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Big Tech Earningspalooza Highlights

By Chris Hill – Updated Apr 10, 2019 at 11:22AM

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Here’s what long-term investors should know about the latest reports from Amazon, Facebook, PayPal, and Microsoft.

On this episode of Motley Fool Money, Motley Fool analysts Ron Gross, Jason Moser, and Andy Cross hit on the week's biggest earnings stories. Despite the whirlwind of scandals, Facebook (META 1.25%) shares popped on a great quarter. Visa (V 0.47%) and MasterCard (MA 0.23%) both shared good reports, but the market liked MasterCard a little more. Amazon (AMZN -0.95%) and PayPal (PYPL -0.04%) fell this week, but long-term investors shouldn't be too worried. A whole new market is blossoming in sports gambling, and we have some companies to get your research started.

Check out all our earnings call transcripts.

And, as always, the guys share some stocks on their radar -- this week, picks that'll be good until at least 2039, when colleague and new dad Matt Argersinger's son turns 20. Plus, host Chris Hill interviews Nat Ives from The Wall Street Journal about the business of Super Bowl ads.

A full transcript follows the video.

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This video was recorded on Feb. 1, 2019.

Chris Hill: It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio, senior analysts Jason Moser, Andy Cross, and Ron Gross. Good to see you as always, gentlemen! We've got earnings from some of the biggest companies out there. We will dig into the business of Super Bowl ads. And, as always, we'll give you an inside look at the stocks on our radar.

We begin this week with the big macro. On Friday, the Commerce Department reported 304,000 jobs added in January. On Wednesday, Ron, Fed Chief Jerome Powell said the Federal Reserve was taking a patient approach to raising rates this year. You tell me: Which one is a bigger deal for investors?

Ron Gross: I tell you, Chris, it's all related, but the statements and action by the Fed are much more important. Not only does it look like they've adopted a neutral stance with respect to rising interest rates, but it looks like actually, there's a slight bias in the futures market to a rate cut. Don't hang your hat on it, however. But listen, when you get low interest rates, solid GDP, low unemployment -- and tame inflation, all at the same time -- you take it and you run with it, because it doesn't happen all the time.

Moser: You kind of figure we may have to revisit at least a thesis or two on the banking side. We've been talking a lot about how the interest-rate environment we've been expecting would potentially offer these banks a bit more of an opportunity at profitability. But if rates are going to hang where they are, or perhaps even go down -- which is amazing to think about, still -- that may delay a little bit of what these banks may be able to do.

Andy Cross: I think Ron's right, with the Fed being a little bit more important here, but that employment number was pretty impressive. Wages increased more than 3% for the sixth consecutive month now. The employment participation rate is its highest since 2013. The employment picture in the U.S. continues to be pretty bullish.

Gross: Because of that labor participation rate, you actually saw unemployment tick up a bit and that U6 rate tick up quite a bit, actually. There might have been some of the shutdown in there. They say they accounted for it; I'm not so sure they did. But people coming back to the labor force is encouraging.

Hill: All right, let's get to some of the big earnings this week. The Web Services business grew 45%, but Wall Street seemed otherwise unimpressed with Amazon's fourth-quarter report. Shares falling a bit on Friday, Jason.

Moser: Wall Street is very hard to please sometimes, Chris.

Gross: A fickle bunch.

Moser: You see it time and time again. The reason I think Wall Street is proceeding with a little bit of caution -- the important thing to remember with Amazon is the metric that ultimately matters for this business: simple top-line revenue. That's the fuel that really keeps this engine humming. From that perspective, the company is performing well. First-quarter projections for management were perhaps a little bit lighter than what Wall Street was expecting. When you have that, along with the fact that now we're expecting them to hit another stage of investing in the business to build out this infrastructure, it's understandable if there's a little bit of trepidation out there. But this is the same great business that we knew even a week ago.

Perhaps there are some concerns there in regard to India. They've been making a lot of investments there recently. But there were some changes to the e-commerce legislation there, essentially tantamount to antitrust concerns that might make it a little bit more difficult for not only Amazon, but Flipkart as well, which is owned by Walmart.

All in all, though, it's still the same business, taking that same long-term approach. Amazon Web Services, as you mentioned, doing really well. Trailing-12-month sales now of almost $26 billion. Operating income for the quarter up 57%. It's really just a matter of, are you willing to take that patient long-term approach with this company? I recommend that you do. I know I am.

Gross: Yeah, and let's not forget, all those investments take a chunk out of the bottom line. While they're profitable to the tune of a few billion dollars, they could be significantly more profitable if they turn that investment spigot off. They choose to build for the future. I think that's a smart move. Bezos knows what he's doing. He's not really that concerned about quarterly profits, which I like. They could be more profitable if they wanted to be right now, but they're playing the long game.

Moser: It's interesting to see how Apple (AAPL 1.14%) and Amazon are coming to this crossroads here. Apple's always done such a good job of making money from selling the devices. Now, they're trying to make money on us using those devices. Amazon's philosophy has always been, "We're going to make money from you using our devices, not really from buying the devices." We're seeing these two businesses hit a little bit of a different point of the strategy at this stage in their lives.

Hill: This week, Facebook shares had their biggest post-earnings gain in three years. Facebook up 12% on Thursday after fourth-quarter profit came in higher than expected, Andy.

Cross: Hoo, and they needed it! 2018 was a tough year for Facebook. This was the quarter that Mark Zuckerberg really needed. Revenue was up 30% to just shy of $17 billion. Now, the growth rate actually was trending down over the past couple of quarters, but still, mobile ad revenues up 36%, now 93% of total ad revenue. Very interesting [average] revenue per user at $7.37. That's up 19% year over year. Seven million advertisers across the platform.

The message for me is that Facebook is still relevant, with 2.3 billion monthly active users on the platform. Still relevant. Obviously, they have some challenges with privacy issues, trust issues, but a lot of advertising flocking to get access to those billion users on a monthly basis. Continue to show impressive growth on the top line for Facebook.

Moser: Yeah, really in line with what we've been saying for a while. All these concerns aside, it's really difficult to imagine an investor not making money in this stock, simply because of the size of the business and the size of its user base. I found this really interesting, they're going to essentially stop reporting all this granular user data and just start talking about users as a family, with Instagram and WhatsApp and Messenger and Facebook. I think it's a bit of a cop-out, honestly, because we're not going to get clarity as to how monetizable WhatsApp is. It sure feels like they paid way too much for that business, and we're never really going to find out if they're generating the return on it. But they can do that. You have to at least admire that.

Hill: Microsoft's (MSFT -0.12%) second-quarter profits came in higher than expected, but shares [are] falling a bit this week due to concerns over Microsoft's cloud business slowing down. Ron, when we talk about Microsoft, it's always about the cloud. What's happening here?

Gross: This was not their best quarter, but I'm a Microsoft bull. Two things going on here. As you said, cloud business growth slowing down, but still up 76% for the quarter. But as that business gets larger, just the way the math works, the growth is going to slow down. It's almost inevitable. But still, a very strong business.

The other thing that investors were focused on is that the Windows operating system business was troubled due to the shortage of computer chips out there, largely because of Intel not anticipating the proper growth and putting production in place to meet that demand. Supplies of chips [were] lacking; that hurt the business. That had a flow-through effect.

Still, I think this is an overall strong quarter. I wouldn't be surprised to see that shortfall of chips continue into the first half of 2019. But, again, short-term problem, I think. Business continues to execute. Satya Nadella has done a great job turning this into a cloud business.

Hill: Well, and when we just look at the stocks, and we talk about the big tech stocks pulling back from their highs, Microsoft is really not in the same boat as the others that we've been talking about. You look at Facebook, you look at Amazon, Apple, which we'll talk about in a second, those stocks are down double digits, 20%, 25% from their highs. Microsoft is still pretty close to its 52-week high.

Gross: Yeah, up 8% over the last whole year. That's pretty good. And as you said, didn't nearly take the hit as the others. It's a fundamentally sound business with strong profits and a strong balance sheet.

Hill: Shares of Apple down from its 52-week high, but bouncing back this week after first-quarter results came in higher than expected. Andy, it seems like, not that we're market-timers here at The Motley Fool, but when they came out earlier in January with their warning, and the stock fell, in hindsight, that looked like a really good time to buy shares of Apple.

Cross: I think so. Same thing we saw with Facebook. A little bit of, "wow, it could have been a lot worse." Or maybe investors were expecting that. Now, both revenues and operating profits were down for the holiday period for the first time in more than a decade. But it's still an amazing business. The real struggle they're having now is, the iPhone business is slowing. Tim Cook wants you to think, "Now we're building a services business over at Apple," and focus more on the services. Services revenue was up 19% this quarter. Services, good; China concerns, iPhone concerns, not so good at Apple.

Hill: Am I the only one who looks at these comments from Cook -- you touched on this as well, Jason -- they're moving maybe not away from the iPhone, but they're trying to really build up the services business so it becomes more important to the bottom line. Because of that, I don't see how Apple avoids getting into video programming in a much bigger way than they are right now, whether they make a bid for live sports, they start getting into their own type of movie production in a bigger way, in the way that we've seen with Amazon and Netflix. I don't know how they have all that cash and don't put it to use. If you really want to ramp up your services, that could be a key piece to it.

Moser: They're putting together video content as we speak. That's something that's going to appear more and more on their platform. I don't know that I necessarily look at that as the biggest market opportunity out there for them today. When I think about a services business in relation to Apple, I like payments; I think Apple Pay has a lot of potential. Apple Pay yielded 1.8 billion transactions, more than double from a year ago this quarter. If they can continue to build out Apple Pay, cases to use it, communicate with merchants why they need to be using it.

And then, healthcare. Tim Cook keeps talking about how he believes that we'll look back at Apple decades from now and feel that the biggest impact they made was in the healthcare space. That's perhaps the biggest market opportunity out there when you think about it. They're making steps into that space. The partnership with Aetna. We know that telemedicine is taking off. There's potential there for them in that regard, as well.

Video, sure, but it's going to be a collection of things, for sure.

Hill: Visa and MasterCard both out with quarterly reports this week. Solid reports from both, Andy, but investors seemed more impressed by MasterCard.

Cross: It was a better quarter. MasterCard revenues were up 15%, and payment volumes, gross dollar volumes on their transactions were up 14%, a little bit lower for Visa. The impressive growth that MasterCard continues to exhibit around the globe warranted a little bit better reaction from investors. They saw that. When you think about the amount of transactions and dollar volumes going across the MasterCard platform, as well as Visa, MasterCard just seems to be a little bit on the higher-growth side. They bought back a lot of stock during the quarter, and they bought back more stock during January. It's exceptionally profitable, growing very fast. MasterCard continues to be the winner in that space.

Hill: eBay (EBAY -0.06%) has been under fire from activist investors, but eBay's fourth-quarter profits and revenue came in higher than expected. Ron, I like how CEO Devin Wenig said on the conference call, basically, "I'm not taking any questions from you about the activists."

Gross: Yeah, it's interesting. Yet the activism does seem to be having an effect. Elliott Management, two of the things they suggested were a dividend and an accelerated buyback plan. And lo and behold, what do we have here? We've got eBay paying a dividend for the first time after 24 years and adding $4 billion to their buyback program. Some shareholder-friendly action there, and I'm OK with it because this is not necessarily a high-growth company. We're seeing revenue up about 6%, StubHub revenue up 2%. They added about 2 million customers, now they're at 179 million. It's not a go-go growth company like it used to be. They can afford to return some capital to shareholders.

Hill: There was a good stretch of time over the last 20 to 25 years where paying a dividend was in some ways a stigma. We talked on this show eight years or so ago: A big question about Apple was, "Are they going to pay a dividend? Is that going to do something to their growth prospects?" eBay comes of age in the dot-com era. They pay a dividend, nobody bats an eye. It really does seem like this is no longer a problem.

Gross: It's a capital allocation decision and it's on a case-by-case basis whether that's a good decision or not. In this case, they can afford to do that because they don't really need the cash to plow back into the business. In fact, they're thinking about maybe jettisoning StubHub and Classifieds, and doing things like that, to create value based on what the activists are saying.

Hill: For the third time in less than two years, Tesla (TSLA 4.01%) has a new chief financial officer. The revolving door in the C-suite overshadowed the fact that Tesla posted another quarterly profit, pushing shares higher this weekend.

Cross: Chris, you got that right. Overshadowed a really good quarter with deliveries at almost 91,000, up 205% from last quarter. Revenue at $7.2 billion, up 120%. And profitable. That quarter for Tesla was really pretty impressive. Unfortunately, the retirement of the CFO, and now hiring as the CFO Zach Kirkhorn, who at 34 will be one of the youngest CFOs, got a lot of the attention. But the quarter that they announced represents a pretty continuing process of Tesla continuing to be more and more relevant and offer products that people want. They gave some really nice color around Model Y and Tesla Semi coming out in the next year or two.

Hill: We've talked before, Jason, about Kevin Plank, the CEO at Under Armour (UA 0.30%) (UAA -0.57%), and the challenges he's faced over the last few years in terms of keeping an executive team around him. It really does seem like the mantle has been passed to Elon Musk. Reuters had a story out this week that wasn't even a story, it was really just a list of all of the executive turnover at Tesla over the last couple of years.

Moser: It's a valid concern. It's one of the main reasons why we had Under Armour on hold in Million Dollar Portfolio for a while. You need to see signs that there is a culture there that people want to be a part of. It was very reassuring to see, actually, that Under Armour recently hired a new chief culture officer. It seems like Plank is really taking this seriously. Perhaps Elon Musk can take a couple of notes from what Kevin Plank's been doing.

Gross: Ain't going to happen!

Moser: [laughs] Probably not!

Hill: Shares of PayPal down a bit this week after fourth-quarter profits fell 6%. Jason, they're ramping up the spending. That's hitting their margins a little bit. I don't know. I'm a shareholder of this company; I'm good with this report.

Moser: I'm a shareholder as well, and I agree. I'm good with the report. The stock sold off a little bit based on the expectations game, but you have to completely ignore that. The fundamentals of this business are as strong as ever. We were talking about Facebook and how scale is such a competitive advantage. Let's talk some big numbers here for PayPal. Total payment volume for the year, $578 billion, up 26%. Total transactions for the year $9.9 billion, up 27%. They now have 267 million total active accounts. Mobile total payments volume clocked in at $67 billion for the quarter. Venmo is now driving this business. They're at a $200 million run rate.

There are a lot of things going on with this business, and they're all good. I think if you're a shareholder, you have to look at this quarter and feel very encouraged.

Hill: Two things there. First, as someone who uses Venmo to send money to my college kid, we've said this before about things like Costco and Amazon Prime, and even Netflix. If they want to bump up the price, I'll pay it. Venmo has some room there if they want to start raising prices, in terms of some of their transaction fees. They're tiny.

Moser: That's a really good point. For the longest time, there were no transaction fees. And really, the fees that they've introduced are all based around that instant funding option. There's risk that PayPal and Venmo take on with that option, but the more data they get on those transactions, the more mitigated that risk becomes.

Hill: For all of the innovation that we've seen in the payment industry, with PayPal and Venmo and Square and all these others, am I wrong in thinking that Visa and MasterCard have...I hesitate to use the word "unassailable," Andy, but it seems like the moats that those two businesses have built are incredible.

Cross: They're extensive. That's one reason also why they have returns on equity and capital north of 50% and profit margins, some of the highest in the S&P 500. You just think about the ability for them to be able to continue to take a little bit of a lick off the ice cream cone every transaction, continue to grow and grow, that's really good for MasterCard. They need to continue to reinvest back into that business. It's really small, hence why they buy back so much stock over the years.

Gross: To come back full circle to eBay and activism, the PayPal discussion reminded me that it was Carl Icahn, back in the day, that pushed to have PayPal spun off of eBay. What a tremendous value creation that was.

Moser: Let me just take a minute here and personally thank Carl. I really appreciate that!

Hill: I was just going to say, do Jason and I need to send him a box of chocolate?

Gross: You need to do something!


Hill: On Sunday night, the L.A. Rams play the New England Patriots in Super Bowl LIII. With over 100 million people across America expected to watch the game, companies looking to promote their products and services to that audience will pay around $5.2 million for 30 seconds of air time. Here to help us make sense of it all is Nat Ives, the editor of CMO Today, the marketing and media newsletter of The Wall Street Journal. He joins me now from the Journal's newsroom. Nat, thanks for being here!

Nat Ives: My pleasure!

Hill: This is the most-watched TV program of the year, and it has been for decades. Most of us watch the commercials for fun. You do this for a living. When you watch Super Bowl commercials, what are you watching for?

Ives: Honestly, anything that surprises me would make me happy. I think I might be a little bit jaded. As one who watches for a living, they begin to show certain patterns that take some of the fun out of it. But, a big laugh or a stirring moment is really what you want to see as a consumer. I suppose if I was a marketer, I would also want to see a compelling sales pitch.

Hill: I'm glad you mentioned the sales pitch. There are ads that we all enjoy just for fun, but it doesn't mean we're necessarily going to rush out and buy that product. How do Super Bowl advertisers define success?

Ives: Unfortunately, I think a lot of them define success based on the pop it gets in the press, and online and YouTube views, in the days surrounding the event. Unfortunately, that wears off very quickly. By the Wednesday after the game, nobody wants to talk about any of this anymore. It's not always evident that you've gotten your money's worth in terms of sales lift. It depends on what your goals are, of course. If you're a brand that nobody's heard of and you need to let everybody in the country know all at once, this might be the right way to do it. You're going to need some follow-up marketing, of course, but it's a nice way to say hello and announce yourself. If you're a brand everybody knows and you need to fend off upstarts, perhaps it's another way to maintain your position. But if you're a brand that's just introducing a funny joke and getting a week's worth of PR out of it, you could be rightly asking yourself, "Did I achieve incremental sales by spending that $5.2 million?"

Hill: I want to get to some specific companies in a minute. First, are there one or two commercials that we should keep our eyes out for?

Ives: The ones that I've seen so far are not blowing me away. I like Bud's ad about the wind power that it uses. I weirdly like Michelob Ultra Pure Gold's ASMR [autonomous sensory meridian response] ad. This is Zoe Kravitz whispering into a microphone for 30 seconds. It's going to stand out in an otherwise very noisy day. A lot of the other ones are commercials I wouldn't be surprised to see any other day of the week.

Hill: I was looking at a PowerPoint that The Wall Street Journal had put together about advertising on the Super Bowl. One of the things that struck me was, over the last 25 years, Anheuser-Busch, Pepsi, General Motors, Coca-Cola -- they're among the big public companies who have spent the most amount of money on airtime. These are also incredibly well-known brands, particularly in the case of Budweiser, Pepsi, and Coke. Do you think that's money well spent?

Ives: It takes a lot more research than I personally have done to authoritatively answer that. But, I would say in the case of A-B, for example, they really are defending their position as America's brewer. They're advertising both their established brands, Bud and Bud Light, and regularly rotating through new brands, including a hard seltzer this year -- alcoholic sparkling water that they're trying to get off the ground. They've got their purpose, and that's why they're going to have 8 1/2 minutes in the game this year, which is incredible.

Hill: For the first time in over a decade, Coca-Cola is not advertising during the game itself. I was a little surprised by this, in part because of their history of spending during the Super Bowl, but also, the game is in Atlanta. That's ground zero for Coca-Cola. Why aren't they advertising during this game?

Ives: Maybe Coca-Cola figured out a better way, they thought, to use their message and timing. They've got this unity ad that says, "He disagrees, she disagrees, but they both drink Coke." They're running it right before the national anthem. It's a really fitting spot that actually is still going to have very high tune-in, probably cost less than the very next spot that's going to run in the game. They'll see what they get out of it.

I support the idea of marketers that are usually in sitting out once in a while or trying something different, just to see if they can detect an effect. If they can't, then maybe they can save themselves $5 million every year.

Hill: For years, Amazon did not spend a dime on TV advertising. This year, I think it's going to be one of the biggest spenders during the Super Bowl. Obviously, CBS, the network that's airing the game this year, is happy about that. Amazon is famous for the way that they analyze data on their website. I'm a little surprised that they're spending this much on TV advertising because, as you indicated, it can be a little tricky, other than just measuring buzz in media reports, to evaluate how much a TV ad is doing for a particular product. Are you at all surprised at the way that Amazon has jumped into TV advertising?

Ives: Amazon is being driven by marketing -- not its website, for example, but its new consumer electronics product. It's trying to sell Alexa and Alexa-powered devices. That's why you see Alphabet in the Super Bowl again this year as well. These guys have a package of electronics they're trying to sell in stores and online. They're also trying to become the default, the Coke to the Pepsi, in the voice-assistant world. This is a wide-open segment that's probably going to get bigger and bigger and bigger. They've obviously made the bet that telling everyone in America that they've got the voice assistant you want is worth it.

Amazon's 2.5 minutes in the game this year actually also includes a trailer for its Amazon Prime streaming video service, which is another highly competitive direct-to-consumer business that takes a lot of spending, both on the content and the marketing, to win.

Hill: Another big tech company that has a relatively new consumer device is Facebook with their Portal device. Unless I missed something, I don't think Facebook is advertising during the Super Bowl. I'm curious -- particularly in the wake of 2018, which was a year of consistently bad publicity for Facebook -- how is Facebook regarded in the advertising community right now?

Ives: Their recent ads, to your point, have been for Portal, and to say, "We're sorry, we're going to do better." That's what they've been on TV for in 2018. And they did a lot of Portal ads in the holiday season. I wouldn't have been particularly surprised to see them advertising in the Super Bowl here. That they're not may reflect some business considerations. It may reflect, now that the holiday season is over, the calculation that it's better to get out of the spotlight for a second and try to clear up their brand.

Hill: I mentioned at the top that the price of 30 seconds of ad time during the game is $5.2 million. If that's higher than last year, it's only incrementally higher. I'm curious if you have any insight into CBS. Obviously, they're making a lot of money off this game; they're charging $5.2 million for 30 seconds. But they've also turned down some advertising. Most famously, there was a medical-marijuana company that wanted to buy a 30-second ad, and CBS turned them down. Why is that?

Ives: CBS and the NFL both are going to be very careful with their image and the image of the Super Bowl. This is considered a secular holiday. This is considered a game for the entire country to watch. You're not going to find anything that's terribly risque or off-color in this year's game. There's certainly ads that have aired in decades past that we would probably consider offensive now, and it would generate a lot of media coverage. But you're not going to see weed in any form advertised in an NFL property anytime soon. The NFL just got around to letting liquor into NFL games. This year, even liquor is not allowed in the Super Bowl, so cannabis is beyond the pale for these guys. They're trying to remain looking as squeaky-clean as they can. The NFL, too, has plenty of controversy to deal with; they don't need new headaches.

Hill: All right, last question, then I'll let you go. Separate from the Super Bowl, just when it comes to advertising writ large in 2019, what's something that you're watching this year? It can be a trend, it can be a particular company. What's something that's on your radar in the advertising and marketing industry?

Ives: I'm always keeping an eye on the balance between ad-supported media and media that, one way or another, lets consumers stay away from advertising. For example, Netflix versus ad-supported Hulu versus an ad-free version of YouTube. There are all kinds of new streaming services coming along, and of course, there are the ad blockers online. The ability of marketers to reach consumers in any sort of normal, recognizable way is being constrained. Seeing what channels remain and what new ones come along is fascinating. Everything else outside of that is asking a completely different skill set for marketers, and that's creating content that people actually want to see.

Hill: If you want to know which businesses are making headlines for their marketing spends, you can follow Nat Ives on Twitter. You can also sign up for CMO Today, the free email newsletter about media and marketing from The Wall Street Journal. Nat, I know it's a busy week. Thanks for taking a few minutes and enjoy the game!

Ives: Thanks for having me! You too!


Hill: Our email address is [email protected]. With the big game on Sunday, this is a very timely email from Bill Davis. He writes, "There was a great New York Times article this week about the huge growth coming in sports gambling, based on recent legal changes and attitudes and outlooks in the sports culture. Can you talk some about this expanding market opportunity and maybe suggest a basket of stocks in this area?" Jason, we've talked about a war-on-cash basket, the health-and-wellness basket. Is there a sports-gambling basket?

Moser: [laughs] I want to approach this from the perspective -- I'm not a big gambler, so it's hard for me to actually see where the competitive advantage lies in any one particular entity. Where I do feel like there's an advantage is, no matter what, that money has to go from point A to point B. I've talked often about how with this move, all of these payments providers have an opportunity to make some money from this market. The war-on-cash basket certainly applies there to a degree.

I'm also going to push Bill over to a recent episode of Industry Focus: Jan. 15, Nick and Asit did a whole show on casino stocks and sports gambling; it's like an hour long. They really dug into a lot of that stuff. I would encourage him to go back there, listen to the Jan. 15 episode of Industry Focus.

Hill: Ron?

Gross: Bill, because I care about you and our listeners, I did a little research here. These are not recommendations, but the main players here you want to check out: The Stars Group, William Hill, Boyd Gaming. If you're a fan of the FanDuel-type companies, Paddy Power Betfair out of Britain actually acquired FanDuel, so that would be a way to play that.

Hill: William Hill, no relation.

Gross: No?

Hill: [laughs] Before we get to the stocks on our radar, any prop bets for the game of interest to you guys? The one that always gets me is the over-under on the singing of the national anthem. Like you, Jason, I'm not a big gambler, but I look at that and think, "Gosh, that seems like the easiest thing in the world to fix."

Moser: Yeah, and it's usually really great fodder for the Stern show that following Monday. They always have fun with that, and then juxtaposing it with Robin's efforts at the national anthem one time ago.

Gross: It's funny stuff. You can bet this year and most years on the color of Gatorade that will be poured over the winning team's coach. It seems like you could get a little inside info on that, too.

Hill: Absolutely. I'm happy to share some news, really the best kind of news. Earlier this week, our friend and colleague Matt Argersinger became a father.

[all applaud]

Moser: Hey, congratulations, Matty!

Hill: His wife gave birth to a healthy baby boy. I'm sure Matt did a great job standing next to her in the hospital while she did all the work. Everyone's doing well. We could not be happier in part because all of us around this table, and also behind the glass, we are all fathers. We all know just how sleep-deprived Matt's going to be for the next year or so.

With that in mind, we've got a very special stock on our radar this week: It's stocks for baby Argersinger. Not that Matt is not a great investor; he is. But we're going to offer up some ideas for this baby boy. We'll be conservative in our time line, because look, you know what this kid has ahead of him? Many more decades of investing than we have.

Cross: A lot of time!

Hill: We'll put together some ideas for when he turns 20 years old. So, radar stocks for 2039. Steve Broido is not only going to suggest a stock of his own, but he's going to pick one for the baby to double down. We're going to have a five-stock portfolio. Ron, you're up first.

Gross: All right. If little baby Argersinger is going to be a snappy dresser like his dad, I've got to go back to Carter's (CRI 0.81%), CRI, the leading manufacturer of children's clothing in the U.S. under names like Carter's and OshKosh B'gosh. As I said, they're the dominant player here. They've performed well over multiple market cycles, 2.2% dividend yield, buys back a ton of stock. They're digesting the Toys R Us bankruptcy, and there are some China trade issues here, so the stock has suffered, but that makes it awfully cheap.

Hill: Steve, question about Carter's?

Steve Broido: I know Carter's stores. Is Carter's merchandise available outside of Carter's stores?

Gross: They make specialty collections for folks like Target, Walmart. They have a specialty collection for Amazon. You can get them there.

Broido: I'm glad you knew the answer to that one.

Hill: Jason Moser.

Moser: I was thinking we could probably have a recommendation for Matty and Jean, too. They're going to have to set that coffee maker on "stun," so why not buy a few extra shares of Starbucks?

But for the young man, I'm going to go back to my daughters' portfolio. The most recent addition for them -- Santa brought them a few shares of Square. I think that's not a bad pick here, either. You know all about that business. They're building out the Square Financial Services side now, as they've resubmitted their banking-license application. I think that's going to be a really neat part of the business once they build it out. I'm really encouraged with the things that they're doing. They're opening up access to capital, new products and services for customers. That'll help them build up a pretty enviable competitive position over time. So, hey, listen, man, if you're looking for the ultra-long term, that's probably a good addition.

Hill: Steve, question about Square?

Broido: I hear the name Square all the time. I still don't really know what they do. Help me!

Moser: Oh, come on, Steve!

Broido: I know that you swipe your credit card on the little thing. Is that it?

Gross: It's like a circle, but...

Moser: [laughs] That's basically it. It's a hardware company that's developed a very robust ecosystem behind that hardware. They help businesses deal with payments, inventory management, all sorts of things.

Hill: Andy Cross?

Cross: I'm going to stick with the advertising theme for young Mr. Argersinger here and go with Trade Desk (TTD -0.66%), TTD, one of the most impressive companies I've followed over the past year. They're the masters at programmatic trading, advertising matching with clients, and ad impressions. On average per day, their clients -- who are mostly advertising agencies -- have exposure to almost 600 billion ad impressions per day. They're really helping drive the automated programmatic trading, matching up buyers and platforms, publishers, with ad impressions. The growth has been 50% a year for the past year or so. Very profitable. Beautiful balance sheet. It's founder-run by Jeff Green, who's really impressed me. I like Trade Desk for the next 20 years.

Hill: Steve?

Broido: Does a company like Trade Desk work with people like Facebook? We talked about that earlier in the show.

Cross: Facebook and Twitter, those are closed, walled-off gardens. They're all on their own. Trade Desk helps all the publishers and ad buyers out there outside of some of those walled gardens.

Hill: So, that's three stocks for the portfolio. Steve, you get to essentially pick one to double down on. And then, if you have one of your own, that would be great!

Broido: I think Square. I'm hearing the war on cash. That'd be terrific.

Moser: Hey, now!

Broido: In terms of my stock, I see the future, Ron Gross: It is round, it is filled with tires. It is Titan International (TWI -2.78%).

[all laugh]

Gross: Oh, my goodness!

Broido: Coming full circle.

Gross: Awesome!

Hill: I want to go back to something you mentioned.

Gross: TWI.

Hill: You mentioned Starbucks. I was looking at this -- and I'm a happy Starbucks shareholder -- the market cap of Starbucks is $85 billion, whereas Dunkin' Brands is $5 billion. So, just in terms of growth opportunities, Matt Argersinger, a proud son of Massachusetts: I kind of feel like maybe Dunkin' Brands, at least in terms of the next 20 years, a better growth opportunity.

Moser: Perhaps.

Hill: It doesn't really have the footprint right now, certainly not outside of New England.

Moser: Perhaps. But with all of his New England loyalties, I always see a Starbucks cup on his desk! Explain that!

Hill: That's fair. That's fair.

Gross: He's going to love watching that game this weekend with his boy. That'll be great!

Hill: As Jason said, hopefully he's got a lot of coffee. All right, 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 engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Andy Cross owns shares of Facebook, Mastercard, Netflix, PepsiCo, Inc., Starbucks, Under Armour (A Shares), and Under Armour (C Shares). Chris Hill owns shares of Amazon, eBay, PayPal Holdings, Starbucks, Under Armour (A Shares), and Under Armour (C Shares). Jason Moser owns shares of Alphabet (C shares), Amazon, Apple, Intel, Mastercard, PayPal Holdings, Square, Starbucks, Twitter, Under Armour (A Shares), Under Armour (C Shares), and Visa. Ron Gross owns shares of Alphabet (C shares), Amazon, Apple, Costco Wholesale, Facebook, Mastercard, Microsoft, Square, Starbucks, and Titan International. Steve Broido owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Costco Wholesale, Facebook, Mastercard, Microsoft, Netflix, The Trade Desk, Twitter, and Visa. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Carter's, Facebook, Mastercard, Netflix, PayPal Holdings, Square, Starbucks, Tesla, The Trade Desk, Twitter, Under Armour (A Shares), and Under Armour (C Shares). The Motley Fool owns shares of Microsoft and Visa. The Motley Fool is short shares of CBS and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends Anheuser-Busch InBev NV, Costco Wholesale, Dunkin' Brands Group, eBay, and The New York Times. The Motley Fool has a disclosure policy.

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