In this episode of Industry Focus: Consumer Goods, host Emily Flippen is joined by Motley Fool contributor Asit Sharma to share their top consumer goods picks for the new year and beyond. Find out why Sleep Number Corporation (NASDAQ:SNBR) might have a bright future ahead, and what challenges AirBnB (NASDAQ:ABNB) is facing.

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This video was recorded on January 5, 2021.

Emily Flippen: Welcome to Industry Focus. Today is Tuesday, January 5th, and I'm your host, Emily Flippen. This week is top stocks week here on Industry Focus. Today I'm joined by Asit Sharma to talk about each of our top picks in the Consumer Goods industry as we head into the New Year. Asit, thank you for joining.

Asit Sharma: Thank you, Emily. It's good to be back with you again in the New Year and hopefully we've put the worst of 2020 behind us. I have a bad habit of jinxing stuff. Why did I even say this? I hope I don't jinx 2021. Everyone, if it turns out not to be a great year, you know who to blame. [laughs]

Flippen: Well, hopefully our stock picks here will be a little bit better. The top stocks week was Brian Feroldi's idea actually, and it was a great idea to put some new names out there that we haven't had the opportunity to chat about, that we're excited to see what happens for them, not just in 2021 obviously, but throughout the next few years as well. We're going to talk about two of the companies that we're most excited for as we head into the new year, hopefully better for these businesses or better for 2021 as compared to 2020, and hopefully the same is true for the businesses we're going to talk about. I will admit, Asit, as we started to tape this, we were both undecided about our top picks up until this morning. I think I went through three or four iterations of what stock I wanted to highlight before settling on this company. But yours is interesting and it's not one that I really thought a lot about as admittedly a consumer or an investor.

Sharma: Well, when you approached me with this, I had a lot of ideas for some really nicely performing consumer goods stocks. But then I thought, they've really done so well last year. I know I'm going to come on and talk about a stock that I'm excited about, and it's probably going to plunge just because it's gone up 200% or 300% [laughs]. Last year was crazy that way. I went back to the drawing board for a company that I like that actually did pretty well last year. I think it was up about 70%, but one that I think still has some full potential. Should I plunge on into this?

Flippen: Yeah, go for it. That's a great teaser. I'm excited now.

Sharma: Emily, feel free to jump in. We're each going to pretty much talk through our ideas. I might be droning on, feel free to interrupt me with questions, because I've got a lot to say about this. But this company is a sleeper of a stock. [laughs] The company is called Sleep Number Corporation, symbol SNBR. It's an under the radar company because it's made a transition from being a traditional mattress company to a provider of smart mattresses. These are mattresses that are adjustable, they can heat just at your feet because you fall asleep quicker if your feet are warmed sooner. I didn't know that. These mattresses do all kinds of neat stuff just to improve your sleep IQ, your ability to have a good night sleep. One of the things I like about this company is that every earnings conference call, the CEO comes on and she says. "Hello, everyone, my sleep number last night was 88, my sleep number score." They have a whole scoring system. They almost gamified sleep in some way. As some apps do that, you'll go around everything is getting quantified. But I think that they do a really good job of making mattresses.

Why I'm excited about it is because I don't think the market has quite recognized the company's potential. This is a rare example of a direct-to-consumer business. You can only buy its mattresses and associated products through the company. It's a specialty retailer, and it's found success with a largely store-based model, quite unusual in this day and age. This is about a $2.3 billion market cap company. If you've ever looked for one of their mattresses, you probably already know they are not cheap. I'm in the market for a new mattress, but I don't know if I'll be buying a Sleep Number mattress. They begin at $1,000 and go up to about $5,000. This is before various add-on options. Each style of mattress has its own menu of add-ons that you can tack on, from adding on a frame to making the mattress smarter, to buying a feature that adjusts the height of the space besides you if you've got a partner who snores. Everyone, if you've got a partner who is keeping you up at night, maybe you need to go in for this add-on, where you can tilt the bed. They may not even notice until their head is up. It's quieter when you sleep. I was very intrigued by that feature. Not that my wife snores, still it's a treat.

Flippen: My partner snores and I could see using that as a useful, but admittedly slightly passive aggressive way of waking him up at night, so I can get myself some sleep.

Sharma: One day you'll be an owner. I predict. [laughs]

Flippen: Given all the money I just spent on my NordicTrack, I think I'm going to give myself a buffer of at least a few months before going into another piece of expensive home furnishing.

Sharma: Well, this is a great segue into my next point, because this company is benefiting from a rising trend of home ownership. If you're familiar with the construction industry, you know that homebuilders are booming because in the nine or 10 years following the Great Recession, there was an underproduction of homes across the country. Now, as millennials are finally starting to start families, they are buying homes and they are equipping those homes with the types of products that millennials are famous for. They're technology embedded, they're app-driven, and so this is a great target market for this type of consumer.

During COVID-19 last year, like a lot of store-based retailers, Sleep Number ramped up it's alternate channels. What were those alternate channels? One you can guess, online commerce or e-commerce. Now, can you guess the second one, Emily? There's a really important channel that this company uses.

Flippen: If it's not e-commerce, is it just their physical retail stores?

Sharma: Yeah, physical retail is their primary channel, e-commerce is their first alternate channel. The second is phone sales. [laughs] When I saw this I was like, wait a minute.

Flippen: Phone sales?

Sharma: Phone sales were big when I was a kid. What's with the phone sales? But it makes sense if you think about it. When you're buying a bed that might end up costing you $3,000 or $4,000, you might want to talk to a salesperson if you're ordering it online and ask a lot of detailed questions. They spend a lot of money on sales and marketing. Part of that budget is going to employing people who are just really knowledgeable about the product and are willing to spend 15-20-30 minutes at a time with the customer who is about to make a big purchase. These combined channels are really helping the company expand its sales. If you look at what happened during the pandemic, they had a tough second quarter, but by the time we got to their last reported quarter, they had accelerated their online and phone sales by 100%. Now, this isn't that unusual, we've seen so many companies, you and I have talked on Industry Focus, Emily, about so many companies that ramped up e-commerce and we've seen these types of numbers doubling and tripling of online sales. But what I like about this company is that by the third quarter, it had 98% of its 600 stores back up and running. This continues to make up the lined share of the company's revenue.

Even after online and phone sales doubled this year during the pandemic, they still garnered about 85% of sales from their stores. The stats on the stores are simply outstanding. Sleep Number has about $1,000 in annual sales per square foot. If you think about retail sales, a really well-heeled retailer with nice margins might be doing $500 or $700 per square foot. That's a really impressive number. They're averaging about $3 million of revenue per store each year, which itself is also impressive. By the way, the average revenue per mattress for this company is almost $5,000, $4,800.

Let me talk a little bit about other financials, Emily, and then I'm going to make my investment case and ask you maybe to poke some holes or maybe agree with you, maybe I can sell you on this one. I talked about the revenue taking a hit in the second quarter. They annualized sales at about $1.7 billion, and they still have a quarter to go before their year is closed out. Just looking at their latest press release, I'm going to read a few numbers and then talk about these. In the third quarter, year-over-year, their net sales increased by about 12% to $531 million. You can see that is not a really huge company out there in the marketplace. Remember I mentioned that it's relatively small, a $2.3 billion market cap. I'm going to return to this market cap when I finish up.

The gross profit doesn't look like a mattress company or the gross profit rates. They have a gross margin of about 63%, which is pretty high. I think it goes back to the technology that they are infusing in the mattresses, also that they can command a premium for this. They really don't have a direct competitor that offers all the features that they do in their higher-end mattresses. Hence, they're driving a lot of operating leverage just through sales of these premium price points. Operating income in the third quarter increased about 78% to $70 million against the prior year quarter. What's so important about this? Well, it was primarily driven by that increase in phone and online commerce sales. Basically, Sleep Number has found a channel that it was invested in before, but really was ramped up during COVID. But unlike some other retailers I've looked at, they dropped a lot of that money to the bottom line, meaning that they were well beyond their fixed cost base. They were well beyond their breakeven point. That last bit of earnings growth is coming from new online and phone sales. They are looking to keep that level of online phone sales going forward, which remember, I said it's about 15% of total sales. Looking at cash flow generation, as you can expect with such high margins, that really increased as well. In the first nine months of 2020, cash-flow increased about 50% to $287 million.

They've got a really light capital footprint, Emily. They have only invested $28 million this year in capital expenditures. Basically, you've got a company that made this transition three years ago to being a smart mattress company, but a lot of their investments to do that are already completed. Now, it's just more research and development expense on the books. I like that a lot as well.

Now, why am I so enthused about this company for 2021? I didn't mention that it's gone up 70% in the past 12 months. Well, the difference here is that some of the tech companies that I follow are just priced for perfection. If we get a market correction in 2021, I expect that some of the tech companies I like [laughs] are going to see some profit taking. I'm not so sure that Sleep Number is going to see as much profit taking if we have, let's say, a big sell off at some point this year. That's because it's pretty undervalued, in my opinion. This company is trading at about 19 times its forward projected earnings for this year. But the market is discounting the fact that it is so technology embedded and has such a nice premium in it's pricing power, and assigning it a multiple that is not any different than the average small-cap company. If you look at the S&P 500 Small Cap index, which is 600 stocks of really small capitalization companies, their average PE ratio for PE ratio is right about here at 19 or 20 times in any given week. I think they turned this number. There are few sources that turn it every week, so it fluctuates between 19 and 20.

The Russell 2000 Index, which is a much more broadly accepted measure of how Small Cap stocks should be priced, is currently priced at 30 times in aggregate of forward earnings, which means the average company in that index is trading at about 30 times forward earnings. If you just look [laughs] at those two numbers and understand how all this investment is behind Sleep Number and it's starting now to reap its investments, you can see that it's got some multiple expansion that is likely ahead of it. I think some of that's going to happen this year. The other thing that is really interesting about the companies, it's got a very high return on capital of about 21%. If you like the term ROIC, return on invested capital, it's got an ROIC of 21 and it's trading at about nine times free cash flow. When you take that picture together, this is a safer bet for a company that still is yet to be recognized by the market. I know that the market got excited last year [laughs] and pushed the stock-up, but it's got more to go here. The last thing that I want to say about it, and then we'll take any questions you have or maybe poke some holes in this is, the company has been building its store base year in and year out and they do this very steadily. Despite what's happened with COVID, unlike so many other retailers who've said, "Hey, we're going to cut back on store growth." Their equation is working.

So management actually said this year, "Look, we are going to develop our stores at a compounded annual growth rate of 4%-5% through 2025." What that means is that they will add, if you do that math, roughly about 20% of their store base within the next now four years. That is going to be one just built in propulsion for the top-line. Companies that have been growing at about a 12% clip this year, they have not put out their forward projections for next year, but I expect it will land somewhere between 8% and 12%. They have started to outperform most analyst estimates. I think that momentum is going to continue. I see this as a stock which can gain about 20%-25% this year. I see it as an easy double in the next five years, maybe sooner. On a risk-adjusted basis, this is my top high-tier into a sleepy world of consumer goods stocks. I found it hard to come up with one which is going to double or triple this year because then I'd be moving into tech stocks territory. But for consumer goods, Emily, what better idea than a mattress company which helps you sleep better at night as well as gives you some nice stock returns in [laughs] your pocket?

Flippen: Your pick is truly a genuine consumer goods pick, I will admit. Preemptively, my top stock may be a stock that you could argue is a tech business. We'll get to it, but I have to admit [laughs].

Sharma: I think it's a CG.

Flippen: I'll argue that it's CG, I'll make that argument. I have to admit when I look at Sleep Number, I'm confused by its business model because it seems to be flying in the face of the business model that we've seen emerge from these smaller mattress players. Now, the mattress industry is, I'm sure you're well aware, is extremely fragmented. The mattress producers, the people who are making the mattresses are very concentrated, but the branding, there is no single dominant brand that gets consumers all very excited. Personal preferences are very much a thing when it comes to picking a mattress. But, what we've seen is, all of these, you could argue mattress start-ups, are companies like Purple, Casper. Say we're going to do direct sales for the most part, you can order online. We'll deliver it to your house. We'll give you a certain number of days where you can sleep on it for free and then we'll take it away if you don't like it. They are trying to be more responsive to meet the consumer with where the consumer is. It's astounding to me that during 2020, when most people were at home, not leaving home, Sleep Number was still doing the vast majority of their sales from in-store purchases, and that those in-store purchases have been so lucrative. Do you think that there is a threat to Sleep Number from businesses like Purple and Casper which do a lot more online in terms of marketing and branding versus Sleep Number? The reason why I make that statement is because as you were talking, I was very rudely Google searching mattresses. When I Google search just mattress or mattress stores, Sleep Number, nowhere to be found, but clearly people are willing to pay a premium. I guess that was a very, very long winded way to ask the question of, what do you think about the competitive environment for mattresses?

Sharma: I think it's a really tough industry to make money in. This is one of the reasons that I am excited about the stock is that they're profitable. I'm not quite sure about Purple, I haven't looked at them in a while, but maybe Casper. If you think about the newer model companies, they actually don't control as much of the supply chain as Sleep Number does. Sleep Number actually won an award, not just for the mattress industry, but it won a supply chain industry award last year because they have spent so many years really fine tuning that. They have very lofty margins compared to the newer mattress companies, that their gross profit is flipped upside down if you look at our margin rate, but I think they pose a very healthy threat to Sleep Number. I think Sleep Number should pay attention. In the world we're in, you have to have a pretty decent online presence. Either you've got brand power, so organic search you come up, or you are really targeting customers who are searching through paid search. I think that they should really lean into that in the future, but one of the interesting things is, because their model is so much different, they are more of an experiential company in the fact that they've got these stores which have these incredible statistics that I talked about. They're catching you in the visible space. If you are in a major metropolitan area, they are top of mind when you want a mattress because you pass by the store quite a bit.

They have the in-built traffic flow. In some ways, if I was just not paying attention to the risk, I can say, oh, they don't need the internet traffic. This is not a threat. I think it is a threat and I think you've got a really great point, Emily. But what is interesting is that they are only increasing their sales through this model, so it's more of a top-of-mind experiential company in a different way than their competitors who are more experiential in, hey, deliver the mattress and if the customer doesn't like it, they can ship it right back, no cost, we'll send another one. Maybe at the end of the day, a customer is more comfortable with, "Look, I could try out the mattress in the store. I don't want to go through the hassle of making it up in my room or having it installed in my room and then [laughs] having to get it shipped out and get another one." The last thing I'll say about just mattress installation is when you buy one of their mattresses, they have this premium experience where the people come, they assemble it in your room, they show you how to use it. That's part of, I think, the price point and the pull for people who want to buy this product. It is niche in that sense, although I think they've got a lot more runway and more brand awareness still to go that they could do a little bit better job with that.

Flippen: Maybe you've mentioned this at the offset and I've since forgotten, but you mentioned you are in the market for a mattress. Are you leaning Sleep Number? If not, why not?

Sharma: It's a great question. We've had a really nice mattress set for a long time and only this year my wife and I, I think honestly, it's just being charitable, say, it's been a year. I'll say the last couple of years, we've noticed that it has gotten old. But I think the thing that has just paused us is just the expense of a new mattress. It's something that you want to take some time to think about. This is definitely, I was looking at their $900 version. I should say it's a $1,000 version, but they have sales frequently. So, you can get it for $900. That actually has a lot of the base or core technology that their more expensive model does. I would definitely consider that, and added it to my mental list as I was looking at the stock. The answer to that question is yes. Unfortunately, I don't think I'm going to be one of the consumers who hits that average sale of $4,800. So many other things that we need before I plug down that dough. But the entry-level mattress is not bad and I'm guessing there's a sleep number here in Raleigh, not where I live in North Raleigh, I can probably go try it out. They might have to pick me up and carry me out of the store because I might fall asleep and not wake up for a couple of hours. But why not? It's on the list.

Flippen: Well that sounds absolutely ideal. The company that I think is topping my pick for 2021, if you're using their services, I guarantee you're not going to be finding a $5,000 Sleep Number mattress with the locations you would engage with if using this company's services, if that doesn't give away the stock, I don't know what would. But it's definitely a premium experience there with Sleep Number. With my company, before I get into it, I want to say I did go through a couple of iterations, before settling on this business.

First, I thought about Match Group, which again, we could argue is not a consumer goods company, but I could also argue is a consumer goods company because a lot of the same fundamental drivers of demand for their services depend on fundamentals of drivers of demand for consumer goods. I went to Bilibili, which is a Chinese video streaming services and I thought that was way too ancillary to make a strong argument, before remembering that there was one company that went public this year, that I never really got the opportunity to talk about on Industry Focus that I definitely think fits into consumer goods. But Dylan Lewis, and I believe Jason Hall, beat me to the punch or I should say beat us to the punch, Asit, in talking about this business.

Without any further ado, my top peak heading into 2021 is Airbnb, which I'm sure a lot of our listeners, especially frequent listeners, are already pretty familiar with. I think most listeners have engaged with their services before. They are an e-commerce portal, which allows you to book experiences and rooms and locations across the world when taking trips and vacations. What I think is really interesting about Airbnb is just the opportunity for Airbnb to disrupt. I really traditionally ingrained service structure. When Airbnb got started, it was really just Air Mattresses, that's how they got their name, Airbnb. They were setting up air mattresses at people's floors that you could rent out for a really cheap rate. What it did was actually create an entire industry of its own in the similar way to Uber disrupting the cab industry, Airbnb has completely disrupted the hotel and travel industry. It made it a lot easier for people to travel, a lot cheaper in some cases, but more importantly, allowed people to book really unique experiences that simply couldn't be offered on other platforms.

When I look into 2021 and beyond, it's hard to argue that Airbnb wouldn't be bigger, and wouldn't be more important for many years into the future. That's my top pick. I will admit it's not a cheap business. It's almost a $90 billion business at this point, so it's bigger than a lot of its hotel peers. But I think it deserves that premium valuation because, again, they're not competing on the same level. Think about your experience if you choose to book a hotel room. Say you're on Expedia, say you are on Marriott or Hilton's website directly. Going through and purchasing that room, there is nothing personal about it for you. When you show up in your location -- let's go somewhere fun. Let's say you're going to Lisbon and you've booked a hotel room. That experience of booking a hotel room doesn't connect you with any locals, doesn't connect you with the culture, doesn't provide anything to you except for a place to put your head at night. What Airbnb does is, you're more conscious about the location that you're choosing, the people that you're engaging with and I think that gives Airbnb a bigger, more competitive strategy. When you look at how they can expand their market opportunity, by deeply engaging with the consumer who is looking for a personal or local touch. I think the biggest thing that I'd add, honestly, I don't want to get into it the same way that Dylan and Jason did, because I'm sure all of our listeners have already listened to the case for their S-1 on that podcast.

One thing I will say that they didn't get the opportunity to touch on was the experience business. It's a very, very small part of their revenue right now, but there are essentially little tours or experiences, classes, engagements with the local community that you can book on Airbnb's portal. I think their opportunity to take an already engaged audience and expand their relationship with them, so they're booking the entire vacation, not just the place to stay, is really exciting and potentially really lucrative, because their take rates on those experiences are much higher than the take rate that they have on simply listing places to put your head. So, I like Airbnb. There was a lot of fluffy stuff. I'll quickly mention some numbers here. They had nearly $40 billion of gross bookings in 2019, which led to a net revenue of over $5 billion. So it's a big business again, and part contributing to its relatively expensive, you could argue, market gap, but they have gross margins north of 75%. The big issue here is the fact they're not profitable despite 91% or more than 91% of their total visits coming through direct or unpaid channels. They're spending over $3 billion last year in marketing, when in reality, most people visiting their sites weren't coming through a pay channel, which begs the question of, at what point are they simply wasting money? At what point do they reach a critical mass that allows them to be profitable? I'm not sure where that is, but I would estimate that a lot of their sales are going to their international business, which is still a substantially smaller portion as compared to domestic, which is U.S. based bookings. I'm excited to see what that brings them in 2021 as well. So, I like it, I argue that's a consumer goods business. Asit, do you have any thoughts?

Sharma: Yeah, I'll agree with you. I think Airbnb as a consumer goods business, and I'll agree that it's a really persuasive, but I don't own it yet, but I am going to, like I do with other IPOs, just season it, [laughs] watch a couple of quarters of results and I likely will be a buyer. I think the total addressable market for Airbnb is just intriguing, because I remember from the S-1, it was some ghastly big number, trillion bucks or whatever.

Flippen: I think it was like something like $3 trillion, which it was very, very generous.

Sharma: Yeah, and I want to say that despite it being generous, the experiences total addressable market, was itself huge, and when you think about that, that's really where the economic engine, as you just pointed out, Emily, is going to be generated from. I was intrigued that they have a version of what hotels call the ADR, the average daily rates. This is just occupancy times the price of a room. If you multiply those two numbers together, the percentage times the amount hotel's charging, you get something called an ADR, an average daily rate. Everyone tracks us in the industry. Airbnb did its own version in their S-1, and just going on memory here, but it was above the midpoint tier, so basically $110. I may be off by $10 or $20, but they were in the mid-tier range of hotels. Just think of going to not a budget hotel but not a really premium experience either. Where does all the magic occur? It will occur in these experiences which have already seen a lot of uptake when you put the two of those together. I also think there's an opportunity for the company to really scale on a global basis. It's already so big, and they have been just so aggressive on brand awareness, Emily, that I'm guessing, at some point, shareholders will say, "Okay, pull back a little bit now and drop a little bit of hub to the bottom line," and maybe that will answer your question of why they are spending so much. I think that's been a bent of this company. There have been a few overspend in certain areas just because of ambition.

From the S-1, they had more in real estate investments for their offices than they did in technology [laughs] overtime, which was surprising to me, but it goes to the founder's vision of just being ubiquitous and this huge company, they certainly are heading in that direction. One thing I've learned just through hard lessons, from being a natural skeptic and almost coming at stocks from a value perspective, is that when a company can really capture scale, watch out at some point or another, it'll hit that profitable runway and then the stock really starts to sore. You have to understand the proposition, believe in the leadership, believe in the business model, and sometimes, just float with that even though losses are on the table now. But I think you already mentioned that the company is profitable already on an operating cash flow basis, I think so. Yeah, I'm with you there on Airbnb.

Flippen: Yes, I'm excited by it. Before we wrap up today's podcast, I'm seeing as we take this podcast here on Motley Fool Live, there's a fair number of questions about competition for Airbnb, and in particular, VRBO, Vacation Rentals By Owner. I think they were before Airbnb. I could argue that Airbnb is a VRBO knockoff, either way, both play in this space. I'm actually not worried at all about competition for Airbnb. I think that's the one thing that I don't lose any sleep over. I wouldn't lose any sleep over with this investment, simply because the two sites, I think, are headed toward a different audience. Now, there are certainly properties that are listening on both Airbnb and VRBO, but I think Airbnb targets a slightly younger user who's maybe paying a lower average nightly rate in part because VRBO sells, or I guess the last people to rent out properties that are whole properties, while Airbnb lets people take whole properties or just rooms. The rooms itself I think it's really interesting because if you are looking to save money, you can get a short-term rental or short-term stay where you're just using what you need, which is in a lot of cases, just a bed or a couch to put your head on, or will also give you the opportunity to get that $400 a night vacation rental for your whole family if you desire. I think the market opportunity in my opinion for Airbnb is slightly bigger. They also have more of an international presence and more listings. I think the most recent numbers had I think double the amount of listings that VRBO has.

I think there's room for both obviously, but I think that they are not quite going after the same exact person. The direct notice for Airbnb, that 91% of direct visits to their website, I think, shows a certain level of awareness in the end-user that is also really valuable. Where I would lose sleep, my biggest concern, obviously, you talked about the move toward profitability, which is much longer term. I think I just have questions about what the regulatory hurdles end up being for this business long term. Think about all the different jurisdictions in which Airbnb is operating. Here in the United States, even on the state level or in the city level, there can be different rules and regulations about how many units can be Airbnb units, where you can have Airbnb, the disruption it's having to the local economy, in particular, access to housing for the communities in which they operate. But then, you take that and you multiply it by an international scale and it becomes very logistically challenging. I think it will be hard for Airbnb to navigate these regulations as they continue to catch up with their business model, and that could potentially stifle the number of locations or rentals that they're able to put in different cities across the world, which to me is the bigger concern, less so competition.

Sharma: Yeah, it's a really great point, Emily. In fact, if you think about the Iberian Peninsula, so Lisbon you were talking about, think of Madrid, these are cities that have pushed back a little bit because they've seen so much of their city centers turn into these rental units through Airbnb. But I think the company is attuned to that and they are going to work with municipalities and figure this out. It's going to take a while. They're not quite in the true adversarial position that a company like Uber sometimes is going into a city and having to battle whatever the local laws for taxis are. We saw a lot of that in the early days, but they're exploring a new business model and they will take time to find this symbiotic relationship with cities. They did seem to have a cooperative bent. They're not out to try to aggressively fight for market share within the city and fight the municipality. I feel like they'll overcome that.

I just quickly wanted to say again about VRBO as well. If you look at the interfaces, they're structurally pretty similar. Now, if you go to VRBO and look for a rental there, you're going to see also a great bit of pictures you can click through, just like Airbnb, but Airbnb aims so much more for that experiential part of the business, not just in the experiences but just an idea to encourage you to meet your host and so many people still flock to Airbnb to get that kind of non-hotel experience where they can meet someone from a different country, learn a little bit about the culture. It's just a different business model and edge that I think they have. I agree, the two can exist in the same market. The market is so huge, it's staggering how big this market is.

Flippen: Well, I look forward to the end of 2021, not to say that these are one-year investments, because I know that in both these businesses we believe in the long term. It will be interesting to circle back on these two businesses, have a little internal competition, Asit, about where they are a year from now. I think that, if I had to speculate about where each of these businesses are in a year, I think, Asit, you beat me over the first year. I think 2021, for all the great fundamental reasons you provided about its valuation and the opportunity it has heading into the new year, I think those reasons maybe see a higher stock appreciation from Sleep Number as compared to Airbnb, which admittedly is going to have a tough part of their business for at least the first half of 2021 but long-term, I just can't get over that multi-trillion dollar market opportunity that I think Airbnb has in front of it. If you have to speculate, intertwine my speculation, where do you fall?

Sharma: I see Airbnb having a potentially rough couple of years, but I see a five or 10-year return potentially phenomenal from this company. For talking, what is your choice, if you had to buy just one, I would buy Airbnb and hold it. Why I like Sleep Number is simply because, in the consumer goods space, it can be hard between companies that are more techy and just exploding and then these big stalwarts that never seem to move. The ones that I do love for their dividend like Coca-Cola, they're not going to make the brute gains in your portfolio. Sleep Number is a nice growth story in this industry. Like I said earlier, I think it's an easy double in the next five years. Is it Airbnb? Uh-uh. If I had to choose, I would go with Airbnb, but luckily, I think you can own both now that fractional share trading, for anyone who's listening, who's thinking you have to buy full shares of these, if you want to just buy a bit of each company, you can invest even a few dollars through most major brokerages now. So, why not own them both?

Flippen: Well, Fools, thank you for sticking around and listening to our consumer goods top stocks for 2021. Don't forget to tune in for the remainder of the week. We're going to have more top stocks coming in each of our respective industries, I believe, for Wildcard Wednesday tomorrow, Jason Moser and Matt Frankel are going to be on to provide some of their top picks, so definitely tune in later in the week to continue top stocks week. Without any further ado, Asit, thank you so much for joining me as always.

Sharma: Awesome. Thank you, Emily. Really fun today.

Flippen: Listeners, that does it for this episode of Industry Focus. If you have any questions or you want to reach out to say "Hi," you can always shoot us an email at industryfocus@fool.com or tweet at us @MFIndustryFocus.

As always, people on the program may own companies discussed from the show and The Motley Fool may have formal recommendation for or against any stocks mentioned, so don't buy or sell anything based solely on what you heard here. Thanks to Tim Sparks for his work behind the screen today. For Asit Sharma, I'm Emily Flippen, thanks for listening and Fool on.