Get caught up on this week's biggest market news on Motley Fool Money. General Motors (GM 2.66%) announces plans to cut some 15% of its workforce, which might be what the struggling company needs to catch up. With its most recent report, Abercrombie & Fitch (ANF 1.81%) proves that mall-based clothes retail isn't dead. Burlington Stores (BURL 1.22%) blew the market away this quarter, just like they have for the past few years. Shares of Tiffany (TIF +0.00%) are down on a weak report, and long-term investors might want to buy on the dip.
Plus, as always, the analysts share the stocks on their radar this week. And just in time for the holidays, host Chris Hill talks with industry expert Chris Byrne about the hottest games, trends, news, and more in the toy industry today.
A full transcript follows the video.
This video was recorded on Nov. 30, 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, Andy Cross, and Ron Gross. Good to see you as always, gentlemen! We've got the latest headlines from Wall Street. We will dip into The Fool mailbag. And, as always, we'll give you an inside look at the stocks on our radar.
But we begin with the latest hacking target, this time from the hospitality industry. On Friday, Marriott (MAR +0.07%) announced its guest reservation database was hacked for information on approximately 500 million guests.
Ron Gross: That's a lot of guests.
Jason Moser: Is that a lot? It sounds like a lot.
Hill: They are still trying to figure out if credit card information was obtained. But, probably worth pointing out, shares of Marriott down more than 5% Friday.
Moser: It's also worth noting, I was reading, they did stand by that any payment information that could have been breached was encrypted. There's that, I guess. But to me, we'll make probably a bigger deal out of this in this studio than most consumers out there will make of it. In this age of social media, everybody feeling compelled to share every little facet of their life, if you're walking around at this point in the game and in denial that your data has been breached in some way, shape or form, I have a bridge to sell you, too. It's just something you've got to get used to. We talk about these data breaches. It's not a matter of if, it's a matter of when.
Marriott's breach, they got some fairly innocuous information. I don't know that it's going to be any real problem. It's a big audience, because with the acquisition of Starwood, the real catalyst between that deal was building up this big loyalty program from the two separate entities. This could ding that a little bit the short run, perhaps, if loyalists feel like they want to be a little bit more careful with their information.
But I think if anything, at the end of the day, what it really does is reiterate that we as consumers, now more than ever, need to be checking our credit record on a consistent basis, whether it's annually, semi-annually. Credit card companies out there now give you deals where you'll get your credit record every quarter. I do that with American Express, for example. Just keep on top of your information and understand what your credit record looks like. I think that'll keep you safe.
Andy Cross: I will just say, the New York Attorney General's going to open up an investigation. They first got wind of this in September, it took them a while to kind of figure it out. You mentioned, Chris, they're still working on some things. It is a knock to Marriott. And I do agree with Jason -- long-term, it probably won't matter as much for the customers that continue to use Marriott, especially the rewards program. But if we start to see more and more of these things, it does start to have a compounding effect. We certainly saw that with Facebook over the last year.
Gross: Big question for me is, next time you go to book a hotel, do shy away from Marriott or a Starwood property because you are concerned about the data breach? I think a very small percentage of folks will pass and move on to a different hotel chain. I don't think it will have a huge impact. Maybe a blip.
Biggest problem with Marriott is that they only have double beds in their rooms. I like a queen or king. Focus on that.
Moser: You need a little extra room to stretch out every now and then.
Hill: To the loyalty program, it does seem like this is an opportunity for Marriott, and particularly their management team and their communications team. I agree with everything you guys said, but it seems like, if they don't manage this from a communications standpoint, if they don't reach out to their loyalty members, then they could have a self-inflicted wound.
Moser: I may be a loyalty member. I honestly don't know.
Hill: Ron is clearly not.
Moser: Clearly not. But anytime I ever book, it goes through booking.com and I try to just get the best deal. But I do agree, in this case, they have the opportunity. Because they have information on all their loyalty club members, they can reach out and really take control of the narrative here, which is important. We've seen in other cases -- breaches like Equifax, for example, it can be argued that they didn't exactly handle that one with as much grace as they should have. A big opportunity for them to get a little bit more high-touch with their consumers. That obviously does matter to a lot of those loyalists.
Gross: Speaking of the loyalty program that I am not a member of, the Starwood credit card is a very, very popular card, probably one of the top one or two cards that I see of people that I hang with. The question is, are people going to be shy about using that card? Or are they going to have to get a new card because their number has been compromised? That's never fun to do. That creates a whole big chain of events and a problem for both the credit card company and Marriott. I think the credit card part is, obviously, usually the biggest deal.
Hill: Earlier in the week, General Motors announced it is laying off 15% of its employees and cutting production at five plants in the U.S. and Canada. Ron, we hate to see these type of job cuts, but it's clear that CEO Mary Barra and her team don't have a lot of options.
Gross: They don't have a lot of options. It's always painful. But if things are not operating efficiently, you've got to make a move. Here, you have factories that are operating on a single shift to build models that have fallen out of favor, specifically the sedans, the Buick Lacrosse, the Chevrolet Impala, the Cadillac sedans. So, what are you to do? Are you supposed to continue to run your business inefficiently to save jobs? Or do you do what you have to do, make the painful decision, hopefully relocate a lot of these folks to other plants. That would be wonderful, if that could happen. But unfortunately, these things are painful. You need to take the business into account. You need to take shareholders into account. You need to run the business efficiently.
Now, Trump has come out and said, "If you're going to do this, we're going to start looking at subsidies." It's two separate things. One: run your business as efficiently as you can. Two: are subsidies necessary? To me, they're not the same thing. You have to look at both independently.
Hill: United Technologies (UTX 1.23%) finally made it official. The industrial manufacturing giant is splitting itself into three companies. United Technologies will be the aerospace business. Carrier will be the heating and air conditioning business. Otis will stick with elevators and escalators.
Gross: Did you say elevators?
Hill: [laughs] Oh, yeah! Andy, this is a $100 billion company. If I'm a United Technologies shareholder, am I happy about this move?
Cross: I think it was Neil Sedaka who said that breaking up is hard to do. Apparently, not so much for United Technologies, or, frankly, for industrial America. We're seeing this at Dow DuPont. It's going to split up. And, gosh, General Electric probably should have done that a long time ago. I think it is good for shareholders. The stock's reacted a little bit negatively. I think that's because this has been expected for about a year, they've been talking about this, if not longer. Splitting into three businesses, now that they've bought the Rockwell Collins Aerospace business for more than $23 billion, bring that into the family, there's really very little synergies between the three businesses. They operate in such different categories. It allows investors to be able to focus on where they want to put their capital, allows the management teams to more effectively run those businesses. Those businesses are fairly cyclical. The Otis Elevator business and the Carrier HVAC business, they're very tied to housing and real estate. They lose a little bit of that cushion that you get from a conglomerate.
But the benefits from getting those businesses separated and the management teams being able to run those businesses more effectively as independent businesses, I think this is smart. Ultimately, shareholders will be rewarded. I'm not super excited to jump into the stock now. I would wait. But I think ultimately, it's going to benefit them.
Gross: Agreed. Sometimes, conglomerates make sense. If there are synergies -- we hate that word -- across businesses, or if there's a decentralized structure, such as a Berkshire Hathaway, where he has top-quality CEOs in charge of each individual business. In this case, the cost structure, the distribution models of each business, are quite different. So it makes sense. It's another win for Dan Loeb, activist investor, who's been pushing for a shake-up at United Technologies for a while.
Hill: Disappointing third quarter for Tiffany. Overall sales came in the light. Shares of Tiffany down 12% on Wednesday, Jason.
Moser: It was falling from what had been a strong year to date. I think the bigger question with the business, at least in the near-term, centers around whether management is going to be able to hit the full-year guidance that they offered last quarter. If you remember, last quarter, they actually raised guidance based on what they felt like was an improving consumer environment, particularly in the luxury space. But fast-forward to this quarter, there are some headwinds there, particularly in the Chinese consumer, both at home and abroad. That matters, because the Chinese consumer accounts for about a third of the global luxury market. They are going to invest a lot of money here in the coming year in their New York flagship store. That's going to play out on the expense side a little bit.
But you look at all of this, and the one thing Tiffany continues to do so well is protect that brand. They don't resort to fire sales. They don't try to unload a bunch of inventory on the cheap. And in protecting that brand, that really protects their competitive advantage. Last quarter, we were looking at this and saying, "This is a stock where you really want to look at buying it when the pessimism is at its height, when the stock is really getting hammered." And the stock was around $125 back then when we were saying that. Fast-forward to today, and it's obviously gotten shelled here. With a business that has a very proven track record, maintaining the brand and the business itself, this is probably worth a look for investors today. This might be that little window of opportunity.
Hill: Shares of Abercrombie and Fitch up nearly 30% this week after third quarter profits came in higher than expected. Ron, Abercrombie's management was pretty bullish on the holiday quarter, too.
Gross: You thought mall stores were dead. You all were so wrong. No, no. You know, this was a good quarter. There's a lot to be happy about here. Stronger than expected sales growth is allowing them to reduce the number of stores they plan to close, which is an interesting thing to be excited about. Nevertheless, they're going to close 40 stores instead of 60. Things aren't as bad as they thought. They're excited about the holiday season, as you mentioned. They saw performance that was strong across their brands. They were able to renegotiate leases, which obviously cuts down costs. Comparable store sales up 3%. Their Hollister same-store sales -- they own the Hollister stores, as well -- up 4%, with Abercrombie being weaker at 1%. That averages out to 3% overall. Digital sales up 16%. Interestingly, 75% of their online traffic comes from mobile devices, which tells you something about their client base. Certainly a younger demographic.
They're turning around the business. They're renegotiating leases, they're cutting costs. It's accruing to the bottom line. Adjusted EPS up 10%. 3.8% dividend yield right here. So, not too shabby.
Hill: Pretty interesting that Hollister is doing the heavy lifting on this, not unlike what we've seen over the past few years with Gap, where Old Navy is the one really driving that business.
Gross: It leads one to think, are the other businesses really even necessary? Or should you focus on the company that's most profitable?
Moser: Well, like you said with Abercrombie and Fitch, this was less bad. It doesn't sound like it was great. It just sounds like it wasn't as bad as people would be expecting with a teen retailer. We put those things in the ringer on this show many, many times. Do you look at that as a company where you'd think, maybe this is one I'd want to consider owning? Or is it still, eh?
Gross: I don't think I would want to own it. Mall-based retailers are still tough, very tough, especially when you get into the fashion aspect of it. It is less bad. Nothing wrong with a 10% growth in earnings per share. But things are still going to remain difficult. This is just one quarter, one holiday season. Let's see what happens next year.
Hill: After a strong third quarter report, shares of Salesforce.com (CRM +3.97%) up more than 10% this week. Last quarter, there were questions, I would say, about growth slowing at Salesforce.com. This report seems to have answered some of those questions.
Cross: Salesforce continues to be a very impressive company. The clear leader in consumer relationship management software. A $100 billion market cap, does $13-15 billion in sales this year. You look at the growth that they're expecting, the number of deals that are now generating more than $1 million in sales during the quarter they signed was up 46%. Future revenues under obligation growth was up 34%. That's a little bit lower than last quarter, but still very impressive. They continue to be the leader in this space. It's a market that is huge. More than $100 million potential market opportunity for this space in general. Even at the largest size that they are, at $100 billion dollars in market cap, I feel like the growth prospects are still out there. Marc Benioff, who is the leading shareholder, owns more than 4% of the company, is a real legend in the Silicon Valley space. He continues to have bold aspirations for Salesforce. They're continuing to meet the demands that are set out there, that are very healthy but deliverable on.
Hill: Shares of Dick's Sporting Goods (DKS 1.30%) up slightly this week after a solid third quarter report. Not a great report, Jason. But it does seem like, when you think about how rough 2017 was for Dick's Sporting Goods, they're working their way back.
Moser: Yeah, that's fair. I think it was a better quarter than probably a lot of us were looking for. I would view this as a big win for them in the face of what I think is going to become a more challenging environment for them in the coming years. As you look to all of these big brand names, and their developing their own direct-to-consumer offerings, that really gives you a less of a reason to go to a Dick's Sporting Goods, to be honest with you. They're answering that call by coming out with more private brands. They have a new private brand they're very excited about that will come out next year. Didn't really shed too much light on that on the call. But it's worth noting that e-commerce for the business, approximately 12% of total sales, vs. about 10% a year ago. Nothing wrong with that.
I wouldn't look to this company to be growing their store count by a whole lot here in the coming years. It is fairly mature at this point. They are going to have to continue competing on pricing. It's going to play out on the margin line. You look at the stock today, it's trading at around 11X full-year estimates. That's for a reason. It could be either a value trap or a value play. I tend to lean toward the former there because I'm just not sure I see the catalyst that takes this thing forward, particularly when you consider the consumer environment today. It's really not a bad one at all. Consumer confidence is high, unemployment is low. We should really be seeing companies like Dick's performing a little bit better than they are.
But all things considered, it's still pretty good.
Hill: In the same way that, when we were talking about Toys R Us going bankrupt, and companies like Target and Walmart picking up the slack there, who's picking up the slack in this industry? Is it the same players? Is it Target and Walmart doing a better job?
Moser: No. Frankly, I think it's the brands themselves. You're seeing strong performance from Nike, and even Under Armour is getting that North American segment turned back around. Whether it's Adidas, Nike, I think the brands themselves are taking advantage of that and trying to build their own identities in the space, and it seems to be working.
Hill: Another strong report for Burlington Stores. Third quarter profits came in higher than expected and the company raised guidance for the full fiscal year. Ron, I had no idea Burlington Stores was this good. And by this good, I mean, the stock.
Gross: That's exactly where I was going to go with this. I completely agree. When I dug in, I was really surprised. It's one of these off-price retailers that is just getting it done really, really well. Five-year stock price up 440%. I wouldn't have guessed that. I think of them as the old Burlington Coat Factory.
Hill: Right!
Gross: Not that impressed. But you know what? They beat on the top and bottom line here. Comp store sales up 4.4%. 48 new stores. Gross margins were up. Operating expenses were down. Adjusted earnings per share up 73%, certainly helped by a lower tax rate, as all companies have been this year. Raised full-year guidance. They have 679 stores, that continues to increase. The company is really doing well.
Hill: How are we not talking about this company every quarter?
Gross: I don't know. We talk about TJ Maxx, we talk about Ross, we talk about a lot of these off-price folks that are doing well. This should definitely be mentioned in the same sentence.
Hill: I'm just baffled by this. We've got an industry that has struggled in so many of the names that you just mentioned. In some ways, it gives me hope that a company like Burlington Stores and their management can find a way to make this concept work.
Gross: Yeah. Even though, like Jason said, the economy is doing great, consumer confidence is doing great, people still like a bargain. They sell things at 65% off. It's really appealing to customers.
[...]
Hill: Black Friday and Cyber Monday are in the rearview mirror, but we've got a lot of days left for holiday shopping. What is the hot toy for 2018? To answer that question and more, we turn to a 30-year veteran expert of the toy industry, Chris Byrne. Chris, welcome back!
Chris Byrne: Thank you! Nice to be with you guys!
Hill: You're joining us from Central Park!
Byrne: I am!
Hill: That just sounds like the most wonderful place to be.
Byrne: [laughs] It's pretty neat!
Hill: Before we get into the toy industry and some of the big players, let's get to the toys themselves. What are some of the hot toys this year?
Byrne: The big trends is collectibles, lower-price toys, interactive toys. There are these things called Wrapples, which are like virtual pets. They're plush, flat bracelets with little creatures on them. Those are doing well. Something similar called Pomsies is doing very well.
But probably the biggest brand in L.O.L. Surprise! from MGA. You get collectible dolls, and they've taken the unboxing craze and made it into play. You unwrap these things down, layer after layer after layer, and you finally get a doll and different prizes along the way. The opening of the toys is as much part of the play as playing with the toy once it's done.
Hill: I saw an appearance that you did on television from just a week or two ago where you were playing a game that I'd never heard of before. I'm not sure I want to buy it, necessarily. Can you explain to our audience about a game called Tic Tac Tongue?
Byrne: [laughs] Tic Tac Tongue is, we sit around the table and we put on lizard faces. I mean, why not? It's a mask, you put it over your nose and mouth, and built into it is like a birthday party blower, one of those things that you blow on and it unravels, kind of like a frog's tongue. The idea is that preschoolers sit around the table and blow on these to try to knock over cards in sequence. It's really fun. It's a very creative company called Yulu.
Hill: I like that you couch that this is something for preschoolers. It also seems like something that adults are going to be buying, as well.
Byrne: Oh, certainly! There's nothing as fun as running around the house with a lizard face on, annoying people.
Hill: [laughs] Are there any big trends right now when you look at the state of the toy industry?
Byrne: Games is a big trend. There are lot of great games out there. There's a thing called Yeti, Set, Go! A lot of skill and action games. Yeti, Set, Go!, you're hitting the heads of Yeti, trying to kick plastic meatballs onto a mountain. There's Pimple Pete, where you're actually expressing pimples from a face. There's Pie Face!. There are a lot of these games. It's kind of like a second golden era of games. Going back Marvin Glass in the mid-60s with Mouse Trap and Crazy Clock and all of those. There's a lot of that. That's one of the big trends.
The other, as I mentioned before, is collectibles. There are so many collectibles out there for different kids. Boys, girls, whomever. Everything from the L.O.L. Surprise! to Shopkins to Stikbot, which are great little characters that you can make stop motion movies with. Low price points, high collectability, and a lot of fun.
Hill: One of the stories we've talked about on this show this year is the bankruptcy of Toys R Us and the ripple effects of that business disappearing. How is that playing out, whether it's for companies like Mattel and Hasbro to some of the smaller players in the industry, as well?
Byrne: It's certainly been a change. The toy industry has gone through changes over the years. But with this one, the challenge has been trying to find, where is all that inventory going to go. Walmart stepped up, Target stepped up. A lot of manufacturers are selling new products through eBay (EBAY +1.38%). Walmart.com, Jet.com, a lot of people are going more aggressively into toys. Party City (PRTY +0.00%) opened Toy City, which are pop-up stores. That's a great idea, because fourth quarter is when most of the toys are bought. I think it's a one-year problem. Ultimately, you're going to see fewer toys, because a lot of the toy manufacturers expanded their lines to fill all of that shelf space at Toys R Us. I think we're going to go back to some of what we saw in the 60s and 70s, which is higher revenue from a smaller number of toys overall.
Hill: For older people like me, in terms of classic toys, classic games, are any faring better than others in the increasingly digital age that we're in?
Byrne: I think it's really interesting, because today's kids, 12 year olds, 13 year olds, have always had a smartphone, so they're discovering games and board games as sort of this novelty to them. Othello is doing really well. There's been a resurgence in chess. Scrabble is having a very good year. Monopoly, there's a lot of different variations of Monopoly. Hasbro's introduced a whole line of parody game like Monopoly for Millennials or The Game of Life: Quarter-Life Crisis. These are very, very fun, but those are really targeted to adults.
Hill: Please tell me that Monopoly for Millennials has a property that does nothing but sell avocado toast.
Byrne: [laughs] Probably. You know, what you acquire there is experiences rather than property. The thing is, you can't afford the real estate anyhow. It's very funny!
Hill: In terms of the big retailers themselves, obviously, with Toys R Us gone, Walmart, Target, Amazon, is the competitive landscape today basically the same as it was a year ago? Or have we seen any shifting?
Byrne: It's pretty much the same as it was. Most toys are bought because the child has requested it. So parents are increasingly going online to try and find them, to find them in stock, because it's easier to sit, click away at your keyboard for five minutes, than to get in a car, drive to the mall, and do all that stuff. It's not really that people are loyal to a specific retailer, they're loyal to trying to find the toys that they want. That's been one thing that the internet's really helped them to do.
Hill: What's something that's under the radar, whether it's for younger kids, older kids, something that we should keep an eye out for that's not getting the hot buzz of the must-have toy of 2018?
Byrne: One of the ones that I've really been intrigued by this year is Nintendo Labo. It works with a Nintendo Switch, so already, you've made your audience a little bit smaller. It's cardboard pieces that you craft together, and then they interact with the video games. I've been so intrigued as I've watched kids play with this, the combination of crafting and online play. I think you're going to see a lot more of that as kids integrate technology with physical toys.
Hill: Last question, then I'll let you go. This is your busy time of year. You're in Central Park right now, that's how busy you are. At what point does Chris Byrne get to relax and enjoy himself? Is it the day after Christmas? When do you get to relax, and where do you go?
Byrne: [laughs] I go in the corner and hum to myself. No, no! [laughs] You know, the last weekend before the holiday is usually the last big sale time. Of course, people have to buy earlier if they're getting things online. I have about a week and a half off, then I turn around and I go to Hong Kong and start at the Asian toy fairs, and 2019 is off and running.
Hill: If you want the latest on toys, including reviews and recommendations, check out Chris Byrne's website, thetoyguy.com. Chris Byrne, happy holidays! Thanks so much for talking!
Byrne: Thank you, guys! Happy holidays!
[...]
Hill: New radio stations adding Motley Fool Money this weekend! Ron, in Honolulu.
Gross: Oh, that's amazing!
Hill AM 690 and FM 94.3, The ANSWER. We are so happy to be heard in Honolulu!
Gross: Aloha!
[all applaud]
Hill: This week, the world of investing collided with the worlds of sports and entertainment when the SEC charged Floyd Mayweather and DJ Khaled for promoting initial coin offerings without disclosing that they were being paid to promote the ICOs. Both Mayweather and Khaled are paying six-figure fines -- which they can absolutely afford to pay -- and have agreed not to promote securities for two to three years. Am I the only who --
Moser: No, you're not!
Hill: [laughs] Am I the only one whose reaction to this was, "Why is anyone taking investing advice from Floyd Mayweather and DJ Khaled?"
Gross: They have real money, these guys. Why are they bothering with these small little...
Cross: They want more money.
Moser: Hey, man, when you're caught up in the hype, and you can be an influencer, that drug is addictive, Ron.
Gross: I get it.
Moser: It's funny, I actually was thinking about this earlier in the day, before I saw this news. A lot of times, when we're investing, it's really helpful to be able to just look at something and say, "You know what, I don't know enough about that. I'm just going to take a pass because I know I don't know enough about it." And I used crypto as a perfect example. I would venture to say that 98% of the people that are all-in on crypto have no clue what it means, how it works, or why it matters. And I would put these two in that group. I really would! I mean, I'm not trying to insult them, I just guarantee they don't know -- I mean, I saw that DJ Khaled says, "it's a game-changer." OK, tell me what game that's changing and exactly how.
Gross: [laughs] A lot of games are changing.
Moser: I got a little bit worked up, because I bet you a lot of people invested based on those two guys! And that really sucks!
Gross: I'm giving them the benefit of the doubt and saying the failure to disclose was literally just, they didn't know. Do you think they were purposely trying to skirt the SEC security laws?
Moser: Possibly, but when you have that kind of money, and you have that kind of a fan base, don't you get some kind of a lesson in transparency? I mean, it's not the first advertisement they've ever done, right?
Cross: I'm so unhip, I didn't even know who DJ Khaled was, first of all. Second of all, Jason just mentioned transparency, that's one thing that The Motley Fool has stood by for so many years. We have a performance track record. Unless you see that, and you understand that from a person that you're going to take investment advice from, just don't. It's just smart not to do.
Moser: Very well said!
Hill: Here's how it's a game-changer: he's writing a big check to the SEC.
Moser: That changed his game, didn't it?
Hill: Our email address is [email protected]. A question from Brendan O'Brien in Maryland. Brendan writes, "It's easy to buy after a stock drops too much because of turbulence. It's much harder for me to tell when to sell after a stock rises too much after some good news. Do you have any tips? Thank you." Basically, Jason, a version of a question that we frequently get, which is, "How do I know when to pull the trigger on selling a stock?"
Moser: I think that's a great question. There's not one set answer. It certainly depends on the individual and what stage you are in life. We always point toward diversification as being a really easy way to eliminate this. The more you're able to spread that money around, the less you're focusing on any one individual position. Sometimes you just forget the day-to-day machinations of the market, and you just check back a few years later and you see you have an investment that's done very well. To that end, I know this probably doesn't fit everyone's strategy, I've employed it a couple of times. I think the house money strategy is kind of fun. If you can actually buy shares of a stock and then sell enough down the road to recoup your initial investment, and keep the rest of those shares for free, that's a nice way to get that risk off the table. You're not worried about it, because essentially, you didn't pay anything for the shares anyway.
Regardless, don't get stuck in hindsight. By that, I mean, don't read those articles that say, "If you invested $1,000 in Amazon back in 1985," and I know it didn't exist back then. Those articles just look back and say, "You would have made this much if you had invested this much." Those are meaningless. They mean nothing at all. Investing is all about looking forward. It's about the future.
Gross: Yes. I would say, the vast majority of the time, a one or two-day stock pop is almost never the reason to sell a stock, unless you've been dying to get out of GM and this was a little gift that you got, and you'll take your money and run. Instead, ignore the stock price. Ignore the stock chart for the most part. See if this business that you are a part owner of is on the trajectory that you want them to be on. Are you happy to be a shareholder? Are they doing the right things? Are they making the right moves? Is the management team allocating capital correctly? None of that really has to do with a one or two-day pop in the stock.
Cross: And be careful when you're selling stocks that have run up or are doing well and trying to fill that with a stock that has underperformed or is not doing well. Be careful about watering your weeds too much instead of your flowers as they continue to grow and grow. Those businesses that are doing well are doing well for a reason. You shouldn't just sell those because the stock's up.
Hill: I do like the recognition, though, in Brendan's question. He's recognizing, "I like to invest in good businesses, but I recognize that there are absolutely times when a stock goes up to the point where," and we've all been in this position, we look at it and we go, "Look, I love that this is going up, but I would not buy it at this price. This is a crazy price that it's at right now."
Before we get to the stocks on our radar, I should mention again, we're hiring here at The Motley Fool. Not just here at Fool global headquarters, but also for our office in Colorado. We are looking for developers, we are looking for marketers, we are looking for investors, just to name a few. You can check out all of our job listings at careers.fool.com. Guys, just so you know, when I say we're looking for investors, you're all safe. I didn't want you think for one second that I had information that you didn't.
Cross: I'm glad to hear that!
Hill: You guys are safe. Let's get to the stocks on our radar. Our man, Steve Broido, taking a little time off this week. Market Foolery producer extraordinaire Dan Boyd behind the glass this week. He's going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?
Gross: I've got RPM International (RPM 2.07%), ticker RPM. They're a specialty chemical manufacturer making things like paint and coatings and ceilings, roofing systems. A really stable business, great record of growth through both acquisition as well as organic growth. Big international opportunity on the consumer side. This is important: they had some asbestos liability that's been around for a while. They just made their final payment, which will now free up cash flow going forward to make more shareholder-friendly moves. They have increased their dividend for 45 consecutive years.
Hill: What?!
Gross: I like that. It's a Total Income recommendation here. 2.2% yield currently. I think both the stock and that yield are going to grow in the future.
Hill: Dan, question about RPM International?
Boyd: Yeah, Ron, could you have picked a more boring company to highlight this week?
Gross: [laughs] Yes, I could have! But there's nothing wrong with a nice, solid industrial company!
Hill: Jason Moser, what are you looking at this week?
Moser: Taking a look at Etsy (ETSY +0.13%), ticker ETSY. Just reported another very strong quarter. The stock is having a phenomenal year, up around 220%, and I think that's for good reason. Buyers and sellers on the platform, those metrics continue to go up. They were able to pass along a recent price increase to sellers with very minimal pushback. And I'm starting to see some ads on TV, actually, now, during the holiday season. Getting a little bit more brand awareness out there. I think they've done a very good job in nurturing that brand equity.
I did note, 10 days ago, when we saw some of that market volatility, that while everybody was selling, I bought two stocks that day. In full transparency, Etsy was one of the stocks that I bought that day. Talking my book here a little bit, I like this company. I think they're geared up for a pretty good holiday season.
Hill: Dan, question about Etsy?
Boyd: Jason, if you were going to start an Etsy shop, what would you sell?
Moser: Oh, man, I was hoping you'd give me this question! My daughter and I actually ran through the Etsy process one day. She's big in the slime market, Dan! If you don't know about the slime market, we'll talk about this after taping. It actually was a very easy setup there. The only problem was it was basically asking for all of my bank account information, and I wasn't totally convinced of how long my daughter was going to last in the slime market. I think I would go with slime, because hey, man, the demand out there is still robust and growing.
Hill: Can I just suggest that you push forward with this idea? In the wake of what Ron said, I could see RPM International acquiring Moser Slime Incorporated, a little buyout opportunity.
Gross: No promises.
Moser: Liven that RPM right up!
Hill: Andy Cross, what are you looking at?
Cross: Ollie's Bargain Outlet (OLLI 0.84%), symbol OLLI, reports next week with sales estimates of about 17% expected. EPS, earnings per share, up more than 40%. 10 million Ollie's Army members strong. What Mark Butler, who is the lead shareholder, calls the bargain battalion. I'm excited to see what they're able to do. They've been able to grow their comp growth 17 consecutive quarters. It was up 4.4% last quarter. Their "semi-lovely" stores continue to do very well for this $5.6 billion company. I'm excited to see what Mark and his team have in store for the holiday season.
Hill: Dan, question about Ollie's Bargain Outlet?
Boyd: Certainly. Andy, is there a publicly traded company with an uglier logo than Ollie's Bargain Outlet?
Cross: Listen, they pride themselves on their "semi-lovely" stores, not their ugly logo. And, hey, I think it's a lot of fun. The Ollie's stores are really about a lot of fun as they grow to more than 900 stores, up from about 300 now. They have big expectations ahead.
Hill: This is not a knock on the business, but I think the Sherwin Williams logo is still pretty ugly. I think it gives it a run for its money.
Boyd: I won't argue that.
Moser: Good observation!
Gross: Another paint manufacturer! I see a theme!
Hill: Three stocks. Dan, do you have one you want to add your watchlist?
Boyd: Yeah, I like Etsy. I've bought things from Etsy. My fiancée is all over Etsy all the time. I think it's a good company.
Moser: Hey, now!
Hill: Ron Gross, Jason Moser, Andy Cross, guys, thanks for being here! That's going to do it for this week's edition of Motley Fool Money. Our man behind the glass is Dan Boyd. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!
