodinger, S-D-G-R, or Schrodinger? I actually have never heard of this company until recently, until I started to dig in a bit. They develop software that speeds up the drug discovery process. They collaborate with other pharmaceutical companies to bring new drugs to market. They've got five compounds in development right now. They went public back in early 2020 at $17 per share.

Stock now is at 94, so they've had a nice little run so far. Growing fast, great margins. Not profitable yet, but they're getting close. I want to understand that a little more. Co-founders are still involved. Big shareholders, Bill and Melinda Gates Foundation, D.E. Shaw, a company called Deerfield Management. It seems really, really interesting to me.

So I've got to do much more work on this, but I'm going to dig in. Dan, question about Schrodinger? Absolutely. Chris, Ron, if you don't get a quote for Schrodinger's stock price, does it go up or down? I'm not even sure I understand the question. Is that like a tree falls in a forest? Do you hear it or not? You know, I was worried that a Schrodinger joke might be a little too high breath for you. And I guess I was right. Your Schrodinger's cat is what you're referring to. The thought experiment. Yes, yes, yes. named after the Austrian physicist who was born in the 1800s.

Perhaps that's what you're talking about. Somebody's got the Wikipedia article open right now. Dan, two very different businesses. What would you like to add to your watch list? I'm going to go with McCormick here. I know I'm giving Jason some flack for it being his favorite stock, but it is a very good company with great products. Love it.

I just want to remind the dozens of listeners that we call this stocks on our radar for a reason. and I think Ron illuminated that wonderfully when he led with, I never heard of this company until two weeks ago. So again, it's a race. Two weeks would be generous. Jason Moza, Ron Gross. Guys, thanks for being here. Thanks, Chris.

That's going to do it for this week's edition of Motley Full Money. The show's Mixed by Dan Boyd. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.