In this segment of the Motley Fool Money radio show, host Chris Hill asks Motley Fool Explorer's Simon Erickson, Supernova and Rule Breakers' David Kretzmann, and Motley Fool Pro and Options' Jeff Fischer to tell us about the companies they have their eyes on this week, and why: HDFC Bank (NYSE:HDB), an Indian financial institution; Stamps.com (NASDAQ:STMP), an software-as-a-service provider of shipping solutions; and Southwest Airlines (NYSE:LUV).
A full transcript follows the video.
This video was recorded on May 26, 2017.
Chris Hill: Time to get to the stocks on our radar this week. Our man behind the glass, Steve Broido, will hit you with a question. Simon Erickson, you're up first. What are you looking at?
Simon Erickson: Chris, this is early research for me, so buyer beware on this one, but I'm looking at HDFC Bank. The ticker is HDB, that's for the American depositary receipts. This is an India-based bank. The reason that it's interesting to me is, last November, India has really been trying to cut down on corruption, so what they're doing is invalidating their paper currency, they're trying to pull people into digital banks. That's going to take a lot of costs out of transactions and boost the transaction volumes, I think, for banks like HDFC. I think this could be a big opportunity for that company.
Hill: Steve, question about HDFC?
Steve Broido: How important is internet access then, if everything is going digital?
Erickson: Hugely important. You can't get on to a digital bank if you don't have an internet connection. But a lot of it, actually, Steve, isn't going through desktop computers like we had in the States, it's going off of mobile phones.
Hill: David Kretzmann, what are you looking at?
David Kretzmann: I'm looking at Stamps.com, ticker STMP. This is a software-as-a-service provider of shipping solutions geared toward small businesses and enterprises of all sizes that basically sells stuff online that needs to be shipped somewhere. So, whether you're selling on Amazon or eBay or Etsy or wherever, Stamps' software will integrate that into a single place and help you find the best deal on shipping from USPS, UPS, FedEx, or others. Their retention rates are rising, it's a subscription business, and average revenue per user is also on the rise. So, good combination for a subscription company.
Hill: Steve, question about Stamps.com?
Broido: How can the margins be good if the U.S. Postal Service charges what they charge, and then you have a middle person inserted here. How does this make sense?
Kretzmann: They don't make the money on the postage. That's just sold at cost. They make money from the monthly subscription cost.
Hill: Jeff Fischer, you're up.
Jeff Fischer: Nothing too exciting, but it's fun to think about the companies that you love, and really make your life better, whether it's Starbucks or Amazon, or, in this case, Southwest Airlines, ticker is LUV. I can't tell you how many times it's improved my life by being able to change my flight to somewhere at the last minute. The stock trades at 15 times forward earnings. It's returned 15% annualized the past 10 years, which is more than double the S&P 500's annualized return. I think the future looks bright as oil costs remain modest.
Broido: Is there too much comedy in Southwest Airlines? Every flight attendant seems to be making a lot of jokes. I'm not interested in laughing, I just want to get where I'm going.
Fischer: I guess if you're a grumpy, aging man, there's too much comedy.
Broido: That was a statement, not a question.
Hill: Steve, do you have a stock you want to add to your watch list?
Broido: I think Simon's looks pretty interesting.
Erickson: All right.
Hill: We knew he wasn't going with Southwest.