At The Motley Fool, we're buy-and-hold investors, but before we can hold great stocks, we have to find them. So our analysts are always on the hunt for strong new investment ideas. And every week, some businesses stand out from the crowd, which is why each Motley Fool Money episode includes host Chris Hill asking his guests -- this time, Motley Fool senior analysts Andy Cross, Jason Moser, and Ron Gross -- which companies they have their eyes on, and why. Their picks for the Nov. 1 episode: financial exchange CME Group (CME -1.93%); 3D-sensing chipmaker Lumentum (LITE 0.12%); and IT consultancy EPAM Systems (EPAM -1.13%).
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on Nov. 1, 2019.
Chris Hill: Let's get to the stocks on our radar. Our man behind the glass, Steve Broido, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?
Ron Gross: I got CME Group, ticker CME. Operates the world's largest future and options exchange. Most powerful player in the space. Great position to innovate or acquire. Great tollbooth model, where they process a trade and they charge for transactions, clearing, settlement fees are collected as well. As institutions look to manage risk, they turn to derivatives. That only increases their business. They have increased their regular dividend consecutively for the past nine years. They also pay an annual variable dividend based on profits. When you look at all of that combined, the yield right now is at about 2.3%.
Hill: Steve, question about CME Group?
Steve Broido: What's an options strategy that you would recommend I never take or try?
Gross: [laughs] Nothing naked, which means you have to own the underlying stock at the same time. Don't just speculate using options.
Hill: Oh, really? That's what naked refers to? I thought it was just some creative term to get people interested in options.
Gross: [laughs] No.
Hill: Jason Moser, what are you looking at this week?
JasonMoser: Going to with what is now the top-performing stock in my augmented reality service. Everybody's heard of this one, say with me folks -- Lumentum. Ticker is LITE. As I led into here, second quarter results were very good for the company. They are a chip maker, ultimately, in the VCSEL, vertical-cavity surface-emitting laser. Ultimately, that's the technology that's required for 3D sensing, which gets us into great places like biometric authentication, augmented and virtual reality, etc. 5G rollout is a nice tailwind for this company. And they really do actually own that VCSEL space. A lot of things to like there. It's a good start to the year for them.
Hill: Steve, question about Lumentum?
Broido: Where can I see this product in the field today? Not 20 years from now, but today. Where's this today?
Moser: Check out your local smartphone, whether it's an android or an iPhone. You're going to typically find that technology being incorporated into all of these new phones.
Hill: Andy Cross, what are you looking at this week?
Andy Cross: EPAM Systems, symbol EPAM -- $9.6 billion company. It's a digital and software consulting firm. It's recommended in a few of our services. It's founder-led. Arkadiy Dobkin founded the company back in the early 90s. It provides digital and technology consulting services for lots of different firms around the world. Expectations are quite high coming into the next quarter that's released next Thursday. Sales have grown 20% for 30 straight quarters. If my math is correct, that's a little over seven years. The travel and consumer side of the business, different travel sites and consumer sites, has been growing only about 8% last quarter. That's a little bit slower than what we'd like to see vs. some of the financials and tech part of their client base, which is more like 17% or 24%. So I want to see the travel business show a little bit of a rebound.
Hill: Steve, question about EPAM Systems?
Broido: What's driving the growth going forward?
Cross: All the digitization, all the applications we're using, when we look at companies and what they're trying to do, how they're evolving, everybody is trying to become more digital. That's really been a big driver for EPAM over the last 10 years.
Hill: Steve, we've got CME Group, Lumentum, EPAM Systems. None of them household names, but three very interesting businesses. You got one you want to add your watch list?
Broido: I think Lumentum makes the most sense to me right now, so that's what I'm going with.
Moser: Hey, now!
Hill: Does it have anything to do with the sales job that Jason did? He really sold it.
Broido: He did.
Cross: Vertical-cavity... that was a mouthful.
Broido: You had me at vertical.
Hill: [laughs] Yeah. You lost me at cavity. Jason Moser, Andy Cross, Ron Gross, guys, thanks for being here!
