On this episode of Motley Fool Money, host Chris Hill together with Motley Fool analysts Emily Flippen, Ron Gross, and Andy Cross hit on this week's biggest stories.
Rite Aid (NYSE:RAD) is probably a bit under the weather, if the one-for-20 stock split is any indication. News about Disney+ (NYSE:DIS) sent Disney shares soaring. Certain branches of Switzerland's government has weird (read: bad) opinions about coffee. Uber's S-1 left some big questions unanswered. PagerDuty (NYSE:PD) IPOed to thunderous applause, and Pinterest's upcoming IPO is turning some heads. And, as always, the analysts share some stocks on their radars. Plus, Chris Hill talks with Motley Fool Singapore's David Kuo about the other side of the U.S.-China trade war, the shifting landscape of Southeast Asian industry, why dividends are like Christmas every day, and more.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on April 12, 2019.
Chris Hill: This is the Motley Fool Money radio show! I'm Chris Hill. Joining me in studio this week, senior analysts Emily Flippen, Andy Cross and Ron Gross. Good to see you as always!
Ron Gross: How are you doing?
Hill: Doing all right! We've got the latest headlines from Wall Street. We're going to head to Singapore to check in with our ma, David Kuo. And as always, we'll give you an inside look at the stocks on our radar.
But we begin this week with the Magic Kingdom. On Thursday, the Walt Disney Company held an investor day to unveil more details about its Disney+ streaming service. CEO Bob Iger said the service will cost $6.99 a month, lower than analysts were expecting, and nearly half the cost of Netflix's standard plan. Disney+ will immediately include most of the movies from Marvel and Pixar, as well as 30 seasons of The Simpsons. That was on Thursday. On Friday, Andy, shares of Disney had their best day in a decade and hit an all-time high.
Andy Cross: Chris, forget Game of Thrones and the battle for Westeros between the Starks and the Lannisters. The real battle is in streaming!
Gross: I didn't understand one of those references.
Cross: Streaming, between the likes of Disney and Netflix and AT&T and Facebook, Twitter, YouTube, the list goes on and on. This was Disney's latest salvo and their most important one, this big streaming initiative they talked about the past couple of years, announced that they were going to go off of Netflix and move all to their own streaming platform. $7 per month, Chris. I mean, Netflix costs $11 to $13. So it's a bigger discount than I think that many of us, at least, that I was expecting. They're going to invest more than $1 billion per year in content. They're hoping for 60 to 90 million subscribers by 2024. I mean, when you just think about the catalog of programming they have, this makes, I mean, for many of us, almost a no-brainer.
Gross: I'm coming for the High School Musical series, but I'm staying for the Lizzie McGuire rerun.
Cross: [laughs] Beautiful!
Gross: No, I really liked this announcement, and I like the detail that that accompanied the announcement, the future guidance, which could easily end up being wrong, but I appreciate the effort. The big thing will be to see if they can get enough subscription revenue to offset the licensing revenue that they will lose. They'll lose 150 million from Netflix alone when they pull their content off of that. That will be certainly something that I'm watching.
Emily Flippen: I actually think they're operating in a space here that has relatively limited competition because they are focusing so much on children and kids programming. There's not a lot of options for that with a lot of the current streaming services. Having a dedicated streaming service specifically for kids, especially at a price point this low, it definitely has a great value proposition.
I'll just add that, it's clear why they're doing the low introductory pricing. They're going to bring people in, show them the value of the service. I have no doubt that a year, two years, three years from now, they're going to be charging two or three times as much for this service than they are right now.
Hill: Well, they certainly have a lot more runway to raise prices. Netflix has shown the ability to exercise that pricing power that we like to see, Andy, in different businesses. Certainly, Disney, I think Emily's absolutely right, has the ability to do that even more so. I'm curious, though, Andy. You mentioned all the different competition in streaming. There was one name you didn't mention, and I think there's a reason why. You didn't mention Apple.
Gross: I noticed that, too. [laughs]
Hill: Which made a big show of their streaming service. Bob Iger is on the board at Apple. He was asked about his role when it comes to those things. And he said, and I quote, "I recuse myself from those discussions. There aren't many of them. It's still a very small business to Apple." So on the one hand, you have Apple saying, "This is where we're going," and then you've got a board member saying, "No, they're not really there."
Cross: Yeah, just a slight oversight on my part, forgetting Apple there in the list. I mean, the list of competition is extensive. Very interesting to compare the announcements. Bob Iger, talking from a studio where they filmed Mary Poppins, been around for 70 years. No real all-stars, no stars joining him so much. Apple totally different. Just speaks to Disney's brand equity and the content library they have behind there. Apple has talked so much about the streaming space. You can't be a media tech company these days -- and by the way, those are really merging together, especially at these large mega-cap companies -- without competing in streaming. Disney, just from the content library alone -- Netflix will spend more than $10 billion on content this year, maybe up as high as $15 billion, some are saying. Disney just have to spend that because they have the content library to rely on.
Gross: I think it will be interesting to see if down the road, they bundle this with ESPN+, and maybe even Hulu. Hulu, dicier, because they only own 60% of it. Obviously, Comcast and AT&T being the other owners. My bet is against the bundling. But I'll be interested.
Cross: I think they said it's likely. They're likely to bundle all three together.
Flippen: I think that's a huge mistake, if that's true. You look at how paid TV developed. It started to bundle everything. The thing is, people hated it, because they're paying more and more every single month and they weren't using all the content. A household that wants to watch ESPN, but doesn't have kids, is slowly going to grow frustrated with the fact that, maybe those two things are bundled, Disney+ and ESPN. And they're paying for all these kid shows, which they'll never use. So I think if they go that direction, they're repeating past mistakes, and they're going to start losing business to businesses that are doing specialized streaming services.
Gross: Would it be good if you have the choice of a la carte or bundle?
Hill: Real quick, before we wrap up, Andy. Bob Iger set the benchmark out there in terms of several years out, how many they're looking to get at. What do you think success looks like for them over the next, say, maybe a shorter timeline, like two or three years?
Cross: If you look at Netflix at 140 million global subscribers, if they can get to 90 million, which be more than half of what Netflix is today, in five years or four years, I think that's a great success! I think they could do it. I'm modeling 100 million members paying $10 a month, you got $10 billion in revenue per year, not a bad business for Disney.
Hill: Uber filed its S-1 as it looks to go public later this spring. Uber is aiming for a valuation of $100 billion right out of the gate, Ron. I don't blame them for that. But I'm not interested. How about you?
Gross: Well, if you like revenue, then you're interested. If profits are your thing, then perhaps not. [laughs] And don't be misled. Some of the articles you'll see out there do say that Uber is profitable almost to the tune of $1 billion. That's misleading. There's about $4 billion of one-time occurrences in the latest year for investment gains. So the company really has an operating loss of about $3 billion.
But listen, hey, 91 million users, up 35%, that's about 5 times the number that Lyft has. It's a very strong business. But, as they rightly say right in the S-1, operating expenses are actually going to ramp. Profits are not going to be a thing here for quite some time.
Hill: Yeah, that was the part that leapt out at me, Emily. They basically said, "Yeah, we don't know that we're ever going to be profitable."
Flippen: Maybe I spend too much time looking at companies that are probably never going to be profitable -- that didn't scare me, honestly, as much as the industry itself scares me. When I look at these companies, they're competing so heavily over price. For both Uber and Lyft, I can only speak for myself and my experience, but I've had a discount on both of those apps for months now. I have no doubt that's related to the fact that both of these companies are trying to go public, have gone public, and are trying to show the power of the user base. There's no doubt that there's value in being Uber, right? You don't say, "I'm going to go hail a cab over my app." No, you say, "I'm going to grab an Uber. I'm going Uber home." So there's value in that name brand. But $100 billion? That scares me, because in order to have that investment, say, double, they're going to have to grow like gangbusters. And that, in my opinion, will require something like self-driving cars.
Hill: I appreciate that Uber was very upfront in their S-1 filing about how they're spending money, how they're going to ramp that up, and what a challenge profitability is.
But we got a little bit more insight this week into another IPO that's coming up. That's Pinterest. They set their price range at $15 to $17 a share. That's a business I don't know as well as Uber, but I have to say, as an investor, I'm more interested in it in part because they appear to be more much more conservative in their tone with how they're talking about going public, especially when you consider, Ron, that Pinterest is in the business of digital advertising, which seems like it has a pretty nice runway of growth ahead of it.
Gross: They've grown nicely in the past, the runway is there, I think this will actually be a successful IPO, if I had to make a prediction here. I think it'll probably have some staying power, unlike Lyft, which was hot right out of the gate, and has come back to Earth. I'd be really curious to see how Pinterest sustains itself from a stock price perspective. I think it will be good.
Flippen: I think it'll be good, too. A large part of that is because, actually, at the midpoint of their estimated price, are priced below what they've been priced at in the private market. So they're actually pricing themselves at a reasonable valuation. You'll notice that their revenue growth is greater than Uber's revenue growth. To me, between these two IPOs, Pinterest is the hands-down winner. This is another company that, there's no problem and taking your time before jumping in. I feel like that way with most IPOs. There's really no catalyst for you to say, "I have to buy Pinterest or Uber on the first day." Give it some time. Let's see how management does.
Cross: It'll be interesting. Uber has about $11 billion in revenue right now. It's growing 40% a year. The market value of the stock is about $100 billion. So relatively on the sales basis, it looks a little cheaper than a lot of these other technology companies that are coming out. But Uber is a little bit different because it relies so much on people, much more than other technologies that scale a lot better.
Hill: Just to dovetail off of what Emily said, we had another example this week of what she was talking about, in terms of another hot IPO. This time, it's a software-as-service called PagerDuty. Shares up more than 50% on the opening day. It just seems like it's getting pretty frothy out there. I just sort of look at that and go, "OK, that's fine. Good for you! But let's see how you do over the next couple of quarters."
Cross: Yeah, great performance the first day with PagerDuty. It was up 60%. Selling at more than 30X sales now. Definitely, the valuations are getting very elevated for some of the SaaS companies.
Gross: Yeah. But PagerDuty does have great growth. It does have very, very impressive customer retention rates. Whether that can support a $3 billion valuation remains to be seen.
Hill: More competition in the airline industry. This week, JetBlue (NASDAQ:JBLU) announced plans for service to London starting in the year 2021. Shares of JetBlue, Emily, were up on the news.
Flippen: There was a bit of a teaser leading up to this announcement. JetBlue has been trying to break into Europe for a while now. There's been lots of talk about that. Honestly, I was a little bit disappointed that it was only London. I mean, I think there's a great opportunity here for JetBlue, but it concerns me that it seems that they've really only focused on London at this point. And, 2021? We saw how quickly Southwest turned the tables when it comes to adding new locations to their fleet. This does seem a little slow to me.
But I'm excited by it. I've personally never flown on JetBlue. Maybe, if they're now the new discount airline, especially with the fall of WOW Air, [laughs] if it'll get me to London, I'm happy!
Gross: I'm surprised that didn't work for them!
Hill: I have flown JetBlue a bunch of times. I really love their service. It will be interesting to see, though, if Southwest decides to get involved in this.
Flippen: Isn't it more Northeast?
Hill: It's always seemed like they're not interested in transatlantic flight.
Cross: It's going to be hard with the fleet that Southwest has. JetBlue, may make some adjustments. That can be very profitable, the transatlantic routes. But competing against British Airways ... they're no slouch, they're not going to roll over on this.
Hill: Sticking with airlines, Andy, last week on the show, Delta Airlines (NYSE:DAL) was the stock on your radar. This week, Delta reporting record revenue in the first quarter.
Cross: Yeah. It was a really nice quarter. The stock was near $50 at the end of March. Now it's close to $58. You saw revenue per available seat mile increase 2.4%, which was above their 2% estimate they had just a couple of weeks before that. So they maybe low-balled a little bit. Seat capacity up 5%. Total revenues grew 7.5%. I know you guys talked about some of the benefits that they have from the American Express relationship. They could see benefits up to $7 billion a year by 2023. EPS, earnings per share, up 28% and expected free cash flow of $3 billion to $4 billion this year. Delta probably one of the best performing airlines from an operational capacity out there, continue to do really well. And they showed that in the first quarter.
Gross: Too early to tell it they're benefiting from the Southwest grounding of the Max planes. Did they make any comments that you know of in terms of going forward or with guidance?
Cross: What impressed me is, they had the best first quarter completion performance of 99.06%, which means they canceled less than 1% of their flights. So from an operational capacity, they are doing everything they can do inside the Delta family.
Hill: But make no mistake, they were absolutely asked about Boeing. As we talked about on the show recently, as we expect all airlines when they're reporting to be asked about, whether they've got the 737 Max in their fleet or not.
Rite Aid announced it will stop selling e-cigarettes. But before you leap to your feet to give the pharmacy chain a standing ovation, Rite Aid also reported a dismal fourth quarter and a reverse stock split, Emily, to the tune of 1-for-20.
Flippen: Yeah, Rite Aid reminded everybody that it's still a publicly traded company today. It's one of those companies, they've fallen now. I think they're the fourth largest direct chain. And drug chains in general aren't doing that well in the U.S., not to mention when you're a small one like Rite Aid, so things are not looking great for them. I think this is the company that is very quickly going downhill. And I'm not about to give Rite Aid a gold star for canceling sales of e-cigarettes because the FDA has already sent them a letter saying, "Hey, we caught you selling e-cigarettes to minors. Please stop."
Hill: But is it safe to assume that we should expect e-cigarettes to go in the direction they're going, in terms of companies not selling them? We should also expect, as we've talked about recently with the influx of cannabis, with the topicals, more and more of those coming?
Flippen: Yes, yes to both of those questions! The first being, e-cigarettes has been something that the FDA has been trying to crack down on for more than a year now. It actually has larger implications for the online market, because there's really no way for people who are selling these online to verify whether or not the person who's purchasing them is of age and giving them to somebody who is of age. So they've had a lot of issues in regulating these companies. It's something that's top of the FDA's mind.
But also, CBD is top of the FDA's mind. Granted, the FDA has granted permission for people to sell essentially lotions and stuff that has CBD in it. That's what our drug chains are getting into right now. There's really no legal issue with that as of the moment. I expect, as regulations continue to loosen, we'll see more and more players jump in.
Hill: Next month is the first public hearing that the FDA is having on this, so I feel like, since we're right across the Potomac River, we should go hang out.
Flippen: I'm planning on it!
Hill: Check out the hearing!
For the past hundred years, the Swiss government has had mandatory stockpiles of supplies on hand in case of war or disaster. The supplies include things like rice, sugar and cooking oil. This week, Switzerland's Office for National Economic Supply announced that coffee will no longer be on this list of supplies. I'm quoting here from the report, "The office has concluded that coffee is not essential for life. It does not contribute to safeguarding nutrition." Ron, how can they be so wrong about an issue like this?
Gross: What about Swiss Miss instant cocoa?
Hill: Oh, you know that's in there.
Gross: That's in there, because it's chocolate?
Hill: With study after study coming out, seemingly like clockwork, every six months. Another study about the health benefits of coffee, Andy, how are they ignoring all of this scientific research?
Cross: Yeah, and when you think they have three months of sugar, four months of rice, four months of cooking oils and fats, three months currently of coffee and they're moving away from that? Come on!
Gross: What are they going to fill the space with? Shelf space now, what can we put in there?
Hill: That's my question. You're clearing out the space, you must have something on your mind. What's it going to be?
Cross: They have a lot of wheat, four months of different kinds of wheat.
Hill: Just to go back to the business of coffee for a second. I think it's no coincidence whatsoever that when the Swiss government is making this announcement, shares of Starbucks hit an all-time high on Friday, and Dunkin' Brands, about 2.5% away from an all-time high.
Hill: Investors know what's up. Switzerland, please! It's not too late!
Gross: [laughs] Come to your senses!
Hill: Come to your senses, we implore you!
David Kuo is a regular financial commentator for the BBC. He's also the director of Motley Fool Singapore, which is where he joins me from now. David, thanks for being here!
David Kuo: Good evening to you!
Hill: Evening where you are. Where I am, it's morning. That's the miracle of technology.
Kuo: Correct! We're separated by 12 hours, yes. Morning here is evening over there, and vice versa.
Hill: Before we get into individual stock investing, I want to go macro for a second. One of the dominant storylines for U.S. investors over the last six months has been the trade dispute between the United States and China. How is that story playing out where you are?
Kuo: If you have look at the disparity between America and China, I think most people over here recognize that it's not really about trade, Chris. It's really about economic ideology. We have America, which is one of, probably, the greatest free markets in the world. And, of course, we have China, which is one of the biggest commodity economies in the world. Really, what is happening is that we're having this debate in front of the whole world, where both sides say, "I am right, and you're wrong." America says that it is the free market that works. And China says, "No, no, no, you're totally wrong! It's the commodity economy that works, and the central government should decide how resources are going to be allocated in order to better the entire country."
So, really, this is playing out in front of everyone at the moment. I have no idea who is going to win. If we have a look at China, yes, the economy is slowing down. But the recent figures seem to indicate that China has turned around. So China is saying that its way of handling a slowdown within its economy, by cutting the reserve requirement ratios, by cutting taxes and directing money where it thinks will produce the greatest amount of productivity, is going to be useful for China. So maybe some people will have a look at the Chinese way and say, "That's not such a bad model, after all."
Hill: In terms of the volatility that happens -- and that can be the result of any number of things, not the least of which is the President of the United States tweeting -- I get the sense that as an investor, just as an individual investor, you look forward to moments like that. You've always struck me as someone who embraces the volatility as a buying opportunity.
Kuo: Absolutely right, Chris! The reason why I say that is because I have absolute faith in corporations. I have absolute faith in companies being able to survive whatever the economic conditions might be. You could have high interest rates, and companies will be able to survive. You can have economic downturns, and companies will be able to survive. That really is paramount for me.
With regards to those tweets that you talk about, personally, I stopped listening to Donald Trump ever since he said that his inauguration crowd was bigger than Barack Obama's. I looked at it and I thought, "Well, that's absolutely not true!"
And subsequently, I found everything that he said to be challengeable, almost to the point where, how can I believe a president -- and I have the greatest respect for your leaders over there, Chris, but I just think, how can I possibly believe a man who tells me that his father was born in Germany, when clearly, his father was not born in Germany? I mean, where do you draw the line, where you start saying, "I believe what you're saying"? So, consequently, I don't really pay much attention to the President's tweets. But I do like the idea that it does create volatility in the market. And when share prices are attractive enough, I will go in and buy, regardless of what the President might say.
Hill: For all of the headlines that China gets, obviously, there are many other countries in the region. As an investor, at the moment right now, what countries in Asia excite you the most?
Kuo: I tell you what, Chris, let me just take you a very quick backdrop of what has been going on in China. Many of the factories in China have been relocating their production outside of China. It isn't because of the trade war that is going on between the West and the East. In fact, it is just simply because wages are going up in China. About a couple of years ago, myself and a couple of Fools from Australia went to China. We went specifically to look at certain industries. One of those industries was a garment manufacturer, which is headquartered here in Singapore, but have operations in China. Now, when we turned up at the factory, Chris, there were no machines in the factory at all. All the workers had been dismissed, and the machines had been shipped to Vietnam. When I asked the factory manager why, he said simply because it is too expensive to start making garments in China now. So, consequently, they put all the older sewing machines onto a boat, and the boat was sent to Vietnam. They were up and running within two weeks, Chris. Just imagine that. They had the entire production line up and running in 14 days.
This is really what is happening in China. There is this shift of production lines from China to the rest of Southeast Asia. Some of them will go to Vietnam, some will go to Thailand, some will go to the Philippines, some will go to places like Malaysia. What I'm looking at is the entire Southeast Asian region. And I'm saying, which of these countries in Southeast Asia will benefit from the shifting of the supply chain from China to our particular region, our Southeast Asian region? It won't be here in Singapore, Chris, because Singapore is a very high-wage economy. We don't really make the sneakers and the T-shirts and the jeans that you like to wear. In fact, we tend to go in for more high-tech stuff. But as far as the mass production is concerned, it is Southeast Asia. So that is where I'm looking, Chris.
Hill: I read an interview that you gave recently, where you said that every stock in your portfolio pays a dividend. I was struck by that. I'm curious about a couple of things. First, how long has that been your investing strategy?
Kuo: It probably has been part of my DNA since the year 2001. When I first joined The Motley Fool, I was a jack of all trades. I used to have growth stocks. I used to have value stocks. I used to have income stocks. But what really struck me one day, Chris, was that I felt totally elated, I felt really happy, whenever I received a dividend check. It was almost as though it was Christmas day and I was opening a present. In those days, Chris, dividend checks came in through the post. Once I realized the enjoyment I got from receiving those dividend checks, I started looking for more and more companies that would not only be paying a high dividend, but certainly a rising dividend.
Currently, my entire portfolio consists of stocks that pay dividends. I receive at least one dividend check every month. Some months, I might receive maybe five, 10, 15 dividend checks. It is really that that drives me. When I go out and buy shares, I'm not actually buying shares. I'm actually buying income for the future. And I'm very careful about looking for companies that will deliver me a dividend not just today, but certainly in six months' time, or, in some cases here in Singapore, they pay dividends every three months. For me, it's Christmas every day when you're an income investor.
Hill: There are investors who will construct their portfolio in such a way where they will have a section that's high growth, a section that is dividend payers. Since all of your stocks pay a dividend, what do you look for next when you're looking to buy shares of a company?
Kuo: What I do, Chris, is that I construct my portfolio in such a way that I have a very strong base of high-income producing companies. Then, on top of that, I layer companies that will grow, but at the same time will also pay a dividend. Then I have some fun stocks that I have. These are what I call my speculative stocks. They create a certain amount of excitement, a little bit of volatility in the portfolio, but again, they pay dividends. It is only a company that pays dividends that will make it into my portfolio.
But I always ensure that my base of high-income stocks is bigger than my growth stocks, that is bigger than my speculative stocks at the top. And if you have a portfolio like that, you can go to sleep at night and rest comfortably because you know that as you're sleeping, the companies are working, and then the next morning, you'll be getting another dividend check.
Hill: Now, before you worked from The Motley Fool, you earned a PhD in chemistry. After that, you worked for Hilton Group's horse racing division as a bookmaker.
Kuo: [laughs] Yes.
Hill: My question is, which of those two experiences do you find to be more useful in your investing life?
Kuo: Everything is useful. I think that if you want to be an investor, what you need to do is to learn as much about life as possible. Whether it is studying chemistry -- which came in very handy when I joined The Motley Fool, because I suddenly became some expert within the company on pharmaceutical stocks. It was very helpful in that regard. Bookmaking was also very helpful because, oddly enough, around the time when I joined The Motley Fool, internet poker was taking off. Of course, being somebody who was involved in the gaming industry, that was very useful, too.
By the way, Chris, I got the Grand National winner on Saturday. [laughs] I don't think that's got anything to do with my gaming past. But certainly, I got the Grand National winner. Can you say the same?
Hill: I absolutely cannot say the same!
Kuo: Well, I did! It was a 9:4 winner.
Hill: [laughs] Well, I guess that just means that the next time we get together for dinner, you're going to be paying.
Kuo: [laughs] Anytime, Chris! Anytime! Oh, by the way, it wasn't 9:4, it was 9:2. It was about 4.5:1. That was pretty good, yes.
Hill: Are there any betting opportunities I should be looking forward to this year? Or are you already looking ahead to 2020 for the Summer Olympics in Tokyo?
Kuo: I tend to stick to what I know. I have done some gaming in the past. I used to, when I was quite young at university, go to the casinos in London. I used to go on a Friday and Saturday night, take a small amount of money, and I would have a target. Once I reached my target, I would just simply leave. I think, if you are going to gamble, only bet with money that you can afford to lose. That kind of, sort of, works with investing as well. You need to be able to say, "This is money that I don't need for the next five or seven years," and put that into some good stocks. In my case, some good income-paying stocks. And at the end of five or seven years, you will look back and say, "That was a great investment that I made! That was a good decision!" That is how I'm teaching my children how to invest. That is the way I do it. I think it's a great way to go through life.
Hill: Last thing. We get the chance to break a little news here. I first got to know you over a decade ago when you were working in The Motley Fool's office in London. You were hosting a weekly podcast called Money Talk. That show ended years ago. But I'm very happy to say that you're now coming back to the world of podcasting.
Kuo: Yeah! You can take the boy out of podcasting, but you can't take the podcasting out of the boy. I do remember, when I first started podcasting in the U.K., for Motley Fool U.K., the boss at the U.K. at the time was a man called Bruce Jackson, who is now in charge of Motley Fool Australia. I came across this thing called podcasting. And I asked him, could I do it? And he said, "Well, how much is it going to cost us?" And I said, "Probably not an awful lot." So we recorded our first podcast, and we put it up. And guess what, Chris? We had 10 listeners. I think nine of those were Motley Fool people themselves. [laughs] So, when Bruce came down and said, "How did we do, David?" I said, "We got 10 listeners." And he said, "Well, that's 10 more than we had yesterday."
From those 10 listeners we grew the numbers to... I don't know, it must have been 80,000 or 100,000 people. It was disappointing to leave all of that and come to Asia. But, you're right. We're going to be starting investing in Asia podcasts, where we will hopefully be going around this particular region and give Motley Fool people and people who are not Motley Fool subscribers a flavor of how we approach investing here in Asia, how we tackle some of the more difficult countries and the more difficult economies, and how we are able to hopefully generate a good return to them.
Hill: Investing in Asia, the new podcast from The Motley Fool, is going to be available on Apple Podcasts, Stitcher, Spotify, Google Play. Coming later this month. You can find it wherever you get your podcasts. David Kuo, it is always good to talk to you!
Kuo: Thank you very much, Chris! Thank you!
Hill: Before we get to the stocks on our radar, we've got earnings season just around the corner. Ron Gross, I want to start with you. What are you looking forward to this earnings season? It can be a company, an industry, it could just be something that you're curious to see how they do.
Gross: I'm actually really looking forward to Apple's next announcement. I'm hoping their guidance reveals something about the health of their business, their transition to more of a service subscription business than it has been in the past. The stock has been absolutely on fire this year. We'll see if the business results back that up.
Hill: Do you think we can get Bob Iger to weigh in on this earnings?
Gross: [laughs] Likely not!
Hill: No, because he recuses himself. Emily, what about you?
Flippen: We have a lot of SaaS companies coming up in reporting. I mentioned this earlier, I'm really interested to see how long this SaaS...
Flippen: Bubble, yeah! Arguably a SaaS bubble is coming about. I really think that the amazing businesses that we've seen develop just over the past few years are remarkable. Some of my favorite investments are SaaS companies. But you always have to ask yourself, well, it can't continue like this forever. There are so many players. If you're in a decision-making position for an organization, your decision is becoming a lot harder. It becomes a question of, how do you get these SaaS companies to keep their customers? You have to make that process and their information as sticky as possible, because now, the next new thing is coming along.
Cross: SaaS stands for software-as-service, for those --
Gross: And don't send us emails. It's just a mini-bubble, don't worry.
Cross: I'm looking at the cost structure. We're starting to see a little bit of pricing pressure, but you have the Fed saying, "Wait." Inflation is not running rampant, but employee costs are starting to move up a little bit. We're starting to see some companies talk about this. So if you're a company out there that operates with a lot of people, then clearly you have to pay those people, and if the rates to pay those people continue to increase, that could nick into profit margins for these companies.
Hill: Let's get to the stocks on our radar this week. Our man, Dan Boyd, is behind the glass, so he's going to hit you with a question. Ron Gross, you're up first. What are you looking at?
Gross: I got Tractor Supply, TSCO, the largest operator of rural lifestyle retail stores in the U.S. More than 1,700 stores. They acquired Petsense back in 2016. Another nice avenue of growth for them. The company has raised their dividend every year for the past eight. Operating results are really strong. Dividend yield currently stands at 1.3%. For those that like a dividend, not incredibly high, but their results both from a stock appreciation perspective and the yield both combine to give you a nice total return.
Hill: Dan, question about Tractor Supply?
Dan Boyd: Ron, I can't imagine that you own an actual tractor. Do you own a riding lawn mower?
Gross: OK, first of all, growing up I did have a riding tractor. We had a little bit of property in the back, and it was the first thing I learned to drive. Currently, I do not have anything, thank you for asking!
Boyd: So you're mowing your lawn with a push mower?
Gross: There are people that do those things out there in the world, and I'm happy to support them!
Hill: I'm going to have nightmares at the idea of Ron Gross driving a tractor. Emily Flippen, what are you looking at?
Flippen: My radar stock is actually a cannabis company. Don't judge me! It's called KushCo, KSHB. KushCo is a really interesting play in the cannabis market. They're much more focused on the packaging. If you're a believer that the cannabis market is going to develop as a consumer packaging industry, then KushCo is a great play. The reason why it's on the top of my mind right now is not just because they reported amazing earnings yesterday, management's really delivering on their guidance, but actually because the day before yesterday, they reported that they mis-accounted for a couple of acquisitions, which doubled their losses last year.
Yeah. A couple of details relating to these acquisitions were counted as equity when they should have been counted as liabilities! So, that's just a reminder to everybody who may be choosing to invest in cannabis that this is par for the course now.
Boyd: Emily, what do you think the next state to legalize recreational marijuana use will be?
Flippen: It's always been up in the air. My biggest hope was honestly for New Jersey. I'm still a believer that New Jersey's going to be the next big state to jump on it. But I think federally, it's happening faster than people expect.
Hill: Andy, what are you looking at?
Cross: Chris, I'm sticking with the streaming businesses and Netflix, NFLX, reports earnings next Tuesday. It's all about subscriber growth, looking for near 25% and to see if founder Reed Hastings and Ted Sarandos, the Chief Content Officer, have anything to say about the competition.
Boyd: Andy, I'm kind of worried about Netflix. We just talked about Disney's streaming service. Is Disney going to be what ends up as the Netflix killer?
Cross: No. There will be more than a billion streaming people out there in the next couple of years. Lots of room for growth!
Hill: Dan, you got a stock you want to add to your watchlist?
Boyd: I'm going to go against the grain here and I'm going to go with Netflix. Big surprise, the largest company we talked about.
Hill: All right. Andy, Emily, Ron, thanks for being here! That's going to do it for this week's edition of Motley Fool Money! Our engineer is Dan Boyd. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening! We'll see you next week!