Happy holidays! This episode of Industry Focus kicks off a special week for the show. Dylan Lewis, Shannon Jones, Jason Moser, and Nick Sciple are all gathered 'round the fireplace (i.e., the studio mics) to look back over 2018, then at what 2019 might bring us. In this episode: the best and worst performers in the S&P 500, the biggest stories of the year, 2018 breakout stars, and the coach of the year. Listen in to hear about what 2018 did for the marijuana industry, how Saudi Arabia played a much bigger role in the markets than you may have realized, some of the best CEOs, what to watch out for in this frothy IPO landscape, and more.

A full transcript follows the video.

This video was recorded on Dec. 14, 2018.

Dylan Lewis: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. It's Wednesday, December 26th, and we've got the whole gang in the studio. I'm your host, Dylan Lewis, and I'm joined by Shannon Jones, Jason Moser and Nick Sciple. Guys, what a treat!

Shannon Jones: This is an awesome opportunity to actually be in the same studio with all of you guys at once. I am privileged and honored to be in here with you guys! [laughs] 

Lewis: That's going be tough to top.

Jason Moser: Listen, at the beginning of the year, I wasn't even on your team. I'm just thrilled to be here!

Lewis: It's so awesome to get everyone together! I think people pick this up as we do our shows, but we're taping with people that are remote so often. They're doing the Skype interaction. And you don't get the benefit of the non-verbal tics, that people have to signal, "OK, I'm going to talk now."

Moser: There's a pause, you kind of wait, then you both start talking at the same time.

Lewis: [imitating false starts] [laughs] We're all in the room today because we wanted to do a little year in review, a little look forward, and we thought it'd be kind of fun. We did this last year. We're going to do a slightly different format, not going to do the awards show format that we did last time. We basically have a couple of different categories to talk about the year that was with 2018, and some stuff to look forward to for 2019 for our sectors and the stock market in general.

To kick things off, though, before we get into the categories I've prepared, I'm going to throw a little trivia question at you guys. I ran a screen on the S&P 500 constituents. Any guesses on the biggest gainer and loser in the index to date?

Moser: I think, actually, I may have somewhat of an educated guess. I think TripAdvisor (NASDAQ:TRIP) is part of the S&P. I know TripAdvisor has performed very well this year, as has Twitter. So, those are my two guesses. 

Lewis: TripAdvisor was the second biggest gain. So, you were right there, though. It was just beat out by another tech company actually. 

Moser: Twilio? Well, maybe not.

Lewis: Twilio has crushed it, but I don't think they're in the S&P 500. Biggest gainer: AMD, a semiconductor company. Battleground stock and semiconductor company.

Jones: Never would have guessed!

Moser: Well, see, that's a great lesson in the power of patience there. I've personally owned TripAdvisor for a little bit more than three years. And of course, I established the position and it quickly fell through the floor. They were making a little bit of change to the business model, it didn't work out well. But in the past few years, TripAdvisor has been dead money, it's been an awful investment. But, to see them get past that and start bringing the business back around, it was clear they have something there with that big slew of information and pictures and travel recommendations and whatnot. I held on to my position, thankfully, so we're about back to where we started. I guess that shows you the power of being patient sometimes. 

Lewis: That and Expedia, I wish I understood those businesses. I use Google Flights, or I use the credit card portal so I can use rewards points anytime I'm booking anything. So, as a consumer, I've never gone through and used any of those online travel agencies or booking companies. And I just can't see the use case.

Jones: Do you read the reviews? Like, you don't even go and, like, "I'm going to Spain. Let me pull up the top destinations." You don't even look at the reviews?

Lewis: Well, if I'm staying somewhere, I'm using Airbnb.

Moser: He's just freewheeling it. That's a good point, though. You look at a business like Expedia or Booking Holdings, and that's an OTA, an online travel agency. TripAdvisor tried to do that. That was essentially the pivot they made that didn't work. They fell back on really their bread and butter, all that information. 

I do use it whenever I travel. To give you a good example, we took the girls to the Bahamas this year for spring break. I used TripAdvisor religiously to figure out where to go and what to do. And it really worked out well. Because it worked so well, I then felt compelled to offer reviews so that people going forward might benefit from that knowledge. 

It depends on if that's a habit of yours or not, looking up that information. I guess I've always found value, but I understand the value also in just throwing caution to the wind, too.

Lewis: Yeah, as an investor, I haven't been able to know that the signal is there, that the business is doing well, because I can't participate in it. 

Switching over to biggest loser. Any guesses there?

Nick Sciple: It has to be GE, right? I mean --

Jones: It has to be. 

Lewis: Yes! Down about 62% year to date. We're taping this in mid-December, so this is subject to change. That's one of the big stories for 2018. You have all these legacy companies, these household names -- Sears, GE -- really struggling.

Sciple: Yeah. GE is this company that's been around since the beginning of the Dow, been around for hundreds of years. It got kicked out of the Dow this year. These industrial companies have really been struggling. Are we going to continue to see these conglomerates stay in their current form? Are we going to see an unpackaging of these? It's going to be something to follow for the next year or so.

Lewis: One of the other stories that was overwhelming this year was the beating that the Chinese tech stocks took. I don't know how closely you guys follow that space. In the U.S., we have our FAANG stocks. In China, we have the BAT stocks, it's Baidu, Alibaba, and Tencent. Alibaba down 10%, Baidu and Tencent both down over 20% year to date. 

A lot of different concerns hitting these companies. You have the tariffs going on, potential trade wars, economic slowing in China, and then some regulatory stuff there, too. But you look at a year where almost all the FAANG stocks have performed pretty well, except for Facebook, those stocks have not done as well as their American counterparts.

Jones: Yeah, even on the Chinese biotech end, they got slammed pretty hard. To your point, you have the tariffs, a lot of the products that we actually take, the active ingredient is coming from China. So, there's been a lot of uncertainty with that. 

Also, you mentioned the regulations. China is actually trying to become a big biopharma hub. A big key to that is actually having regulations in place so that we actually trust the data that comes out of these trials. They've been working on that quite a bit. You still have an emerging market that's coming out in China on the healthcare front, but when you start to see the markets go south, usually it's Chinese biotech that will get hit the hardest. 

Lewis: Nick, what was your story for 2018?

Sciple: My story for 2018 has to be Saudi Arabia. Saudi Arabia really touched all kinds of different stories. Politically, we have the Khashoggi killing that's been rattling global politics over the past few months. Then, we have recently the oil production cut with Russia, where OPEC plus -- this is OPEC members plus Russia -- decide to cut 1.2 million barrels per day to the beginning of 2019. You have Mohammed bin Salman, the Crown Prince of Saudi Arabia, high-fiving Putin at the G20 meeting. Developments there. 

And then, of course, SoftBank has been a big story this year with their Vision Fund. About half of the Vision Fund is Saudi Arabian money, $45 billion. Some deals happened with that this year. A 20% stake in Cruise for $2.25 billion. SoftBank has a $2.5 billion stake in Flipkart, which was acquired this year by Walmart or $16 billion. They're the largest shareholder in Uber with $9.3 billion. All that's made possible by Saudi Arabian money. 

And then, of course, probably the biggest story of the year, notoriously, their funding was not secured to take Tesla (NASDAQ:TSLA) private at $420. 

Really, all kinds of stories from politics to economics, just pop culture with what's going on with Tesla and investing in general. They've really touched the entire world this year.

Lewis: I don't think I quite realized how many different fingers in the pie they had in the economic and financial markets until you just listed them out right there.

Sciple: And that's not even to mention that SoftBank's Vision Fund has a $5 billion stake in Nvidia. They have a large stake in Paytm, which Berkshire invested in this year. They have 20% in WeWork. They're looking at maybe purchasing a majority of that. A lot of these big tech trends that we've been talking about, particularly in the private markets over the past year, have been in large part funded by Saudi Arabian cash. 

Lewis: J-Mo, what about you? What are you looking at in 2018?

Moser: It seems like it was the year of the headline. It's been a volatile market all year long, and it seems to all flow around the headline of the day or the headline of the month. Just recently, it seems like every headline has been about either trade tariffs, the dreaded inversion of the yield curve, we've been battling interest rates all year and how that's going to play out on the housing market. We've seen a company like Ellie Mae, a company I cover closely and actually own some shares, we've seen that stock essentially get cut in half because the interest rate environment is tightening up and making those refinances go away. So now, you've got to rely solely on purchases, and people aren't just going out buying houses every day. It's a bit of a longer process than that. 

It seems like we have watched the market react, often in a knee jerk fashion, to the headline of the day. It really runs counter to what we do. We have to always battle to get our listeners, our members to not pay attention to that noise. A lot of these businesses are the same businesses, whether the headline is good or bad. Seems like this is more of a headline-driven year than most. 

Lewis: Yeah. On fool.com, we always like to try to have one Keep Calm piece -- that's what we call it -- ready to go. If we have a sell-off in the market, and it's unexpected, we have some content that we can give to members and people that might just come to the site and check it out, saying, "Hey, we are used to these kinds of sell-offs. This is our mentality when we see these kinds of sell-offs. They're opportunities." I feel like we have had to prepare a couple of more of those pieces this year than maybe we have in past years. [laughs] 

Jones: Speaking of volatility and headline news, we could not go on a show to talk about 2018 if you don't talk about marijuana mania. Right?

​Moser:​ For sure!

Jones: 2018 was the year of marijuana. Pot stocks soared, especially in the first nine months of this year, coming off of the Canadian legalization for adult use recreational marijuana. Also, on the medical marijuana front, 2018 saw the first FDA-approved CBD product from GW Pharmaceuticals. You had a number of different things that were really driving momentum this year. 

We also can't talk about marijuana if we don't talk about Tilray (NASDAQ:TLRY) stock. I don't know how many emails, how many things I saw on social media about Tilray stock. Tilray debuted in the markets in July. It's up about 245% right now. Debuted at $17. At one point, the stock actually went over $300 a share, right in that September to October time frame, because it had such a low float. Also, there was an epic short squeeze that happened. Right now, it's about $78 a share, a $7 billion market cap. But, if there was one stock that captures that big headline focus this year, Tilray is that stock, Jason.

Moser: I couldn't agree with you more. That one defies all logic. They don't even make $10 million in revenue, right?

Jones: They don't.

Moser: To see the multiples that these companies were generating... There was also Canopy and, what's the other one?

Jones: Aurora.

Sciple: Aphria.

Moser: You have some deals being made now. Altria is getting into the mix there, and Constellation. I feel like maybe that's the direction this market ultimately goes. You have these big players that are figuring out ways that marijuana plays into their business model or something new that they can offer. Then, they pick out the what they believe to be the winners in the space. You really have to be careful going in there and trying to pick the pure play winners. At the end of the day, it's just a commodity. It's just a plant. There's nothing that really separates that. So, probably paying a little bit more attention to the big players that are figuring out ways to do neat things with that substance is probably the wiser course of action.

Lewis: As someone that covers healthcare, Shannon, has the rise of marijuana and all of the sudden retail investor interest in marijuana been energizing or anxiety-inducing for you?

Jones: [laughs] I could say both. In terms of just excitement, especially in the medical space. I mentioned GW Pharmaceuticals with their CBD product, Epidiolex. This will usher in, for what has been anecdotal evidence that CBD, which is not the psychoactive ingredient that's found in marijuana, that's THC, but this ingredient could actually make a huge difference in the lives of patients. We saw this with GW Pharmaceuticals. And we saw this in children that suffered from seizures. These are kids that are having like 40, 50 seizures a day, seeing a dramatic improvement. Stuff like that makes me excited. I feel like you're really starting to see, even in the healthcare space this year, it was CBD and fish oil that were two of the biggest headlines. And it's like, we pour billions of dollars into these chemical products, and it's these natural products that are starting to actually show and demonstrate, and can run through a clinical trial and proved to be efficacious.

But, when it's all the other noise, as Jason was mentioning, that's the part where I'm just like, oh, gosh, not another marijuana stock!

Lewis: Yeah, once something transcends stock market focus, and really enters the retail world, and you have people at parties asking you, "What do you think about Bitcoin?" "What do you think about MoviePass?" Or, whatever. That's when, as someone who really wants to make sure that people are doing right by themselves, I start to get a little worried. I'm like, "Oh, boy, the enthusiasm is well beyond people's knowledge bases, and that's a dangerous spot to be for the average investor."

Jones: Absolutely, lots of hype. Yeah, when my mom is asking me about medical marijuana, that's a sign that we are truly in the midst of a huge hype cycle. I'm hoping to see in 2019 that that starts to calm down.

Lewis: I think marijuana probably could have been a rookie of the year candidate.

Jones: I debated that, Dylan! I debated it, I went back and forth on that.

Lewis: Did something else make the cut?

Jones: Yes. For rookie of the year, I actually went with -- this was tough for me, because I went back and forth. But I went with what was recently the biggest initial public offering in history, and that was a company called Moderna Therapeutics that recently debuted on the market. It priced its offer at $23 a share. Did end up down about 19% on the day that it debuted. But, I think investor enthusiasm to invest in innovative approaches, innovative platforms, I'm shocked that that Moderna did this at this point. But given the hype that's in the market, it's no surprise. 

In terms of the amount of money they were able to raise, they raised $604 million. The second one was maybe $253 million. It completely blew that out of the water. But they've got a really innovative drug discovery platform, not just going after one drug, but actually a platform that can develop multiple drugs using a type of RNA, which basically allows us to develop therapies that are more personalized, and potentially more effective, too.

Lewis: I will say, I'm amazed that you had something so quickly. I was looking through the 2018 IPO list, and it's been a rough year to go public. 

Moser: Not the most compelling list of ideas.

Lewis: A lot of big names. You have SpotifyDropboxADTHudson, a lot of companies that are consumer-facing in what they do. A lot of them trading well below where the average investor was able to get in.

Moser: iQiyi went public this year, the Chinese video streaming giant.

Lewis: That's my rookie of the year. Thanks for the tee-up, Jason!

Moser: I'm into it, then!

Lewis: The reality is, of the tech-focused IPOs, there really aren't too many winners to choose from at this point. Most of them have really struggled. At that, they're 50% off of highs hit shortly after the company went public because there was much so pent up demand for the "Netflix of China." So, even with them being above where they first hit the market, there's still a lot of people that are down on their cost basis.

The necessary disclosure with any IPO conversation is that, as you're looking at these types of companies, that's a case in point for why you buy in small bites. Don't go all in at once. 

Jones: Totally agree. Moderna, for instance, is valued right now at $7 billion. They have no approved product on the market. IPOs, it's certainly great to keep up with them. But you know you have a lack-up expiration period coming up at some point, so you can expect to see the stock continue to drop.

I would even say, for IPOs in general, and especially in the healthcare and the biotech space, when we have a really strong IPO class in a particular year, and you've got tons of money flooding into these IPOs, it kind of scares me. Really, what happens is, you have all of this investor money being flooded into ideas that really aren't that great. So, the following year, we end up having a terrible biotech year. The stocks are all down because you have these data readouts that are no good. So, I always get a little nervous when I see a really strong IPO year, just because there's much money being thrown at things that otherwise would not get funded.

Sciple: Yeah. Let's tie that back into what I mentioned about SoftBank earlier, the private markets, we've seen huge bid ups in funding, particularly from SoftBank. You hear about SoftBank telling folks, "Either take our massive amount of money or we're going to give it to your competitor." So, even the stuff that hasn't made it made it to the public market has been bid up in a significant way.

Lewis: I think we might start to see a lot of those unicorns going public in 2019. If there's a thing to look forward to in 2019, that might be one of them. We have the news from Lyft and Uber, both confidentially filing with the SEC. At some point in 2019, we're going to start to get the details on what those businesses look like. There have been some rumors that a lot of the other unicorns, the Airbnb, the Slacks of the world, might also be interested in going public. That's always fun to do from an episode programming standpoint. [laughs] But, it does require some patience as an investor.

Moser: Slack, I was reading, they're at least trying to warrant a $10 billion valuation. I think about that, and I'm thinking, I'm not sure that it really deserves that. But then I think, it's also a first-screen app on my phone that I use every day. It's a very engaging app. I feel like LinkedIn really missed out on something there. That's what LinkedIn was really trying to do. And for whatever reason, they didn't. I was a little bit surprised that maybe LinkedIn didn't try to buy them. 

It's going to be interesting to see. You've got this disconnect between how much you use something and how popular it is vs. how much money do they make and how profitable can they really be? These are all companies that are losing money in their current forms.

Lewis: Yeah. At least with Slack, they have the enterprise software as a service, paying customers, nice recurring revenue model. That's working for them. That looks a lot prettier than, frankly, a company like Snap that goes public essentially pre-revenue and banks on advertisers coming in. So, there's something there, but we won't know whether that's a good-looking investment until we get a chance to look at that prospectus and really dig into it. 

One of the other categories that we wanted to hit on this taping was our coach of the year. This is some leadership or some individuals that have really changed the face of things in an industry or with their company. What do you guys have?

Sciple: Can I do my rookie of the year before we move on?

Lewis: Oh! I'm so sorry, Nick! 

Sciple: You mentioned that IPOs, there's really not a lot of ones to get really excited about this year, particularly in the energy space. So, I went a little bit away from the IPO to Waymo One. There's probably only one story this year that's going to be in the history books forever, and that's going to be Waymo's first-ever autonomous ride hailing service reaching the market earlier this month. We've talked about on your show, as well on the Energy and Industrials show. It's now opened up to the members of the early rider program. They're now paying money to go on these rides, and it's open to their additional guests. It's not necessarily an IPO, but it's something we've been waiting for for a long time. It's really a turning point in how we're going to be moving around over the long-term. They still have safety drivers in the cars. This is still something that they're working on. But it's really something we've been waiting on for years. 

Lewis: And that's the thing that's truly a disruptive technology, both because it's going to change how we get around, and it's going to blow up the business models of some of the companies that are currently working in mobility, transportation and ride hailing. 

Sciple: Sure. We've got Uber and Lyft racing to get their IPO papers filed first. Who can get to the market first and cash in on that demand? But even with that going on, they've still been beaten to autonomous ride sharing by Waymo and the opportunities that they have. Of course, they're backed by Alphabet, which has one of the most dominant monopolies in the world that can really be irrational in this space for much longer than anyone else that's a pure play. 

It'll be interesting to see how quickly those folks can catch up on the autonomous side, and how quickly Waymo can scale up beyond the Phoenix area that it's in right now.

Lewis: With Nick's permission, can we go on to coach of the year? [laughs] Is that allowed?

Sciple: Yes!

Lewis: I'm so sorry for forgetting you before.

Austin Morgan: Some hazing on the rookie. I'm the grizzled vet.

Lewis: Nick, why don't you lead us off with coach of the year?

Sciple: Coach of the year I'm going to give to Terry Spencer from ONEOK. If you're not familiar with ONEOK, they're a pipeline company. Back in February 2017, they acquired all the outstanding units of their MLP, ONEOK Partners. The goal of that was to get rid of the incentive distributions that the general partnership had in that MLP to give them more access to cheaper financing for growth.

The reason that Terry Spencer gets some credit for this is that a lot of companies have struggled -- this has been a trend with these MLPs -- to do that transaction and maintain their business momentum. Most notably, Kinder Morgan significantly cut their dividend after going through a similar transaction. What ONEOK said they were going to try to do is not cut their dividend and to continue growing that over time. And that's really what they followed through on being able to do.

This most recent quarter, their cash flow was up 25%. Their dividend coverage ratio is 1.4X. They've really been expanding their pipeline capacity. In West Texas, in the Permian, they just finished their West Texas LPG Pipeline, and they're already expanding it again. The same thing with their pipelines in Oklahoma's STACK shale play. They've really executed on that acquisition and have been able to continue growing their cash flow. 

Again, part of purchasing that MLP was to make it a little bit easier to do capital market financing. You don't have different shareholders being treated differently. Through this past year, they've raised $1.6 billion in equity to fund these continued expansions of their pipelines. They're on track to grow their dividend 9-11% through 2021. It's already yielding 5.7%. 

It's really a company that has done what it needs to do when it comes to transforming the structure of their business. And it's followed through on all the promises they've made. Which is why Terry Spencer is the coach of the year.

Lewis: Shannon, who do you have?

Jones: I have Mr. Jeff Leiden, the CEO of Vertex Pharmaceuticals (NASDAQ:VRTX). Let me just lay the groundwork here. Biotechs have had a rough year. It's been quite a roller coaster, especially in October. But Vertex Pharmaceuticals right now is the only growth story of the large-cap biotechs. They're up about 24% this year. The stock price has actually doubled in the past two years. 

The story really comes down to Jeff Leiden's management experience and his drive and persistence to treat a disease called cystic fibrosis. If you're not familiar, cystic fibrosis is an inherited and really life-threatening disease that basically impacts your lungs, your GI system. Oftentimes, it's young people. The reason for that is, the average life expectancy for cystic fibrosis is only 37 years. It's a relatively small market, maybe 200,000 patients in the U.S. There hasn't been a lot of money that's been funneled into cystic fibrosis for that reason. 

But under Jeff Leiden's leadership, he came in maybe 2010 or 2012, his drive has been all in for CF. That's his motto, "I'm all in." Right now, they've actually got three drugs on the market for cystic fibrosis. Those three drugs, they are the only disease-modifying therapies on the market to date for this disease. It treats about 50 patients. You would think it stops there, but it doesn't, because Jeff said, "I don't want to just treat half of these patients with cystic fibrosis, I want to treat all of them." So, next year, 2019, it sounds like this company could actually see an approval for, it's basically a cocktail combination of three drugs that they found works for the hardest-to-treat mutations of cystic fibrosis. That's going to drive that 50% up to 90% of all patients can be treated by this one company, which is phenomenal. 

A true turnaround story. I would say, too, in 2018, looking from a financial perspective, Vertex is expected to grow its top line by more than 37% to about $3 billion. They're profitable, which is, of course, rare for biotech and biopharma. But those profits could grow in excess of 57% on an annualized basis over the next five years. 

Like many growth stocks, of course, Vertex is a bit expensive right now. It's trading at about 43X next year's earnings. But with a deep pipeline, they're profitable and committed to patients, not necessarily just going after the next big thing, I say, Jeff Leiden has my vote as coach of the year.

Lewis: See, this is why I love getting in the studio with you guys. I get these stories. My head is in the sand and I'm covering tech all the time. I don't get the exposure to the healthcare and energy news. Jason, do you have something in the financial space that'll absolutely rock my world?

Moser: Sure! The exciting and sexy nature of financial insurance, right? [laughs] Actually, I am going with an insurance executive. Everybody in the room probably knows Progressive Insurance (NYSE:PGR). I'm going with Progressive's CEO, Tricia Griffith. She's been CEO of the company since July of 2016, but she's been with the company since 1988, when she stepped in there as a claims representative. You know what? Me, before I came here, I was a claims representative at Travelers. If I stuck there, maybe one day I could have worked up to the CEO position. Who knows?

What she's done with this company is nothing short of phenomenal. The stock is up about 100% since she took over as CEO. For the year, a lot of the market for financials have been treading water, but Progressive's stock is up 15%. They just continue to be on point as far as brand management. There's a tremendous amount of brand equity out there. People are familiar with Progressive. They know Flo.

Lewis: They love Flo.

Moser: Yeah!

Jones: Do we love Flo? I don't know that I love Flo.

Moser: They stick with what works. And if you don't love her, at least you know her, right?

Jones: I know her.

Moser: They've been known mostly for automobile insurance, but they have homeowner's insurance and other lines of business. They're continuing to grow their pool of clients. It's a $36 billion market cap company today, which means there's still plenty of room to grow when you consider the nature of insurance. It's one of those things that, you may not like it, but you have to have it. She just continues to do a very good job of doing what works. It's not rocket science, it's insurance. And the bigger pool of folks you have in that insurance pool, the better off you're going to be able to be with the business over the long haul, always focusing on that combined ratio, making sure it stays below 100% so you know you're writing good business and paying out the claims that you owe. Just, an impressive business from a lot of different angles there. I was really happy to be able to tap her as the coach of the year..

Lewis: I will round out this discussion with a name that, no matter what episode of Industry Focus you listen to you, you probably know, and that's Satya Nadella from Microsoft.

Moser: That's a good call.

Lewis: Not they've put up a particularly blistering 2018. This is something that has been in the works for several years, someone who has made some tough choices with this business to get them on track, build up a really steady subscription revenue model with their software. The stock is already huge and up 24% this year, now battling Apple for the largest market cap. You look at all of that, and I don't think that that's where a lot of people thought Microsoft would be five, six years ago.

Moser: Well, we were all conditioned under the Ballmer years. It was really a tough stretch. He was CEO for a decade, and the stock was literally flat. It went nowhere. And you wonder, what in the world? This is the software in everybody's workstation in the entire country, in the entire world. How are they not growing this business? It was just, Ballmer didn't have the same forward-thinking that Nadella has.

Lewis: Yeah. And I think it's just going to continue to grow. They have good exposure in the cloud market. Nick Sciple has been pounding the table on Microsoft in the editorial pod recently.

Sciple: They're touching all kinds of major growth trends. Like we talked about with Alphabet and Waymo, they have this core SaaS enterprise software business that's going to keep churning out cash flow for them over long periods of time. They've really been able to grow that in a meaningful way. You mentioned cloud, Azure, the No. 2 player behind Amazon. Of course, they have some natural customers, folks who are Amazon competitors that would prefer to do business with them. 

Not to mention, they're one of the largest video game manufacturers and players. There are some synergies there between what they're doing in cloud and what they're doing in gaming, connecting those things to the cloud and building them out. All their businesses are in a position to grow over the long-term, and they're complementary to one another, which really makes the synergies pretty meaningful.

Lewis: Yeah. You look at the chart for them, up and to the right over the last five years. I don't think that trend is going to change anytime soon. They've got all these businesses that are just chugging along and doing what they need to do. For a business that's that old, that's all you really want. Position yourself in one of the growth markets and make sure that you're not going to mess up your bread and butter.

Moser: Make a lot of cash.

Lewis: Make a lot of cash. Alright, that rounds out our first episode of our multi-episode taping for this holiday week. I'm going to drop our disclosure now and we'll pick things up with some more recaps, some maybe-forgotten stories from 2018, in our next episode. Listeners, stay tuned for that. That'll do it for this individual episode of Industry Focus

If you have any questions or if you want to reach out and say hey, shoot us an email over at industryfocus@fool.com, or you can tweet us @MFIndustryFocus. If you want more of our stuff, subscribe on iTunes, or you can catch all the videos, not this one, but all the other videos are on YouTube. As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against stocks mentioned, so don't buy or sell anything based solely on what you hear. Thanks to Austin Morgan for all his work behind the glass. For all the hosts, I'm Dylan Lewis. Thanks for listening and Fool on!