Home Depot (HD 3.08%) and Walmart (WMT 1.78%) reported big earnings but failed to impress Wall Street. Nvidia (NVDA 3.46%) nosedived on a crypto slowdown, and Eventbrite (EB 1.40%) got a chilly reception. Analysts Aaron Bush, Matt Argersinger, and Jason Moser discuss these stories and review Apple's budding film career. Plus, corporate governance expert and film critic Nell Minow talks shareholder rights, Stan Lee, and must-see holiday movies.
A full transcript follows the video.
This video was recorded on Nov. 16, 2018.
Chris Hill: It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week, senior analysts Jason Moser, Matt Argersinger, and Aaron Bush. Good to see you as always, gentlemen. We've got the latest headlines from Wall Street. The one and only Nell Minow is our guest. And, as always, we'll give you an inside look at the stocks on our radar.
We begin this week with retail. Walmart's third quarter revenue came in just shy of $125 billion. That was higher than expected. Matty, online sales growth for Walmart looking pretty good, too.
Matt Argersinger: This is, I think, a situation where you have to step back and put everything in context. The numbers were great. Expectations beat the 3.4% U.S. comps growth. Great compared to other retailers we've seen. And, 43% growth in e-commerce sales, fantastic. The problem with Walmart is that if you look at the overall revenue growth of the company in the quarter, 1.4%. Not exactly inspiring, despite the growth that they're seeing online. And then, you look at the share of its U.S. e-commerce -- this is according to eMarketer -- they've got roughly 4% of total retail e-commerce sales now. That's up from 3.3% last year. But Amazon's share this year is 48%, up from 43%.
I hate to say it, but as successful as Walmart has been with what it's doing with the stores and online, it's in this perpetual game of catch-up now. This will speak to other companies we're going to talk about, too -- I think at this point in the economy, where we are, where the consumer is, the strongest in nine years, Walmart was trading for 22X earnings coming into this. It really had to knock the ball cover off the ball. The results were good, it just wasn't fantastic. I think that's why there's a tepid approach to the stock.
Hill: Yeah, you look at the stock, Jason, it's actually down this week. Although, Matty touched on other retailers. Yes, Amazon is always a looming out there. But when you look at Walmart compared to some of the other retailers that have reported lately, if nothing else, Walmart appears to have at least a little bit of momentum going into the holiday quarter. Whereas there are a lot of retailers to just don't.
Jason Moser: I think that's also partly the benefit of being a general retailer. You have a little bit of something for everyone. In Walmart's case, they a lot of stuff for everyone. When you look at those retailers that focus on a bit more of a specific market, something like Williams-Sonoma, for example, good concept, good store, it's a bit more of a specific market, so they're going to be a little bit more beholden to not only maintaining those numbers, but keeping that specific market satisfied with new products. Difficult to maintain pricing there. Walmart, a tremendous focus there.
I want to refer back to something I saw recently in a friend. A friend of ours, Scott Hall, I saw on Twitter, Scott said recently, "Real pricing power is having the ability to lower prices in the face of your competitors." I thought that was actually a very interesting way to look at it. I like that a lot. You see something like Walmart, Amazon, they have the ability, more or less, to do that and force their competitors' hands, typically smaller competitors. You have to really give it to Walmart. That scale does help in the space a lot.
Aaron Bush: I think it's a good point. Technology is deflationary. If you can take advantage of that, then you have another source of pricing power. For Walmart, they have to move online. I know I've said this a couple of times before, but part of what's really difficult is, they're not really getting new customers. They're just trying to retain the same customers by adding much more in cost through building their own online website and tons of acquisitions. They're still in a tough place if they want to become a growth story again, but they've done a good job holding their own.
Argersinger: Now, speaking of the holidays, I will say, the one thing they have going for them this year is the fact that this is the first holiday season we go into without Toys R Us around. In terms of toys, games, things like that, I think Walmart should see a big boost.
Moser: And remember, Target said that they were going to make some pretty big investments in square footage to help soak up a little bit of that space that Toys R Us is leaving behind.
Hill: Home Depot's third quarter report looked great, and the company raised guidance for the full fiscal year. Somehow, Jason, shares of Home Depot were falling this week.
Moser: You're telling me the market wasn't rational, Chris? I mean, come on! Yeah, let's remember, voting versus weighing. We always have to keep that in mind. I think it was a very impressive quarter from Home Depot on a number of fronts. We're talking about comps growth there. Home Depot's comps growth in the 5% range, very impressive. I would encourage investors to not get sucked into the quarterly narrative of concerns over, perhaps, a slowing home improvement market or a slowing housing market. Focus on the bigger-picture data that really sums it all up. We're talking about the fact, for example, that by 2020, 54% of U.S. homes will be greater than 40 years old, versus 51% in 2016. We all know that aging home base means they're going to need to be improved upon, and that's Home Depot's specialty. We talk about online sales, online sales growth at Home Depot was up 28%. They've been able to pass along some product inflation to the consumer, which is nice. Comp average ticket grew 3.5%. They did have a little bit of help from some tough weather a year ago.
But to me, while I think concerns regarding the economy in the near-term are fair, to assign those concerns to Home Depot's business over the longer haul are, of course, a bit short-sighted.
Argersinger: I'll just say, hearing what Jason said about Home Depot, thinking about Walmart, I don't know if you guys feel this, but I feel like there's an underlying attitude right now in the stock market about the economy and where we are in terms of, "Could things get better from here? Could corporate earnings get better? The economy is about as good as it can get." If these companies aren't putting out fantastic numbers, it's worrisome, their underlying trends in the market. I don't know.
Moser: I feel like we're getting to that sentiment. I feel like we're getting to that point, where now, it's like, "Okay, what's your next act?" If you can't wow me, maybe we have to reset this thing a little bit.
Hill: I definitely feel that. Walmart, just because of how big that company is -- as you said, it wasn't a great quarter, but it was very good quarter. Jason, I guess I'm more skeptical than you. I looked at Home Depot's quarter, everything was up. Everything was up! You can get super granular on their quarter. Average ticket, overall transactions. I'm dumbfounded that the stock was down.
Moser: More skeptical on the business or the actual forecast for the market?
Hill: On the wisdom of the market in the short-term.
Moser: I think in the short run, that probably is spot-on. Again, we go back to voting versus weighing. What are you using to approach investing? I would use Apple as another great example of a company where right now, the market is, fairly, voting that there are some questions as to whether they can pivot to being a compelling service business. I think the market fairly is questioning whether Home Depot is not going to witness some harder times here in the near-term. And they very well may. But it's still the same strong business, with a tremendous market opportunity in front. I think if you're looking at it through the context of five years or even longer, this is a compelling business. The market is selling it, I think investors with a longer time horizon need to be looking at this one.
Hill: Another rough week for Nvidia. Third quarter revenue came in lower than expected. Nvidia also lowered guidance for the fourth quarter. Shares down close to 20% on Friday. Aaron, Nvidia had a bad October, and things are looking worse now.
Bush: Yeah, this was a really terrible quarter. A lot of the headlines are blaming cryptocurrency. That was a big deal a year ago for them. But really, the bigger story is that management just screwed up. A year ago, people were buying their GPUs left and right, trying to get in on the crypto mining craze. Predictably, that demand went away, but retailers had raised prices, and they were very slow to bring prices back down. And those same chips that people were buying for crypto mining are also what is used for gaming PCs. Gamers were not buying those chips at higher prices. So, it just turns out that they weren't selling the same number of chips at the same rate.
For whatever reason, management thought it was OK to continue manufacturing lots of new chips. People were asking questions about inventory the past couple quarters, and management kept saying, "It's fine. This is good." But looking now, you see, inventory has built up 70% over the past nine months. Essentially, they're not going to be manufacturing many more of these gaming chips at all. Next quarter, they're actually guiding for a revenue decline. Two quarters ago, they were growing 40%. For that to turn from that positive to negative ... people didn't see this coming. The stock market has this right by slamming it.
Hill: When I mentioned that October was bad for Nvidia, it was bad for other chip makers, too. Western Digital, Micron Technology, that sort of thing. But it sounds like you're being pretty specific about this group of management.
Bush: Yeah. They just messed up on inventory. This is a management team that has done a phenomenal job over the past few years of tapping into sources of demand, riding tons of tailwinds. I expect that the tailwinds are still there, and they'll get through this. But it makes the near-term impact on the business very rough.
Argersinger: From your perspective, you think this is more of a short-term inventory mismanagement versus they're seeing weaker end demand in any of their markets?
Bush: It's mainly that. But I do think that there's still a little bit of question. Going through all this, what type of growth rates will they see on the other side? I do think there is concern there. I have some concern there. But the tailwinds themselves aren't going away.
Moser: You have to remember, though, when it comes to building up oversupply, in regard to inventory, in the near-term, you have to question how that plays out on pricing. If they have to start liquidating some of that inventory ... Now, I think that Nvidia's got a pretty strong hand when it comes to technology and what they're producing. But they could have to resort to some pricing to move that stuff, which plays out on that bottom line.
Hill: The wildfires in California are being felt on Wall Street as shares a PG&E have been all over the place lately. Shares of California's largest utility have been falling this week until Friday, Matty, when the shares rebounded more than 30%. What is going on here?
Argersinger: Have we ever talked about PG&E?
Hill: I don't think we have.
Argersinger: It's actually the country's largest utility company. It's California's largest utility company. Over 16 million people use PG&E in some form or fashion to get energy. This is a really tragic story, what's happening in California, these devastating wildfires. We know we've seen all the property damage, and, of course, the loss of life. The problem with PG&E is that there's a good chance that electrical equipment failure on their part has caused at least one of the fires, if not more. If you think about the damage that we've already seen, the loss of life, people are already suing PG&E. So, the liabilities here could run up well into to the billions. The problem is, they're already liable for about $1.7-1.8 billion in damages from last year's fires in California that they were found to be liable for.
It's really bad news for the company. Coming into Friday, actually, the stock was down 40% in just the week to a 15-year low. It's bouncing back on Friday though because the California Public Utilities Commission president has said that allowing the state's largest utility company to go bankrupt is probably not a good idea. That could be so. Certainly, a bankruptcy of that size, for a company that's so influential, touches so many lives in California, would probably be a problem. It might prevent the company from fixing a lot of damage that's being caused. It's really a tough story. It's evolving, as we see. But there's no question that this is a company that's going to have billions and billions of dollars' worth of liabilities now and into the future. Speculating on whether or not they can actually get through it is probably not a great idea.
Hill: Eventbrite issued its first report as a public company. Eventbrite is the event and ticketing platform. You tell me, Jason, how'd they do?
Moser: I think this is a pretty compelling investment idea, actually, for a few different reasons, one of which is the largest growing market opportunity in ticketing and event management. Just in gross ticket fees alone, in the top 12 markets that Eventbrite pursues, that market is responsible for $3.2 billion in gross ticket fees. To put that in context, Eventbrite's trailing 12-month revenue is less than $300 million. Plenty of opportunity there to try to capture.
I actually broke my personal rule with Eventbrite recently in actually buying shares myself. Normally, when it comes to new IPOs, I like to see a few quarters to understand better what the business is about, leadership, generally how they're doing things. Kevin Hartz, one of the guys behind this company, and his wife, is the CEO. I'm very familiar with Kevin Hartz through what he did with Xoom. You remember Xoom, Chris, of course. For me, there was a lot of familiarity already there.
When I look at this business, the metrics that matter are headed in the right direction. Paid tickets, which is how they make most of their money, grew by 32.2%. And they have a noteworthy relationship with Square, who's going to control their payments infrastructure starting in 2019. A lot of smart people involved with this business. I'm very, very interested to see how they play out.
Bush: I really like the focus that Eventbrite has with more middle-sized events. They're not really tackling the big events like Live Nation, or small gatherings. But that's a massive market around the world. Right now, their market cap is still only about $2 billion. It's encouraging to see those metrics go in the right direction.
Moser: We were talking about this before taping, another neat thing about this business, the low cost for customer acquisition. It's a pretty organic acquisition there. Essentially, 95% of the people that use the platform sign up for it to either use it to buy a ticket or some small event that they're managing. They do a good job of keeping those customers coming back for more. That's an attractive part of the business, I think.
Hill: Apple has signed a multi-year agreement with A24, the movie studio behind such Oscar-winning films as Moonlight and Ex Machina. Aaron, I could be wrong, but this feels like this is just the first of several moves like this that Apple is going to make, given their cash.
Bush: I think you're right. There are two important things to understand about this. One, this is just a way to strengthen Apple's ecosystem. We'll figure out as time rolls on how exactly movies will fit into it. I bet it will tie into Apple Music, maybe like a broader entertainment service suite, and fit into that strategy. I think this is them flexing their muscle. This isn't something that Spotify can do. Pandora definitely can't. If they're trying to build a solution to be differentiated from those guys, this is a good step in that direction.
Second, they're not looking to make money on this. Streaming music is a bad business. Plugging this into that will also be a bad business. A24 itself isn't really known for big blockbuster hits. What they'll get out of it, probably, is acclaimed movies with good marketing abilities tied into that. They probably won't make money off of this, but through the marketing and building up their brand, people will stick with the Apple ecosystem more.
Hill: That's OK, because I've heard Apple has other ways of making money.
Moser: [laughs] To that point, everybody who's griping about the fact they're not going to be offering up units sold going forward, they are going to start offering up the cost that comes into the revenues in that Services side of the business. I think that's going to be fascinating, #1 because they make that money in a lot of different ways, but also, we'll get more clarity, like Aaron was saying, about how far this can take them in regard to the marketing and whatnot.
Hill: Next week is Thanksgiving. An early Happy Thanksgiving to the dozens of listeners. Of course, because it's Thanksgiving next week, a tradition unlike any other. It's our annual Thanksgiving show, which longtime listeners know is the only show that actually has a sound effect. We blow our entire sound effects budget on this one show per year.
Moser: [laughs] By "budget," you mean exactly how much?
Hill: It's not large. Thanksgiving, definitely in the news. Add this to the list of things that millennials are ruining. Bloomberg reporting that, you know what's on the rise? Smaller turkeys. Apparently, Millennials are not looking for the big behemoth turkeys. The smaller birds, weighing as little as six pounds, sales of those up nearly 10%.
Moser: I attribute this to meal package companies. Most of these millennials apparently don't know how to cook, I guess. So, what do you do with all that leftover turkey? They don't want to have leftover turkey. They want to have something they'll finish right there at the dinner table.
Argersinger: I didn't know a turkey could be as small as six pounds.
Moser: Isn't that a Cornish game hen or something?
Argersinger: Yeah, it doesn't seem right!
Hill: Let's go to our man behind the glass, Steve Broido. Steve, in terms of food, what are you looking forward to most at Thanksgiving?
Steve Broido: Stuffing. I'm 100% a stuffing guy.
Hill: [laughs] Wait. You go through, and you're not even getting turkey --
Broido: Of course I'm getting turkey, but I'm really looking forward to the stuffing.
Argersinger: I wonder what millennials think about stuffing. Aaron?
Bush: I'll eat anything.
Argersinger: There we go!
Hill: You've seen Aaron eat before. He's not picky. Jason Moser, Matt Argersinger, Aaron Bush, guys, we'll see you a little bit later in the show. Coming up, we will talk shareholder rights and the movie business with the one and only Nell Minow. Stay right here, you're listening to Motley Fool Money.
Welcome back to Motley Fool Money. I'm Chris Hill. We've got proxy battles and we've got Hollywood making its final push for award season. So, of course, we turn to our favorite expert in corporate governance, who just happens to be a film critic, and that's Nell Minow, who joins me now from Washington, D.C. Nell, thanks for being here!
Nell Minow: Thank you! I'm always happy to be on.
Hill: Washington D.C. very much in the headlines this week, mainly because the new Congress folk have come to town, and they're getting organized. But it turns out the SEC has been busy this week. You and I are taping this on Thursday, when the SEC is holding a daylong roundtable to discuss proxy voting. This is one of those things that sounds quite boring, but I'm also assuming that this has a big impact for individual investors like you and me.
Minow: It has a big impact for anybody. Whether you can buy and sell stocks on your own, or you have a retirement plan, or you just have a job, it has a huge impact. What's happening here, just to show you what a huge impact it has, is that the Koch brothers and the National Association of Manufacturers have put $6 million into a fake K Street-created AstroTurf dark money group called The Main Street Investors. You can always be sure that these groups are about the opposite of what their name is. They call themselves The Main Street Investors even though it's completely corporate-funded. They pretend to be on the side of investors, and their one sole and only purpose was to get this hearing going, because they want to cut back on the rights of shareholders to vote on proxy issues. It's a big shell game for them. When they try to avoid regulation, they say, "Let the shareholders decide!" But when the shareholders start voting against them, and we're getting 40-60% votes on some of these shareholder proposals, then all of a sudden, they want the government to step in.
Hill: Is this happening because it's easier in this day and age for investors to get organized? It's easier to have access to information and also rally like-minded shareholders around certain interests?
Minow: I wish that was true. The fact is that almost all shareholder proposals are either filed by large institutional investors, like the New York City Pension Fund, which is, I think, the #1 in terms of proposals filed, and four people, four individuals. Everybody out there listening to this can file a shareholder proposal. You only need $2,000 worth of the stock. And I wish more people would. But the fact is, only four people filed most of the proposals. The important part, though, is not how much stock they have and how many proposals they file. The important part is the level of support they get. They file proposals that a lot of people are happy to support. They may not be willing to go out and buy a stamp and look up the rules and file a proposal themselves, but they are very happy to support a proposal for, say, annual election of directors looking at climate change. If 78% of boards of directors say that they've never once discussed climate change, and a shareholder proposal comes up saying, "Maybe you should discuss it," I think a lot of shareholders would support that.
Hill: You've been there all day. What is your main takeaway so far in this process, and where it goes from here?
Minow: I'm really holding my breath. There was a bipartisan piece of legislation introduced this week, clearly in connection with this hearing, to limit the rights of proxy advisors. I think it's very ill-advised, possibly unconstitutional. You don't want to see the government trying to stop somebody from publishing something, which is what proxy advisors do. But it shows you that -- there have been full-page ads in the Wall Street Journal and The Washington Post placed by these groups -- you can tell they really are pulling out all the stops to try to make it harder for shareholders to provide any kind of feedback to managers.
I will say that the testimony today has been heartening in a lot of ways. Certainly, the Chamber of Commerce business roundtable are there using words like "zombie investor" and "robo voting," but there are actual investors there, both individual and institutional investors, showing them that their data is completely wrong.
Hill: Earlier this month, since we're talking about shareholder activism, Evelyn Davis passed away at the age of 89. She was an advocate for shareholder rights. Someone that probably most investors are not familiar with, but I get the sense that you crossed paths with Evelyn Davison once or twice.
Minow: I did! The very first time I ever met her, I went to an annual meeting. And when I walked in, she was arguing with the staff because she didn't want to have to walk over to the microphone. She wanted it to be right by her chair where she was sitting. And, she wanted the CEO to move it to himself. So, yes, she had the CEO squatting down to unplug the microphone and drag it over to her chair. That was what she liked to do.
She was a real combination. On the one hand, she was very smart. She could read a financial statement. She heard the issues that she raised about CEO pay, the quality and independence of board members, political contributions. Those are all still issues that we care about very much today. She was way ahead of most people on those issues. On the other hand, her tactics were rather flamboyant. She sometimes showed up at an annual meeting in a bathing suit or hot pants. She would interrupt one of her shareholder proposals to ask out one of the board members on a date every so often.
Hill: I'm just jotting down a note. The next time I go to an annual meeting, I should wear hot pants or a bathing suit.
It's interesting, I've read some stuff about Evelyn Davis this weekend, and, as you indicated, it points out some of her tactics. She's clearly a colorful person, a flamboyant person. But, in her defense, she was doing this at a time when it was probably easier for companies to ignore individual shareholders, and it was harder to get attention.
Minow: That's absolutely true. The same thing with John and Lewis Gilbert, who kind of invented shareholder activism. Every shareholder on the planet should take time at least once a year to send a mental thank-you to John and Lewis Gilbert. If it wasn't for them, shareholders would have no right to ask questions at the annual meeting, no right to do shareholder proposals. They really did all of that. They started going to annual meetings in the 1920s, before the stock market crash, and they would be ushered out of the meeting. After the crash, when the SEC came into being, they were instrumental in making sure that shareholders had some kind of rights.
Hill: Let's move on to Hollywood. Earlier this week, domestic box office hit the $10 billion mark. This is the fastest it's ever done that. Doing that in less than 10.5 months is a record. I know that movie ticket prices are always ticking up bit by bit, but it really does seem like a lot of movies over the summer and into the fall outperformed expectations. Is the box office business a little healthier than maybe we give it credit for?
Minow: It's healthier overseas. If you look at those numbers, you will see that the U.S. is not making much of a difference. We're selling more and more and more tickets overseas. This summer, I saw four movies in a row that were co-productions with China. You can always tell that not only because of the opening credits, but you can tell it because there is no wit in the dialogue, there's no puns, there's no cultural references that might not travel overseas. What there are lot of special effects, a lot of fight scenes, a lot of explosions, and a lot of people getting punched. And those movies have done very, very well. Movies like Skyscraper and The Meg.
Hill: We saw Stan Lee pass away this week, 95 years old. Best-known for creating Marvel superheroes like Spider Man and the Incredible Hulk. All this outpouring of support and tribute from Hollywood was wonderful. I couldn't help but look at Stan Lee not just as a fan of movies and his creative output, but also the business output. If you took all of the movies that Stan Lee was either the creator of the main character, or a producer of the film, more than $30 billion worth of movies. It's really incredible, the legacy that Stan Lee has left.
Minow: That's right. I thought you were going to say you were thinking about him as a brand expert. Nobody has ever done better in creating a brand than he did. He gets maybe an A- as a creative talent, but he gets an A+++++ as a brand creator. When you think that there was a time when the comic book industry was on its deathbed, and they'd started turning it around and started making movies, and it was really only when Marvel started making its own movies -- when other studios were making Marvel movies, they were horrible -- that it took off. And now, superheroes are the most popular single genre in movies, what spies were in the 1960s and 70s. And Stan Lee gets a lot of credit for that, not just for coming up with the idea of Thor, the Fantastic Four, Spider Man, Iron Man, and all the other ones, but also figuring out how to sell it.
Hill: This is the time of year when we see some movies coming out. Yes, there are family movies coming out over the next six weeks, but there are also those films that are aiming for a Best Picture nomination, that sort of thing. What should people who are looking for more adult-themed movies -- and by that, I mean not animated -- what should we be on the lookout for?
Minow: I think that one of the best movies of the year is opening up this week. It's called Green Book. It's based on the true story of a very sophisticated, very elegant black musician in 1962 who went on a tour of the Deep South before the Civil Rights Act. The Green Book was the tour guide for black Americans. The slogan was "vacation without aggravation," and it was a list of hotels and restaurants where black people would not be harassed. And his driver was this Italian guy from New York who had never been out of the city. And the two and go on this journey together. There are so many ways this movie could have gone wrong. There are so many ways it could have been insensitive or cheesy. Who expected this from director Peter Farrelly, better known for There's Something About Mary and other raunchy comedies? But you know what, it is just lovely. It is a wonderful film with Mahershala Ali and Viggo Mortensen, who packed on about 40 extra pounds for the role. It's really, really well-done.
Another one -- you mentioned family movies, and of course, this is the time of year for family movies -- I think that the new Mary Poppins movie is going to be just great, also.
Hill: Really? I don't have a huge sentimental attachment to Mary Poppins. I have my fingers crossed on that one. No disrespect to Lin Manuel Miranda, who's brilliant. But I saw they're coming out with the new Mary Poppins movie, and I thought -- kind of like you said about Green Book, there are a lot of ways Green Book could have gone badly. I feel like there are a lot of ways you could do damage to the legacy of Mary Poppins.
Minow: I think that's true. God knows, Disney doesn't always knock it out of the park. They just released Nutcracker and the Four Realms, and it was lousy. Beautiful to look at, but really an incredibly stupid movie.
But, I am a Mary Poppins fan, I do love the first movie. I also read all four of the books. I know there's a lot of good stuff in there. And everything I've seen makes me think that this is really going to be very special. We've had a couple of movies that have already come out that are Oscar contenders, including A Star Is Born. I think Lady Gaga is a frontrunner right now both for Best Song and Best Performance. BlacKkKlansman, a terrific movie from Spike Lee starring John David Washington, who -- I'm only going to say this once -- is Denzel Washington's son. No one will ever have to identify him as that ever again because he's going to be a big star on his own. We've already seen a lot of good stuff, but there's more coming.
Hill: Before I let you go, we've got some Thanksgiving next week. Happy Thanksgiving in advance to you and your family. Certainly, NFL football is very much a staple when it comes to Thanksgiving Day. If you have any advice for people who maybe aren't looking for football, and are just looking for a movie that the whole family can enjoy, whether it's something that's coming out now or something that's slipped through the cracks over the past few years, what would you recommend?
Minow: There's a really good one coming out next week. It's the sequel to Wreck It Ralph. It's called Ralph Breaks the Internet. It's wonderful for the whole family. A lot of stuff there for the grown-ups, a lot of stuff there for the kids, and probably the funniest single seen I've seen all year.
Minow: [laughs] Yeah.
Hill: Well, now I have to go see it.
Hill: You can follow Nell Minow on Twitter, get her thoughts on corporate governance, movies, and a whole lot more. Nell, Happy Thanksgiving!
Minow: Always a pleasure. Thank you!
Hill: Coming up, we're going to dip into the Fool mailbag and give you a few stocks on our radar. This is Motley Fool Money.
Our email address is [email protected] Question from Isaac Melon, who writes, "The recent market volatility has created a good problem for me. Several stocks on my watchlist have dropped significantly. The problem I have is little cash on the sidelines to take advantage at the moment. I want to make a purchase of one of these stocks to add to my IRA. I'm 24 years old, so I have a long timeline. What is the best way to separate the wheat from the chaff?" He includes five stocks on his watchlist, which are down anywhere from 10% to upwards of 25%. As he said, Jason, that's a good problem to have. But let's kick this around for a minute. What's a good way, when you're in this situation, to say, "Alright, I've got some money, I really only have money for one purchase." Do you go with the one that's down the most?
Moser: Reading this question, I must admit, this first thing I went to was the It's Always Sunny in Philadelphia episode where they're actually arguing about what is better, being the wheat or the chaff. With all of that said -- because I'm still not sure, actually -- I'd lean more toward the one that you don't own yet, if possible. If you have a watchlist of stocks and you whittle it down to five stocks that you really like, perhaps consider the one that you don't own for the sake of diversity. Now, if you own them all, you have to go with, if I ask you the question, "Which one of these businesses do you like the most?" Probably, one's going to come to mind. That might be the one you want to lean toward.
Also, be very aware of the businesses that run in cycles versus the ones that don't. I'll use energy as an example here. With businesses that run in cycles, you need to be more aware of where we are in the cycle and where the cycle could go.
Bush: I would just add that sometimes, some of the best, especially growth-oriented companies, tend to get hit the most when the market is volatile. So, that's where I tend to look. A lot of times, they rebound the hardest, too.
Hill: Let's get to the stocks on our radar. Our man behind the glass, Steve Broido, is going to hit you with a question. Jason Moser, you're up first. What are you looking at this week?
Moser: We talked about Home Depot this week. I'm looking at Lowe's (LOW 4.03%), ticker LOW. Next week, earnings looking back to August. The stock has certainly pulled back a little bit since then, since they've announced some store closures, clarified a bit more on strategy with new CEO Marvin Ellison. I do like this market in general. I think the home improvement market is a tremendous one that should continue to, over time, just get better. I think that Marvin Ellison has a lot of good ideas and has the opportunity to take this business in a good direction. The pullback in shares here over the last few months is a bit more compelling today.
Hill: Steve, question about Lowe's?
Broido: Does one business have a competitive advantage over the other?
Moser: Generally speaking, we look to Home Depot as the leader in the space. The store base is very similar. They both have the same number of stores, essentially. But Home Depot has just been better when it comes to customer service, when it comes to serving the pro side of the business as well as the do-it-yourselfers. I think that's really where Marvin Allison is trying to take this business in Lowe's -- getting better on the customer service side, making sure they have what you want.
Hill: Aaron Bush, what are you looking at this week?
Bush: I'm looking at Take-Two Interactive (TTWO 3.50%), ticker TTWO. Two weeks ago, they had the biggest entertainment launch of all time. Red Dead Redemption 2 made over $750 million in three days. And the stock is down over 20% from its highs. Take-Two is turning into a video game giant with tons of successes. Red Dead that isn't the only thing that they have. A few years ago, people were saying Grand Theft Auto is the only thing they had. Between more games, higher margins, more recurring revenues, lots of catalysts, the timing feels pretty compelling.
Hill: Steve, question about Take-Two?
Broido: I'm playing Red Dead Redemption 2 right now. Is there too much story in this thing? It's like a movie. It's taking forever. I skip all these scenes. It's crazy town.
Bush: I think that's a good thing. I think what they want is for people to get sucked into the world so that when Red Dead Online comes out in a month or so, people will want to stick with it and pay them more money.
Moser: Steve, are you a good cowboy or a bad cowboy?
Broido: I'm pretty bad right now.
Hill: [laughs] Matty, what are you looking at?
Argersinger: I'm glad Aaron said Take-Two Interactive. I'm glad that Isaac, who wrote us the email, had Activision Blizzard (ATVI 0.24%) on his list. The stocks on my radar are video game stocks. Activision Blizzard, ticker ATVI; Electronic Arts, EA; Aaron had Take-Two, TTWO; also, Ubisoft, which is on the pink sheets at UBSFY. Depending on which stock you look at, these things are down 20-30%, yet -- and I'm sure Aaron agrees -- these are companies with tremendous tailwinds. It's an industry I love. I can't believe they're down as much as they are. If you don't own any video games, this is a great chance to do so.
Broido: I think I'm going with Take-Two. I'm just having so much fun riding my horse, having a grand old time.
Hill: [laughs] Alright. Jason Moser, Aaron Bush, Matt Argersinger, guys, thanks for being here this week.
Argersinger: Thanks, Chris!
Bush: Thank you!
Hill: That's going to do it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week.