In this final segment from our Motley Fool's Industry Focus March Madness extravaganza, host Jason Moser and contributor Asit Sharma share two stock picks based on investing principles drawn from the winning basketball programs of Coach Mike Young of Wofford and Coach Roy Williams at the University of North Carolina at Chapel Hill. Whether you're infected with March Madness or not, click below to learn which two stocks these Fools believe will prosper well beyond this basketball season.
A full transcript follows the video.
This video was recorded on March 19, 2019.
Jason Moser: OK, Asit, let's go to one more point here before we wrap this show up. We're running out of time, but we want to talk about a couple of stocks that we're taking away from all of this. Two stocks that we're watching. This can be related to anything we've talked about up to this point here. We can relate this to the principles, we can relate it to the market. We want to give some people some stock ideas to take away from this show. I feel like we've touched on a lot. Let's go for one more. What is a stock that you're watching as we get this NCAA tournament kicked off?
Asit Sharma: I am watching Canada Goose (NYSE:GOOS). Longtime listeners may have heard me talk about the stock once or twice before. I'm going to relate it to the principle [at North Carolina] that I just talked about, continuous improvement. I really like what Jason was showing us -- the values that you have, what you're committed to as a management team, results in profitable returns, and that inflates stock price over time, and helps you as investors, you can invest your values by investing in a management team that you're confident in and that aligns with the way you see the world. Longer-term focus, focusing on the right things.
I really like Canada Goose's management team. It's basically a family run business that went public a few years ago. If you don't know, they make the really high-end parkas. Some of them sell for upwards of $1,000 or $1,500. What's very interesting about this company is that they're obsessive about manufacturing quality products. Usually, when we see an apparel company go public, it's fairly predictable. Over a few years, they'll start to scale into multiple geographies, and they'll begin to outsource their production, chasing that almighty dollar, as Jason so eloquently said. But Canada Goose is really focused on manufacturing. A lot of their product is made by hand. They want to have a quality product, keep improving the quality of that product to live up to that Canadian outdoor ethos, where it could be sub-zero temperatures and you bought one of their parkas. It's not just a fashion statement, it's a real piece that will protect you out in the cold.
They have continually invested in local manufacturing. They now have eight separate facilities within Canada where they manufacture their goods. They just opened their eighth facility in Montreal. It's 115,000 square feet. It's going to employ 650 people by the end of 2020. They just opened one in Quebec very similar to this in 2017 which now employs 500 people.
Just to wrap it up, you can go check out their financials. Rapidly growing income because of margins since people pay for this quality product, they'll pay top dollar for it. But, again, something that's anchored in quality. Sort of reminds me of Nike's evolution. Nike built a global supply chain -- a little bit different, because they outsource most of what they produce -- with the same obsessive bent. If you've read Phil Knight's memoir, you'll see this colorful story about how obsessed he was with the manufacturing of his product. I see something similar going on here, except manufactured in-house. And this will be a long-term competitive advantage for Canada Goose. Despite the fact that its multiple is a little bit inflated, over the long term, this is a winner almost purely for this reason: they care about their product, and it's going to be around for decades to come, in my opinion.
Moser: Alright, Canada Goose. I like it! I was thinking about [Wofford] Coach [Mike] Young's focus on community. That word, community, immediately brought one company to mind. I went to their 10-K, I did a quick search, and the word community is mentioned in their 10-K 45 times. I'm talking about Etsy (NASDAQ:ETSY). No, this isn't really anything related to the NCAA Tournament, but I think a lot of people out there do know what Etsy is. It's that arts and crafts network, buyers and sellers, folks going out there and being able to offer up their handmade goods to sell to people around the world. It has, over time, built out a community with that brand there. Etsy is known as that place to go for that type of stuff. I'll tell you, the business has really just continued to perform. When you look at all the metrics that matter, the buyers continue to go up, the sellers continue to go up, the dollars that are going through the network continue to go up. It's a beautiful business model in that it's really just a network at the end of the day. They're not carrying any inventory. It's really all about building this network and connecting buyers and sellers. It's a profitable business, it's a cash flow positive business. Smart leadership. The stock has really done well, and I have no reason to believe that it won't continue to do well. I like their focus on community, too. I'm going with Etsy, Asit.