Once a quarter, Motley Fool co-founder David Gardner indulges himself with one of his favorite Rule Breaker Investing podcast features: the Market Cap Game, in which he attempts to stump one of his analysts by presenting them with 10 companies from the Fool's Supernova universe -- some well-known, some less so -- and tasking them with pinning those companies' current values to within 20%.
This week, his contestant is Aaron Bush, an analyst for several Fool portfolios, and a neophyte at the game. But the last rookie set a high bar for him: Senior analyst Emily Flippen notched a new record score in her debut. Can Bush do better than Flippen? Can you do better than Bush? We'll find out. And of course, along the way, Bush and Gardner will share some investing insights that could be valuable to you.
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 June 19, 2019.
David Gardner: At the end of every quarter, a lot of money managers are indulging in something known as window-dressing, where within their mutual funds, they're selling off losers and buying winners -- in order to show publicly at the end of that quarter all the stocks they have in their fund, which they're required to do, and they like to show winners. We don't window-dress at Rule Breaker Investing. We're not a mutual fund. Why would we do that?
What does the end of the quarter mean to us? It means "The Market Cap Game Show: Episode 8," coming up.
Hi! Welcome to the Market Cap Game Show! I'm David Gardner, host of Rule Breaker Investing. Rule Breaker Investing happens about 12 out of every 13 weeks of every quarter, but one of those weeks is our game show. I'm really happy this time to be joined by a brand-new contestant, my friend Aaron Bush! Please say hello!
Aaron Bush: Hello, everybody! Honored to be here! Thank you, David!
Gardner: Absolutely! Aaron, you and I have worked together for years at Rule Breakers, more recently at Motley Fool Blast Off. Spectacular launch of that service, Aaron!
Bush: Not a bad beginning.
Gardner: We picked stocks. Initially we did with Matt Argersinger, and then we added Emily Flippen to our team. But we picked those stocks in December of this year. Roughly, where's that 20-plus-stock portfolio for members, just six months later?
Bush: We're up about 60% right now.
Gardner: Which is amazing! And one of the companies in that Blast Off portfolio will be one of the 10 stocks today on the Market Cap Game Show. Just a little bit of a spoiler alert.
So, the Market Cap Game Show. A lot of you, I hope, have listened to at least one of these. But we always have new listeners every quarter we do this. So I think the first thing, Aaron, is that we should briefly define "market cap." Could you please define "market capitalization"?
Bush: Sure. The market cap is how big a company is. It's the size of however many shares there are, multiplied by the share price. Ultimately, that leads to a company like Facebook being $500 billion. That is roughly their market cap, I think. It's roughly the size, and that's priced based on future cash flows, future expectations, etc.
Gardner: That's right. So all stock prices are set every single day, even as we speak, as you're listening to us. If the stock market's open, people are shaking hands right now, a buyer is shaking hands with the seller saying someone's in, someone's out, at that price. That price, multiplied by the number of shares, in total for that company, is the price tag for that company. Aaron, you gave a good example of Facebook. Let's go with another example, the traditional example that we use for the Market Cap Game Show. What is the company?
Bush: I believe it is Etsy.
Gardner: You're absolutely right. Etsy, Aaron, 120 million shares outstanding for Etsy, the stock recently at $66.95 as we're taping -- 120 million times $66.95 is, what?
Bush: Off the top of my head, that is about $8.05 billion [editor's note: $8.034 billion].
Gardner: Thank you very much for that, taking it out to a second decimal. So Foolish of you. So, yeah, that's how it works. Now, if you're new, you know why the market cap matters: It gives you a quick sense of how big these companies are. If a company is at a $100 billion price tag, that's a lot bigger than a company at a $10 billion price tag. Sometimes, if we really like both of them equally, we'll start thinking maybe we should recommend or buy the smaller company because maybe it has an easier chance of doubling or tripling from $10 billion than from $100 billion. But the truth is, Aaron, as you well know, we have companies at all ranges of sizes. It's not really so much what the market cap is today. It's where we think it might go one day.
Bush: Yeah. Most people, when they buy a stock, focus so much on the price.
Gardner: The price per share.
Bush: Right, the price per share, not the price of the total company. And that's just backwards, David. It's backwards.
Gardner: It is. I think it's because people have never been taught market capitalization. They didn't have a game show that they could grow up with around the fire, calling the family and all the cousins in, multigenerations sitting around the fire listening to the Market Cap Game Show.
Bush: Is that how it is in your household, David?
Gardner: [laughs] I always picture it in a very Norman Rockwell way, not just for me and my household, Aaron, but for you and your extended household, and everybody's. That's just how I picture things. Maybe I don't have it right.
Bush: It's quite the dream. [laughs]
Gardner: [laughs] So, Aaron, of course I want to launch right into the game. But as is my wont, I went back and listened to last episode, Episode 7 of the Market Cap Game Show. And I just wanted to humorously reflect on -- with Emily, in this case -- how I was leading off the top of that show.
I was talking about the hype around IPOs in 2019. "Hype" is a neutral term for me; I'm not cynical. There's a lot of excitement about these, and some of these have been great IPOs. Lyft had recently come public when we taped in March of 2019. I was talking about how Uber [Technologies] (NYSE:UBER) would come out and come public somewhere around $100 billion. And I was saying, probably I wouldn't recommend that stock, because it's already $100 billion. How high could Uber go? On May 23, 2018 [editor's note: it was 2019], for Rule Breakers -- we don't usually give away new service recommendations, but for this one exception, I will make an exception -- May 23, Uber was my new pick for Motley Fool Rule Breakers. That was only a few weeks ago. I'd forgotten that I was inveighing against that three months ago on this game show.
Bush: What made you change your mind?
Gardner: I think it was specifically, Aaron, that the IPO came out, and Lyft had fallen off some, so Uber came out of the gate not with a really hyped, exciting IPO. In fact, a lot of the stories -- you'll remember, it wasn't too long ago, people were saying it was a failed IPO, it didn't do so well. So, it started to fall. In fact, Uber, today, the stock is at $44 a share. Again, some people who don't know market cap think that that's the value of the company. But you and I know, and we all know because we just defined it, that $44 a share is just the price per share. But if you were to multiply that by the number of Uber shares, you'd get Uber's market cap, which is roughly...?
Bush: [It's] $75 billion.
Gardner: That's exactly right! Well done! $75 billion. So already, Uber is priced $25-billion-plus less than initial expectations. So that started making the contrarian in me start to rise up a little bit and roar. People think Uber isn't ever going to make money, this is not a good company, these kinds of things. So I was like: "I think Uber is going to be around a long time." [snaps] It passes [snaps] the snap test, which I did a couple of weeks ago on the show, picking some stocks; Uber clearly, for me, passes the snap test. So that's why I recommend it. I'm happy to say, we picked it at $40.47, Aaron. It's $44 today, so it's up almost 10%. Beating the market so far. We'll see.
Bush: So far, so good!
Gardner: Do you own Uber?
Bush: I do not.
Gardner: Would you ever buy it?
Bush: I'm open to it. I think, similar to you, I just have recognized that it already is a big company. Also, of course, companies change, they grow, they improve, but just seeing how much money Uber is burning right now, just looking at that makes my eyes bleed a little bit.
Bush: I'm open to it, but I think I like other things a little bit more.
Gardner: Not the top of your watch list.
Bush: Not the very top.
Gardner: Well, maybe some of the 10 stocks featured on this Market Cap Game Show may not just be on your watch list, but in your portfolio. We'll see, Aaron. I want a couple of ground rules, first of all. Aaron has no idea which stocks I picked. He's been in the soundproof booth the entire time. This is a surprise to him. Aaron, is it fair to say you're a little nervous?
Bush: You know that feeling when your teacher quizzes you in front of class, you have a little bit of anxiety? Now, imagine that your co-founder, your mentor -- your boss, in some sense -- is quizzing you in front of thousands of people. It feels a little bit like that. But also, we're talking about stocks, we're talking about investing. I love hanging out with you, David!
Gardner: Thank you!
Bush: So, the pros definitely outweigh the cons here.
Gardner: That's really well-put! And you grew up with this stuff, Aaron. Few people are better-positioned to succeed than you. We realize this is just one sample size, 10 stocks. You're not even actively working on Rule Breakers anymore, or Stock Advisor. You have some other callings here at The Fool. So, you're looking at a stock universe that you don't look at up and down every day for full pay, salary, here at The Fool.
Bush: Somewhat. How many stocks are in the Supernova universe right now?
Bush: So, this is a random 4% or so of that universe?
Gardner: Yes. Is it is somewhat randomized. I do kind of randomize from the universe, but I'm typically going to be favoring companies that it's at least interesting to talk about. I'm not going to take some obscure tiny biotech which we would have to explain to people unless I randomized it and decided to include it this time. We'll have to see.
Bush: Well, I look forward to whatever you throw at me. Hopefully I don't embarrass myself too much!
Gardner: So, ground rule No. 1, Aaron, you have no idea what's coming. God bless you!
Ground rule No. 2, while Aaron might think it's about him, and I might think it's about me, and we're just talking to each other in-studio, nope! That's incorrect. This is about you! Ground rule No. 2, you are playing the game along with us. I'll always pause, give you a moment to think about what your number is, and you're going to play against Aaron. In fact, let's go ahead and rock the hashtags in the coming week: #IBeatAaron, #ILostToAaron, #ITiedAaron. Let us know how you're doing. We play this game for you; Aaron's just a foil and I'm just the empty card-reader emcee.
Finally, ground rule No. 3, we accept answers within a 20% range above and below the actual market cap. Earlier, Aaron, you rocked some math for us. You said Etsy was $8 billion: Twenty percent higher than that is $1.6 billion, [so] $9.6 billion down to $6.4 billion, that's the range. [And] $6.4 billion up to $9.6 billion would be all correct, guessing the market cap for Etsy, which will not be one of the 10 stocks. It's kind of Valhalla, where it's the eternal example that we'll use at the start of every show. No gimme for you, Aaron!
Bush: That's fair!
Gardner: [laughs] So, I think we have all three ground rules set. It's time to play the Market Cap Game Show (TM).
So, Aaron, one of my favorite things about you -- I like a lot about you, I really do -- but one of my favorite things is that I remember talking to you from your college dorm room via Skype back in the day, just chatting.
Bush: I remember that. That was fun!
Gardner: It was! You were a freshman at the University of Texas.
Gardner: I remember that you grew up with The Motley Fool. Your mother in particular was a longtime member -- is, I hope, still a longtime member.
Bush: Still is, absolutely!
Gardner: You interned with us as a younger kid. And there I was, talking to you from your dorm room, University of Texas. Within a year or two, where were you?
Bush: I was right here with you, David. Here at Fool HQ.
Gardner: That's right! You, in fact, decided -- what was your thinking at the time? You decided, "I'm going to leave Texas. I'm just going to go to work for The Fool."
Bush: Well, I kind of already knew, for the most part, what I wanted to do. Having been in school for a little while, I knew I had a better sense of what I could get out of school and what I could learn for what I want to do. Take that, take the financial elements of it. And I just realized, most people, when they think about dropping out, in a lot of senses, they think backwards about the risk. In my mind, it would have been riskier to not take an opportunity that was presented in front of me, where instead of having to pay for school, I get paid; where plan B, going back to school, was always right there the whole time. So I figured, hey, let's see how this goes. I can always go back.
But I feel good, The Motley Fool's a great place with great people, I get to do what I love to do, and hopefully get better at it. So far, it's working out, and I'm really happy that it is.
Gardner: It has been our good fortune. Now, obviously, this is a choice that is not right for everybody. I know there are probably some parents, again, right there at the fire with multigenerations all around listening, Norman Rockwell style, to this game show. And they're like, "Please, Aaron, don't tell my son or daughter to leave college!"
Bush: That's true. The key to dropping out is all about dropping in to something better. Don't just drop out for the sake of dropping out. Have a clear sense of what you're going to do next.
Gardner: That's awesome! Now, running the numbers, as we are wont to do at The Fool -- I think it's fairly compelling these days with such high college tuitions and a lot of student debt, which has become a social crisis -- you start running the numbers on "instead of having paid that tuition, if I'd invested that, and then let that compound over the course of time...": It can be pretty stark.
Bush: Absolutely, 100%! I know I've said this in front of the crowd that we had at Fool Fest, our big event where lots of members come and join us.
Gardner: Just a few weeks ago.
Bush: I said that I think higher ed is the next big short. I think that's true. It might take some time for that to pan out, but absolutely, I think the cost of college and the debt load that it is imposing on an entire generation right now -- something's going to have to break at some point, and we will come up with better solutions as a society. I believe that. I'm optimistic about that.
Gardner: I've enjoyed the conversation. I'm almost reminded that we're playing a game, aren't we?
Gardner: We're actually playing a game. It makes sense to have had that conversation since Company No. 1 is 2U (NASDAQ:TWOU), ticker TWOU. This is a company, speaking of Fool Fest, where the CEO Chip Paucek was one of our guests at Fool Fest a few weeks ago. 2U is a company that enables people to distance-learn, to -- via remote positions -- participate in the classrooms, get degrees. More graduate- than undergraduate-focused. A company that has been a Rule Breaker for the last couple of years.
If things do change, if all of a sudden tuition is just too high, maybe 2U's positioned, with some optionality, to start taking some of that business and educating people at a cheaper rate using the internet. Chip, the CEO, would be the first to say that's not the plan; I asked him that, and he said that's not the plan. That wouldn't make his partners -- some esteemed universities like University of North Carolina, or Berkeley, Georgetown -- they wouldn't be very happy about that. But thinking out loud, it seems at least a possibility.
Aaron Bush, I know you're already thinking about it. What's the market cap of 2U? I'm going to give our listeners at home, around the family hearth, a quick sec to think about what 2U's market cap is. All right, that second is now over. Aaron, within 20% either way, what is the market cap of 2U?
Bush: [It's] $2.2 billion.
Gardner: Wow! That was really good! The answer as we speak is $2.4 billion. You were really, really close. Players at home, if you were anywhere from $1.9 billion up to $2.9 billion, go ahead and give yourself a star, a check. Count it as a single. You're on base. Aaron, you're on base. Your first-ever Market Cap Game Show stock!
Bush: I got a hit!
Gardner: You're 1 for 1, baby! You're batting a thousand.
Bush: I could end right here and call it a perfect batting average. But I'm in for the love of the game.
Gardner: Do you have any thoughts about 2U?
Bush: They kind of remind me of Zillow [Group] (NASDAQ:Z) (NASDAQ:ZG) in a sense that I think they own the category that they're in, in large part. When a university wants to optimize distance education for master's degrees and such, it makes a lot of sense for them to partner with 2U, [which] has a track record of off-loading a lot of the heavy technical and operational burden. For schools that are looking to do that, and I think more and more schools are looking for more flexible programs, 2U is really well-positioned. I think it's similar to Zillow in the sense that, in the same way that a lot of schools rely on 2U, a lot of real estate agents rely on Zillow in order to build attention, have options for consumers who are looking to buy or sell a home.
What I like about Zillow that I'm not seeing in 2U right now, though, is that Zillow recognizes where the future is heading. CEO Rich Barton is back. He's going to change Zillow up.
Gardner: They're starting to buy properties now.
Bush: Right. I think the future of real estate is that more technology platforms will be the intermediaries for transactions. I don't want to go too off the grid here on this, but instead of getting bids just from lots of different individuals, you'll also get your bid from Zillow, you'll get your bid from Opendoor. They're taking the necessary steps to change where the future is going. 2U, I don't see them making those steps to go to where the future is heading.
Gardner: They're partnered with the status quo. It's a big industry.
Bush: It is, and it's been around for hundreds of years. Brands like Harvard and Yale --
Gardner: Hook 'em Horns, University of Texas.
Bush: Yeah, UT. These brands have been around longer than most companies. So, I totally understand why they want to support the status quo; their business is supported by it. But I'm not sure that's where the future is heading if you're really looking for transformational growth. But we'll see. It's a massive market. Tons of people go get education anyways. Hopefully there can be more than one winner there.
Gardner: Before we go to stock No. 2, I first picked 2U in Rule Breakers in 2016. It's up 7% since then, which might sound good; the problem is, the market's up 43% since then. 2U had more than doubled in that first year or two. It was a strong winner. But it really has sold off. It's been cut in half over the past year. We'll have to see -- very interesting company going forward.
Company No. 2. When I think of all the internet early on companies, and how well-known they are today, the ones that survived -- for example, you may have heard of Amazon.
Gardner: Jeff Bezos founded Amazon.com. You know that company?
Bush: I'm familiar.
Gardner: What year were you born?
Bush: I was born in '94, the end of '94.
Gardner: That's awesome! I mean, that's right around when Bezos started the company. You're about as old as Amazon!
Bush: I am! I think The Fool is right around there, too, if I'm not mistaken.
Gardner: We are, July of 1993 -- a newsletter to our parents' friends. We launched on AOL August of 1994. There was another company back then that was perceived to be an even bigger deal than Amazon for some years. We even, I think, at different points, as Rule Breakers, thought, "This company has a better model. They're bigger than Amazon." Later, they started rocking PayPal, which was the way to pay for the goods on this company's platform. The company is eBay (NASDAQ:EBAY), EBAY. And yet, when I think about the companies that are still around today and still pretty big, it's amazing how seemingly off the reservation eBay is within the global conversation of e-commerce, etc.
So, yeah, eBay, it's still out there. It's still profitable. It's prospering. It's pretty big today. I'm on the Wikipedia page right now for eBay. Of course, Wikipedia pages can change. By the time, dear listener, you look this up, it might have changed. But as of right now, this is a line in the first paragraph of the eBay Wikipedia page. Here it is, I quote: "eBay is a multibillion-dollar business with operations in about 30 countries, as of 2011." Wow!
So, eight years ago, they were in about 30 countries. That's the present-day Wikipedia page talking about where eBay is globally as of 2011.
Bush: Someone needs to update that.
Gardner: I agree. Our listeners are smart. I wouldn't be surprised if we go ahead and do that. A lot of people wouldn't know that Devin Wenig is the CEO of eBay today. A lot of people still think about maybe Meg Whitman, or they think about Pierre Omidyar, who basically started this company -- as, by the way, AuctionWeb, and the date was Sept. 3, 1995. Wow! They pretty much clubbed us, because The Motley Fool pretty sure has a sub-billion-dollar market cap. This company, hint hint, no big spoiler alert, has a larger than $1 billion market cap. They started after us. They crushed us from a size standpoint.
Aaron and my players at home, within 20% either way, what is the market cap today of eBay?
Bush: [It's] $25 billion.
Gardner: No. Not far off, but too far off for me to give you a correct answer. Now, I know many of our listeners who are smarter than we are probably got this one right, Aaron, and you weren't far off. It hurts me a little bit not to be able to give this to you. But the market cap of eBay today is $35 billion. At the low end, dear players, if you said $28 [billion] or higher, and at the high end, if you said $42 [billion] or lower -- $28 [billion] to $42 [billion]. That's simple math, right? Twenty percent of 35 is just 7. As a football fan, I know that: seven, 14, 21, 28, 35. So $28 [billion] to $42 [billion], correct answer for eBay. Not far off, Aaron!
Bush: It's a bummer. I've actually never bought anything on eBay, so I was skewing low based off personal experience of, "a lot of people might be like me." But I guess there are some people out there that like eBay a little more than I do.
Gardner: [laughs] Isn't it amazing? The company's worth $35 billion. I just don't feel like eBay gets the respect or press attention of companies one-third its size.
Bush: eBay also owns other things.
Bush: Yeah, they own StubHub. And they have a big classifieds business, too, which is bigger, I think, outside the U.S. than in the U.S. But, yeah, without piecing those things together...props to whoever out there got it right.
Gardner: It started with Beanie Babies back in the day. In Motley Fool Stock Advisor in 2002, I originally recommended PayPal, and then eBay bought PayPal in full some years after that. Then, later, eBay spun PayPal back out. Today, it is a thriving corporation. I'm not exactly sure what PayPal's market cap is today.
Bush: Let's go with $145 billion.
Gardner: Wow! Aaron, nice! That won't be one of the companies in this Market Cap Game Show, but impressive that you could rock that. Interesting, isn't it, to think that it's five times the size the market cap of eBay today? PayPal, which was an upstart back in the day. Anyway, fascinating couple of companies. Both winners to buy and hold. In fact, last five years, eBay's stock up 90%; market up 45%. eBay has doubled the market for patient shareholders over these last five years.
Company No. 3. Now, Aaron, earlier I mentioned that one of the 20-plus Blast Off stocks is featured in this Market Cap Game Show. So I'm thinking you're probably a ringer for this. Not only that, but this one came up last time with Emily. And, indeed, one year ago on the show with Matt Argersinger, I asked him about this company; he got it wrong. Emily got it right. I'm going to predict, Aaron, that you get it right. Have you ever used Tinder?
Bush: I actually have not, no.
Gardner: You've never used Tinder?
Bush: I have never used a Match Group (NASDAQ:MTCH) product.
Gardner: Amazing! To me, anybody under the age of 30 probably has at least swiped left or right at some point.
Bush: I think that's true, pretty much.
Gardner: Except for you!
Bush: I mean, I guess I just haven't had issues out there. [laughs]
Gardner: [laughs] Well, it's not even necessarily issues. This is the No. 3 way that people globally meet their spouse or partner. I believe, Aaron, that you have a girlfriend.
Bush: I do!
Gardner: Good, so you don't need the online medium.
Bush: I don't think she would approve of this market research.
Gardner: [laughs] I appreciate that. And I will say also that I've never used a Match.com or Tinder product myself. But, indeed, Match Group has been a wonderful stock. It's been a winner. And anybody who's listened to Rule Breaker Investing has probably heard me mention it over the months and years. It's one of those that we keep going back to, as it passes the snap test big-time for me. It's one of those companies I think we could all own and do really well on in the next 10, 20 years. Just buy and hold, and keep watching this global winner prosper.
Aaron and players at home, within 20% either way, what is the market cap of Match Group, MTCH?
Bush: Let's go with $20 billion.
Bush: I got a dwoing? That's awesome!
Gardner: That's only the second time that's happened on this show. Well done, Aaron! Yes, that is the rarely used sound effect when one of my players -- Emily did it once last time -- nails it right on. Yep, that's right, Aaron, and players at home, market cap for Match Group is $20 billion today. That means if you said anywhere from $16 [billion] at the low end to $24 [billion] at the high end, you have gotten it right. Matt, a year ago, said $8 [billion]. That was his guess. It was actually $12 [billion], so he got it wrong.
But think about that. It was $12 [billion] a year ago. Now it's $20 billion today. That's up about 70% over the last year. It's been a remarkable outperformer. It's natural that some people might think: "Well, maybe it's due for a pause. It's had quite a run." Even before we quizzed Matt with it a year ago -- we picked it several years ago -- it's been a multibagger for Stock Advisor members.
Aaron, what is our general attitude when thinking about where stocks are headed? Are we looking backward?
Bush: No, we do not look backwards, David. We look forwards!
Gardner: Because that's all that matters next, right? What's going to happen next?
Bush: Yeah. Market caps are based on the future inherently. It's about future performance.
Gardner: You're absolutely right! So, this Blast Off stock has been a big winner. Overall, Blast Off, it's been a pleasure to work on that together with you, Aaron!
Bush: Absolutely! Match has helped that.
Gardner: Yeah, Match has helped. The market since December, by the way, up 16%. So, here I am promoting Motley Fool Blast Off, and yet, we're not even selling it right now. It's not on offer. Nobody can join. I think it's going to pop back up in August. I was checking with the team today. I guess we're advertising for two months from now, which is really not when you want to buy your ads.
Bush: Stay tuned for two months!
Gardner: When was the last time you spent time in a hospital bed or a surgical table?
Bush: It's been a really long time!
Gardner: You may never really have spent time there. I have, occasionally. Our next company, ticker HRC, Hill-Rom Holdings (NYSE:HRC), is the world leader in higher-tech hospital beds. I know this, at least one older member of my family recently moved into one of those beds that's much easier to raise up and lower down. It's just easier, as we get older, to get in and out of. Hill-Rom is the leader within that; also, surgical tables and other things around the hospital and furniture.
By the way, Aaron, you're looking a little blank to me, which is the way I like my contestants.
Bush: No, I have thoughts.
Gardner: [laughs] I'm wondering, Aaron, if one of those thoughts is that this company was split off from its parent company, Hillenbrand Industries, in 2008.
Bush: That was not one of my thoughts, but that's a good one.
Gardner: It's kind of a fun story, but that's a longtime company. Hillenbrand distinguished itself, I think it may have even been mentioned in Peter Lynch's book One Up on Wall Street, because it makes funeral caskets. That part of the business, which is a longtime business and a big performer -- businesses in and around death, Wall Street usually doesn't favor those. It's not sexy to talk about. But often, that's what causes slow, sleepy stocks like Hillenbrand Industries to outperform over time.
Now, Hill-Rom was split out from Hillenbrand and is the hospital furniture company. Before I ask you the market cap, Aaron, it sounds like you had a thought to share.
Bush: I'm just piecing some of these things together that you're throwing out. It's a spinoff, which probably means it's a bit smaller-ish in size. The name Hill-Rom doesn't strike me as some new, cool, hip company; they've been around for a while. But they're also not so well-known as to be immensely popular. So, I'm thinking of a range in which a spinoff that's been around for a while that isn't immensely popular would sit.
Gardner: I mean, I can't tip my hand here at all, but I like in general how you're thinking about this. I like the logic.
Bush: Thank you! It only matters if I get it right, though.
Gardner: All right. One final thought I'll add is, this was a recommendation recently in Motley Fool Stock Advisor. Well, it was last November, so this has been around for a few months. Some of our listeners probably own ticker symbol HRC, Hill-Rom Holdings.
Aaron and players at home, what is the market cap of Hill-Rom Holdings, within 20% either way?
Bush: Oh, boy! $7 billion.
Gardner: Wow, we almost had the rare double-dwoing sound for perfection. Aaron, it's $7.1 billion.
Bush: Are you serious?
Gardner: I am dead serious!
Bush: Let's go!
Gardner: Players at home, if you said anywhere from $5.7 [billion] to $8.5 billion, give yourself a mark in the plus column. Yep. There we go: Hill-Rom Holdings, one maybe to look into.
Bush: I'm shocked right now!
Gardner: Not only are you shocked, Aaron, you're batting .750, which is a great start for a rookie in the Market Cap Game Show.
Bush: Thank you!
Gardner: All right, Company No. 5. Back to one of my favorite websites -- yep, on my top 100 list of all websites, Wikipedia, definitely top 10, possible top five for me: Wikipedia says of this company that it offers the widest range of global benchmark products across all major asset classes based on interest rates, equity indices, foreign exchange, energy, agricultural products, and metals. It goes on to say it has been described by The Economist as "the biggest financial exchange you have never heard of." The company is CME Group (NASDAQ:CME); CME, shorthand for the Chicago Mercantile Exchange. This is a global leader in derivatives, options, and futures. The ticker symbol of CME Group is, logically enough, CME.
Aaron, have you ever traded an option?
Bush: I have, yes.
Gardner: I have not. What did you do?
Bush: When I was just learning about options, I sold a put on NVIDIA, which essentially just means that you receive income up front for the option to buy a stock at a potentially lower price down the road. I was just learning, so I wasn't putting too much time into it.
Gardner: It was a lark. You were a kid.
Bush: But the thing is, NVIDIA's stock went down, I got put the shares, and then I sold out. And NVIDIA has been a 10-bagger since then.
Gardner: I see!
Bush: So, I have used options. I got my little bit of income up front. But ultimately, I still made the wrong call there.
Gardner: Understood. Well, this has been a wonderful performer, first picked in Motley Fool Stock Advisor. I picked it in August of 2017, so coming up on the second anniversary. This may help, this may be a minor spoiler, I don't know: It's up 49% from that day. The market's up 16% over that time.
Aaron, players at home, what is the market cap within 20% either way of CME Group?
Bush: CME is big. I think it's the biggest exchange business in the Supernova universe. I'm going to go $70 billion.
Gardner: Yes, that sound means that Aaron nailed it right on once again! Wow, the legend is starting to grow! Aaron Bush!
Bush: Let's hope that the second half lives up to the first half!
Bush: I'm starting to freak myself out here.
Gardner: It's got to be slightly helpful when the actual fact, which is $70 [billion], is a round number. You were probably not gonna say $71 [billion] or $69 [billion]. You were spitballing a little bit.
Bush: A big market cap gives you a larger room for error.
Gardner: That's right. So, players at home, if you said from $56 billion to $84 billion, give yourself, along with Aaron, a big plus mark. Aaron, you are now 4 for 5 as we finish the first half of the Market Cap Game Show. I look forward to see if you and your competitors at home can keep the music going.
All right, Company No. 6. This is a brand that was initially aimed, clearly, at women, and succeeded so well that as the company grew, the brand began to extend to men. It is an apparel brand. If you are somebody who knows or loves yoga, you may or may not love lululemon [athletica] (NASDAQ:LULU), but I know you know it. The ticker symbol is LULU.
This has been a wonderful performer for Motley Fool Rule Breakers. Since December of 2010, wow, nine good years, the stock has rocketed up more than five times in value. We'll talk in a sec about what you had to do to go through those times, to get to where we are today. Sometimes those stocks go way up and way down, and you've just got to keep holding nine years later.
But without really needing to explain this company or its products, moving right along -- Aaron, players at home -- what is the market cap of Lululemon Athletica?
Bush: [It's] $22 billion.
Gardner: The correct answer was $24.5 billion on the nose. Aaron, you don't want to hit it on the nose again?
Bush: I'm sorry! I have to leave that to someone else this time!
Gardner: At the low end, $19.6 billion was allowable and correct; at the high end, $29.4 [billion]. So, from $19.6 [billion] to $29.4 [billion]. But, yeah, Lululemon, a pretty big-scaled company today, in the $20 billion-ish level of market cap. It's fun, isn't it, just to be able to compare that $24.5 billion to eBay, and know that eBay is $35 [billion], so eBay is still $11 billion larger. But then, a company like Match Group, as much as we love it, is smaller today than Lululemon Athletica. Part of the pleasure of the Market Cap Game Show is playing that competitive score game and learning more about the world.
Bush: Yeah, it's really interesting how companies that are so different are the same size, from their various combinations of revenue and profits and everything that they do.
Gardner: That's probably my favorite thing about market caps, being able to make those radical comparisons. ...
So, nice job. I believe at this point you are 5 out of 6, which means I'm starting to wonder if I didn't make it too easy, or are you just that awesome?
Bush: You threw out Hill-Rom Holdings. That didn't feel easy to me.
Gardner: [laughs] Before we go to Company No. 7, I want to point out that we initially recommended -- bought -- Lululemon at $36 in 2010. Eighteen months later, it had gone to $80. That felt really good. It more than doubled in 18 months. And then, over the next two years, it went from $80 to $40. That's right, it got cut in half and put almost back where we'd started. And then, three years later, as the market's recovering a little bit, it goes from $40 to $60. Not bad. Still, not back to the $80 we had several years before. But at the end of 2017, the stock was sitting right around $60 as we moved into Thanksgiving 2017. Today, it's $187. This company has totally taken off.
Bush: It's rocked it!
Gardner: Aaron, do you own any Lululemon in your wardrobe?
Bush: Unfortunately, no. I don't own the stock, either. I own Under Armour apparel, and Under Armour stock, which has not done as well. I think the market cap of Under Armour is half the size of Lululemon, which is interesting, also, to think about.
Gardner: That really is.
Bush: Rocking the wrong company!
Gardner: I wish we had more time to talk, but we've got to keep moving.
A reminder -- #IBeatAaron if, in fact, by the end of this show, you did outscore Aaron Bush on this month's Market Cap Game Show. We might see more of these -- #ILostToAaron if you end up losing. If you end up tying Aaron -- that's probably going to be impressive, we'll see -- #ITiedAaron.
Company No. 7, I recently saw when I was in Columbia, Missouri. Actually, I was driving down from Chicago O'Hare Airport, where my flight to Columbia, Missouri, had been canceled. I've been rocking the hashtag occasionally on Twitter, last couple of months -- #OHatred --because that's my feeling about O'Hare Airport. The third consecutive time I've been canceled or massively delayed, any time I go through O'Hare.
Bush: That's crazy!
Gardner: It is crazy! We had a ski vacation earlier this year. We had six days set aside. One of those days, we lost sitting in O'Hare, actually sleeping in the Hilton at O'Hare. The only airport I can think where there's a hotel right there in the airport. And now we understand why, because that happens so often, it seems. I'm not bitter.
But one of the companies that we don't see as often here on the East Coast, which represents for many convenience, and for others pizza, in the Midwest, especially, is Casey's General Stores (NASDAQ:CASY). Now, Casey's General Stores I first picked in January 2015. What do I love about it? I love that it's the friendly convenience store. Often in the more rural areas in the U.S., there's not as much competition there. Also, they sell a lot of pizza. And people really like their Casey's. That feeling that people have -- again, we're all around that family hearth as we play the Market Cap Game Show -- that warm, fuzzy, happy feeling with your family, that's there for a lot of people when they cross into a Casey's General Store, especially since it's the only store nearby that might have gasoline or pizza for them at a certain time of night. So that's the role that Casey's General Stores, ticker CASY, plays.
Aaron, before I ask you the market cap, as a Texan, do you have Casey's? Have you ever personally been into a Casey's General Store?
Bush: No, and I've never seen one, I don't think.
Gardner: You need to see more of this country!
Bush: I think so! I need to go on a road trip!
Gardner: It's the heartland, baby! Actually, I really do appreciate that. That was Capital Camp 2019, Patrick O'Shaughnessy's and Brent Beshores' baby. I've already mentioned that on this show, and the fun that I had there in Columbia, Missouri, just a month ago. But yeah: Casey's General Store.
Aaron and everybody playing at home -- no doubt some of us really love our local Casey's as we listen to this, ticker CASY -- what is the market cap of Casey's General Stores?
Bush: I'm going to go for a dwoing here. $5.5 billion.
Gardner: [laughs] You got awfully close! For a second time, you were literally within $100 million, which may sound like a lot, except it's just 0.1 [editor's note: closer to 0.2]. The market cap for Casey's General Stores is $5.6 billion, which means at the low end if you said $4.5 [billion], at the high end if you said $6.7 [billion] -- you, along with Aaron Bush, score that.
Now, Aaron, you've participated as a leader within our Supernova service and the Odyssey portfolio. Has Casey's ever been part of a portfolio that you've overseen here at The Fool on behalf of our members?
Bush: No, it hasn't been. No good reason why, it just hasn't ever made the cut.
Gardner: Well, I'm happy to say it is up 82% since our January 2015 Stock Advisor recommendation; the market's up 51%, so that's 31 percentage points ahead. It took a lot, though, it's taken a big comeback to get there.
Wow, Aaron Bush, 6 out of 7! We've got three left. You're near setting the all-time record. If you get two of these, you will set the all-time record, really, on the Market Cap Game Show. Initially, I just saw you as my friend Aaron Bush, but you're increasingly looking like Babe Ruth to me. You're transforming before my very eyes. I think those of us who are watching this podcast -- we film some of these and put them up on YouTube -- you may see, Aaron may look different to you at this stage than he did at the start of this podcast.
Bush: Well, I'll say, part of this just is, it's my job to be looking at these companies. But I'll take any praise that you'll give me, David. Thank you!
Gardner: You're very welcome! I feel like you're just going to kill this next one, so let's get it over quickly. Alphabet is the company, ticker symbol GOOG [editor's note: also GOOGL]. Initially it was Google -- we all remember Google. I'm just checking here: Google started on Sept. 4, 1998, 20 years ago. Wow, what an amazing 20 years for this company! Starting from nothing in September of 1998, growing to what it is today.
Aaron, I feel like you've probably pegged a few of these. In my mind, you'd already missed Hill-Rom, you probably hadn't gotten Casey, you were feeling a little bit worse for the wear, so I was throwing you a bone. Now, players at home, maybe you are feeling worse for the wear. I probably would have been in your place. Maybe you're happy to know that I'm going with a big, really well-known company. Clearly, children today are raised knowing the market cap of a company like Alphabet. Right?
Bush: They must be!
Gardner: If they were, Aaron, within 20% either way, what would the kids of America -- no, of the world -- be saying the market cap of Alphabet today is? Ticker GOOG.
Bush: They'd probably be saying it's somewhere around $900 billion.
Gardner: Wow, really well done! Aaron, you're now 7 for 8. You were kind of far off on this one. Somewhat surprising. And yet, you're right, [with] these bigger numbers, there's a huge band. The market cap of [Alphabet] as we tape is $769 billion, but $900 [billion] falls within the band of acceptability -- which at the low end is $615 billion, at the high end is $923 [billion]. So, if you said anywhere from $615 [billion] to $923 billion, you nailed Alphabet.
It is worth noting that today, we say Alphabet. Back when we first picked this stock in 2008, we called it Google; that was the company name back then. It's also worth knowing that it's just been a four-bagger since May of 2008. It's beaten the market by about 120 percentage points, so it's been a good performer, but it is a bigger company that came public. Even though it was a four-bagger, we picked it one year later; it had dropped some -- 2009, the Great Recession. It's a five-bagger from there. But, 10 years later, a five-bagger, still only about 100 percentage points or so ahead of the market. So, not one of those raging winners, Aaron.
Bush: Yeah. I could have done better, David. [laughs] No, I think I was thinking Amazon; I think [it's] more like $900 [billion]. And I know they were neck and neck for a while. But I guess something has changed.
Gardner: Well, speaking of big companies and, Aaron, you being 7 of 8: Our last two, one of them is a pretty big company. It's a recommendation that you brought to Motley Fool Rule Breakers. It hasn't been one of our best picks. It is a little down from where we initially picked it; the market is up over that time. You can say a little bit about that in a sec. The ticker symbol is TCEHY.
This was designed for me to drop you over the head a little bit for, on my watch, picking a slight underperformer, at this point -- and yet to also give you a "gimme." And yet now, I feel like you're about to set the all-time Market Cap Game Show record as you answer the market cap of Tencent Holdings (NASDAQOTH:TCEHY), ticker TCEHY, within 20% either way.
Bush: I think it's right around $400 billion.
Gardner: And, unsurprisingly, Aaron, you are right. But surprisingly, you just set the all-time performance record in a Market Cap Game Show as a rookie.
Bush: Oh, my goodness!
Gardner: Which is amazing, because Emily did that with seven just a few shows ago. And now, you have topped Emily! She's in Scotland as we speak. Aaron, you're going to have some bad news for her when she returns.
Bush: I guess so. Maybe one of these game shows later, we need to have a competition.
Gardner: [laughs] I have thought about how to torque this format into a multiplayer game. We'll see about that. I do enjoy just the intimacy of one on one. But Aaron, I should mention, the market cap is $417 billion. Players at home, if you said from $334 [billion] to, yep, the round number, dead spot-on, $500 [billion], anywhere from $334 billion to $500 billion, you got it right.
Aaron, can you briefly lay out, 60 seconds or so, give us 30 seconds on what this company does, and 30 seconds why we still like it even though it's a little down?
Bush: Sure. Tencent, for one, is the largest gaming company in the world -- behind huge games like League of Legends, for example. They also are the leading social media company in China, behind QQ, but more importantly WeChat, which is a staple for Chinese citizens and many people outside of China, too. These two businesses together generate tons of cash. If you were to say a third pillar of the business for Tencent, that would just be all of the investments that they're making, venture-style investments that they're making in other companies. They have a really impressive roster of businesses.
Gardner: All right, Aaron, at this point, it's pure cream. From here, it's just pure greatness. You've already achieved the greatest score yet. There could be some other player -- it could be you later on -- who comes and does even slightly better. You shouldn't let up at all at this point. But I realize, you're now flying precipitously close to the sun. It reminds me of the Greek myth of yore. You're a younger guy, and you made your own set of wings today. They've got some wax in them. You're getting precariously close to the sun.
Bush: Well, let's hope they don't burn up on this last question.
Gardner: [laughs] OK, well, talk about bad transitions, this company has absolutely nothing to do with burning that I can think of, although if we thought hard enough about it, we might. But one of the truisms of our time is that there's a new member of our family for a lot of us. They wouldn't have thought this 500 years ago or 100 years ago, maybe even 50 years ago. But increasingly, Fido, Fluffy -- the pet, the family pet -- the pets, increasingly, we view them as members of our family. That is certainly one of the more important trends of the last 25 years. As investors, we have benefited by identifying some companies working within that space.
Now, sometimes Fido is sick. Sometimes Fluffy needs some diagnostics. That's where this next company, our final one for the Market Cap Game Show, steps in: Idexx Labs (NASDAQ:IDXX), ticker IDXX. Aaron, did you grow up with a pet in the Bush household?
Bush: When I was young. But I have a dog now actually, too. I am familiar with some of these bills that can arise.
Gardner: [laughs] Do you have pet insurance for your dog?
Bush: I think so. Maybe? I don't know!
Gardner: I don't know whether that's a good answer or not.
Bush: It's more my girlfriend's dog than my dog. I just take care of it.
Gardner: I understand. So, presumably, she named the dog.
Bush: The dog's name is Donut, which probably had more influence from me. People don't need to know this, but we had a hamster whose name was Donut Hole because it looked like a donut hole. So we graduated the next pet to being Donut.
Gardner: I think you're right, in a sense, people didn't need to know that. And yet I think there's a humanity to that, that I personally appreciate. Shout out to Donut, who probably is listening somewhere near the Bush family home fire. Or, at least your girlfriend's family's home. But anyway. I feel like I'm just stalling.
Aaron, players at home, within 20% either way: What is the market cap of Idexx Laboratories, ticker IDXX?
Bush: [It's] $25 billion.
Gardner: Wow! $23.4 [billion] was the correct answer. At the low end, $18.7 [billion]; at the high end, $28.1 [billion]. The only thing better than Idexx Labs' performance -- and it's up 309% since we picked it in April of 2014 for Motley Fool Stock Advisor -- the only thing better than that 309% performance was Aaron Bush's .900 batting average. He walked in with no batting average, he walks out with the greatest batting average in Market Cap Game Show history as of now.
Bush: I'm stunned! But it's not quite perfection. I'll have to come back in and seek perfection next time!
Gardner: [laughs] Aaron, before I let you go, do you want to give a tip to players at home? Clearly, you prepared in some way, shape, or form that most of us would do well to learn from.
Bush: I mean, honestly, if you enjoy following stocks, instead of looking at the stock price, look at the market cap. You pull up your brokerage every day to see what's going on, don't pay attention to the stock price, pay attention to the market cap. If this was the "Stock Price Game Show," I probably would have been 2 or 3 out of 10. It really just shows, what you prioritize and what you think about every day, I think, pays off.
Gardner: 'Nuff said! Thank you, Babe Ruth!
Bush: Well, yeah, we'll see. Next time, it could be completely different. But now that I have some clout when it comes to market caps, I will give some advice.
Gardner: All right, well, a reminder -- wow, if you can rock the hashtag #IBeatAaron, good on you! I'm looking forward to meeting you one day if you scored 10 out of 10. Aaron just scored 9 out of 10 on the Market Cap Game Show. Emily's all-time record had been seven. Wow! I'm wondering if I screwed up my pregame preparation. Too many softballs? I need to check in briefly with my producer, Rick Engdahl. Rick, I'm full of self-doubt. Did I go easy on Aaron?
Rick Engdahl: There [were] a couple of softballs in there, I think. But I did hear at one point that Aaron was helping in the role of Emily's coach, so he might have had a little secret sauce when he came in here, too.
Gardner: I did not know that. So, basically, Emily had been mentored -- Emily, our previous greatest player, had been mentored by the man himself!
Engdahl: I've no doubt that Emily was coaching Aaron just as hard!
Gardner: [laughs] It can be helpful to memorize market caps. I mean, if you, player at home, or Emily or Aaron -- admittedly, they do it more full-time than most of us -- but if you actually want to memorize market caps, I think that's great! I think that's a better world! If more people really know, to the first or second decimal, the market caps of these companies, I think that's a world that's smarter, happier, and probably richer, too.
Well, next week on this show, it's going to be your mailbag. That's right, it'll be the final Wednesday of June 2019. Looking back over this month, if you had any comments or thoughts about "Five Stocks That Pass the Snap Test," which is how we opened up June; or if you enjoyed any of my "Great Quotes: Volume 10," or have a suggested quote that I could use in a future volume of "Great Quotes"; or if you want to chastise me for somehow going easy on Mr. "9 out of 10 Babe Ruth" Aaron Bush, please do. The email address is email@example.com. Just email us your questions, thoughts, suggestions, or poem: firstname.lastname@example.org. You can also, of course, tweet us @RBIPodcast. In the meantime, keep your feet on the ground and keep reaching for the market caps. Fool on!
As always, people on this program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.