Retail, Tech Earnings, and Berkshire's Surprising Buys

Walmart (WMT 0.57%) shares slip on earnings. The Trade Desk (TTD -0.54%) surges on record revenue. Roku (ROKU 1.58%) rises on an unexpected profit. Fastly (FSLY -3.35%) falls on growth concerns. Shopify (SHOP -2.37%) slips. CVS Health (CVS -0.65%) treads water. Berkshire-Hathaway makes some big investments. And Marriott (MAR -0.87%) suffers a big loss with the death of its CEO, Arne Sorenson.

In this episode of Motley Fool Money, Motley Fool analysts Ron Gross and Jason Moser discuss those stories and weigh in on autonomous driving, big tech break-ups, and the streaming wars. Plus, Ron and Jason share two stocks on their radar: Bluebird Bio (BLUE -1.13%) and RadNet (RDNT 0.37%).

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.

This video was recorded on Feb. 19, 2021.

Chris Hill: We got something special planned because it is our 12th anniversary, if you can believe it and as always, we've got a couple of stocks on our radar, but we begin with big retail. Walmart's fourth quarter was full of highlights, e-commerce sales up nearly 70%. Same-store sales in the U.S. up more than 8%, but despite that run, shares of Walmart fell 6.5% on Thursday. That seems like a big drop for a business like Walmart.

Ron Gross: Yeah. Earnings disappointed as the guidance and the report was perfectly fine, but this is not a high-flying tech company, so we can't expect those kind of numbers out of it, especially once we get back to normal post-COVID, but the numbers were great. Walmart comp sales up almost 9%, e-commerce 69%. I'm a Costco guy but hey, Sam's Club does a nice job as well. Sales increased almost 11% there and international was up 5%, so you boil that altogether and you get revenue up 7% which is a perfectly respectable number for a business or retail business the size of Walmart, and you even saw gross margins increase as there was strength really across all categories. Now we had some higher expenses. Operating margins took a hit, that we see consistently across the board partly as a result of COVID. In this case, it was $1.1 billion of COVID related expenses, and they had another one time expense where they decided to repay some property tax relief in the U.K. which we don't need to get into. So operating income it all boils down to being up 5.5%, perfectly respectable, but investors were focused on the guidance where the companies came out and said sales, operating income, and earnings are expected to decline in fiscal '22, primarily due to the impact of anticipated divestitures. Now they're exiting Argentina, U.K., Japan, they're doing that willfully on purpose to focus the business. If you take away the impact of the divestitures, EPS is expected to be flat to slightly up. That also is not exciting to investors, so you get the stock selling off a bit. I love what they're doing with wages. They're going to raise the average wage to above $15 per hour. They're still investing 14 billion in the supply chain and additional technology, and finally they increased their dividend for the 48th consecutive year.

Hill: Impressive stuff. Shares of The Trade Desk up 5% this week after the programmatic ad platform wrapped up a strong fiscal year. Ad spending on The Trade Desk in the fourth-quarter, do I have this right Jason? It was up 60% in the fourth-quarter.

Jason Moser: Yeah, approximately for the quarter. Yes, it was. I remember we talked about how the strong companies coming out of the other side of this mess, they're going to come out of this even stronger. I present to you Exhibit A, The Trade Desk, and a lot of this I think has to do with connected TV, it's those Internet and television worlds colliding. Trade Desk is turning out to be a prime beneficiary rather, and so I think you'll see shares up 200% over the last year. Connected TV was the largest growth segment of the global advertising market last year, and to try to put all of that in the context here, you're talking about ad spend on their platform. The ad spend on the platform for the year, for 2020, was $4.2 billion. It was up 34% from a year-ago. Spend in the fourth-quarter alone, yeah 1.6 billion versus one billion a year ago. According to eMarketer, total global ad spending declined 4.5% in 2020, so you put all that together and you can see The Trade Desk is gaining share at a nice rapid clip, and it sounds like what they're doing is really working. Customer retention remains high at 95%. Revenue has grown at a 50% compounded annual growth rate over the last five years. We're at this point now where more U.S. households are without a cable subscription than those that have one, that trend is not going to change, and then finally, I think it's worth noting on the call, they talked about it reference to the CES and Marc Pritchard is the Chief Brand Officer of Procter & Gamble. He was talking about this move toward digital, programmatic, data-driven, automatic advertising. That's not going away. That's where this ball is rolling, so to speak. When you hear that from the Chief Brand Officer Procter & Gamble, that's the world's largest advertiser, you can see there is a lot of reason to believe that the future looks very bright for The Trade Desk.

Hill: Roku turned a profit in the fourth-quarter. They added more subscribers. Shares of Roku flat this week Ron, but given that it's up more than 250% over the past year, I really don't want to hear any complaining from shareholders.

Gross: [laughs] You'll hear from me because this is another highflier that I completely missed out on, but they are doing impressive work here. In 2020, 38% of all smart TV sold in the U.S. were Roku TV models. That's some nice share that they're accumulating and it's showing up in the numbers. They surpassed 50 million active accounts in Q4. Video advertising impressions more than doubled and that translated into just great income statement numbers. Total revenue up 58%, broken down by platform revenue of 81% increase and player revenue of 18. Gross margins widen significantly. Gross profit was up 63%. Streaming hours increased 20 billion hours to a record almost 59 billion, and ARPU, which we love to talk about. average revenue per user increased 24% now to $28.76 per user, so the numbers are really impressive. Investors were not expecting a profitable quarter, so it took them by surprise in a good way. They're reporting $65 million in operating profit versus a loss in last year's fourth quarter, EBITDA of 113 million respectable and growing. Guidance was not impressive when you look at it sequentially from quarter-to-quarter, but year-over-year, it's going to be an increase of around 50% in revenue, so that growth continues and management does expect a small loss of around 20 million for the coming quarter. Let's see if maybe they surprise again and turn to a small profit.

Hill: Roku is also looking like a company that is going to get even deeper into our original programming. We had talked previously about them paying pennies on the dollar for Quibi's library of content.

Gross: As they should.

Hill: Is that a good move for Roku to invest heavily in original content because that puts them right up against the Netflix and Amazon Primes of the world?

Gross: It worries me, but everything worries me, Chris. It's expensive to [inaudible] programming. My job as an analyst is to worry about these things and making sure that they are spending appropriately. They've got the balance sheet, but gosh, as you said, the competition in original programming is steep and there's so much good stuff out there right now. I don't love the idea.

Hill: Shares of Fastly down 20% this week. Fourth quarter revenue for the Edge Cloud platform grew 40%, but guidance for the current quarter sent some investors heading for the exits. How bad was the guidance Jason?

Moser: Well, let's try to keep everything in context. Guidance for 34% revenue growth in the current quarter. I mean, that's not all that bad, but when you compare it to the way this company has been growing, then you start to understand some of the concerns, and we talk about it often. When a company has a history of growing at really impressive rates, the stock price reflects that, and when that growth starts to slow, then you see a repricing, and I feel like that is what we're seeing here to a degree with Fastly. It's not to say that Fastly can't be a good investment from here, but we have some questions, and I think that on the 40% number that you load up there, it's worth noting organic growth. I think it's starting to become a bigger question because that 40% also included an acquisition that the company made. So organic revenue growth was really closer to around 30%, and then you couple that with that guidance, you start to ask some questions.

It was interesting in the call that it really took a lot of work to get that actual organic number as well. Management wasn't really I would say as upfront with it as they probably could have been. Again makes you wonder about the growth prospects going forward, but gross margin expanded better than 6% for the quarter. I think that's the benefit of their usage-based model. You see some puts and takes with that model and that clearly is a benefit there. Dollar-based net expansion rate was 143%. That was down from 147% a quarter ago. I think a big concern with Fastly though is their ability to add enterprise customers, big customers that spend at least $100,000 per year, and if you look at that sequentially Fastly saw 3.5% growth in those enterprise customers. They saw 12.5% growth from a year ago. Now, compare that to something like a Cloudflare. Cloudflare saw sequential growth of 8% in 50% growth from a year ago. Again it's not to say Fastly can't be a good investment from here, but it does seem like there might be some better options in the space. Given the guidance there, it feels like the selling is at least understandable.

Hill: Marriott posted mixed results in the fourth-quarter, but that news was overshadowed this week by the sudden death of Marriott CEO, Arne Sorenson on Monday. For nearly a decade, Sorenson guided Marriott into becoming the largest hotel chain in the world. The Board of Directors expects to name a new CEO before the end of the month. But Jason, safe to say big shoes to fill.

Moser: Big shoes to fill. Yeah, absolutely. The earning's call was a real tribute to him. They told stories, they held him in the highest regard. It was very thoughtful and clearly a very big loss for the company and the general business world really. I know the conversation is all about Airbnb and the gig economy and sharing economy, one other way the travel space is changing and that makes sense to a degree. I actually think that Marriott is a business that can handle this shift in the travel industry pretty well. I think that it still has a big role to play and a lot of that I think is thanks to what Mr. Sorenson did for this business over the past basically decade. Since March 31st in 2012 when he took over, the stock is up 283% versus the market's 180%. He's more than doubled the topline over his tenure going into this 2020, which was obviously a very difficult year for everyone. If you look at the quarterly results, it was bad, but we expected it to be bad. RevPAR, that revenue per available room, declined 64.1% worldwide, adjusted earnings of $0.12 that compared to $1.51 from a year ago. But there are some notes, some encouragement on the call. There are reasons to believe at least the demand will come back rather quickly. They noted some key markets in China, more demand jumped from around 20% to over 60% in just two weeks after local governments had removed travel restrictions. Then, it's also very encouraging to see the traction that they're gaining and the engagement that they're getting from the Marriott Bonvoy program. That's loyalty, a card, add benefits. All this thing rolled into one. They have 147 million members now. They noted the global credit card spending on their Marriott branded cards was only down 16%. You compare that to that RevPAR decline, clearly you can see people are still using that card. I think that's going to be important. I think that's something this company can really benefit from is generating that engagement, their own little world from that Bonvoy program. eMarketer pegs at 90% of our growing mobile time spent in apps. So if you are a consumer-facing brand, regardless of market, you got to bring a strong app game at the table and they're really working on that. It seems like it's paying off. I see a world where Marriott still has a role to play and we'll be interested to see who does fill Mr. Sorenson's shoes.

Hill: Shares of Shopify down a bit this week despite the fact that fourth quarter profits and revenue came in higher than expected. Ron, I get the valuation on Shopify, but it seems like the business is doing so many things that you would want to see if you're a shareholder.

Gross: You get the valuation, you will explain it to me after the show. [laughs] These are really strong results, but I just think investors were less impressed with the guidance. When you're trading the way you do, you need to really fire on all cylinders, as I like to say. But for the quarter, very impressive. Revenue up 94%, adjusted net income up almost 200%. Subscription solutions up 53%. Now that monthly recurring revenue, the MRR, was $83 million, that's up 53%, which is a strong number and the big number here really out of all of these great numbers, are the merchant solutions revenue, which is their bread and butter, and that was up 117%. Certainly benefiting from the fact that everything moved online during the COVID pandemic and the quarantine. But the numbers are really impressive. Operating margins widened, they had adjusted net income of around 200 million, that compares with only about 50 million this time last year. We're not extremely profitable here right, we've got this high-flying, unbelievable stock up 160% over the last year and even more before that. But we're still in the infancy of profitability. That's where people looked at the guidance and I think investors really were worried here. Management said they expect to grow revenue rapidly in 2021, but at a lower rate than in 2020. As the economy opens up and people returned to brick-and-mortar stores. If you own a high-flying growth stock, you do not want to hear anything about lower growth rates and they're also going to continue to invest aggressively to fuel growth, which you want them to theoretically, but there's obviously a cost to spending all that money.

Hill: Fourth-quarter profits for CVS Health came in the higher-than-expected, but shares still down a bit this week. Jason, if you're looking for signs of encouragement with CVS, pharmacy sales are up.

Moser: [laughs] Yeah. Well, there's a little bit of stuff to look forward to here in this business. It's not been the greatest investment over the past several years, but I do wonder if we won't see some goodwill in brand equity come from everything that we've witnessed with the pandemic. CVS is, I think, now being seen as a part of the overall solution. They are one of the national partners for the Federal Pharmacy Partnership Program, it's central to the plan to vaccinate 300 million Americans by the end of the summer. As far as the numbers revenue growth 4% to just under $70 billion. Not bad, given everything that's going on, adjusted earnings per share of $1.30, operating income was down over 20%. A lot of that was due to pandemic related expenses, reimbursement pressure. In general, just business environment concerns there. But pharmacy services, which is about 55% of overall revenue, that was down slightly for the quarter, offset a little bit by some growth in retail, 6.6%, that was driven mostly by prescription volume in COVID testing. The healthcare benefits segment grew close to 10%, that's encouraging. They're guiding, I think, for some fairly reasonable targets here, guiding for earnings around $7.45 per share so far, top-line growth around 4% or so. I think all things considered, this is a company that is still doing good things, but they definitely have some challenges as the economy starts opening back up.

Hill: Berkshire Hathaway's latest earnings report comes out next week. But this week we found out what Warren Buffett and his team have been buying. Berkshire has taken a $4 billion stake in Chevron and $8.5 billion stake in Verizon. Ron, is one of those better than the other, because both seem a little uninspiring?

Gross: Yeah, so Chevron has clearly, energy is an economic rebound play. We've seen other investors, I think David Tepper over at Appaloosa has recently entered the energy space as well. I don't know if Chevron's is the best way to play that. I think there are better companies out there to maybe play it, but they obviously see something impressive in that company. Verizon, I would assume is a 5G play. Interestingly, I, myself, did the same thing maybe a year or more ago. But in hindsight, I actually think there are better ways to play 5G than the service providers. Jason would certainly know more than that than I do. But these are interesting moves. They lowered their stake in Apple by 6% and Verizon's now three% of the portfolio. That's a big bet they're making.

Hill: It seems like they're bored. [laughs] I know there's serious people doing serious things, but these seems like, as I said, uninspired purchases.

12 years ago this week, Motley Fool Money started. Just a humble little podcast. Eleven months later, we make the leap to broadcast radio. The first podcast to do so. We don't get anything for that. We don't get a plaque or a bag of money, but we [laughs] could be honored being first. Something that we used to do more often on the show, but I haven't done for a while is buy, sell, or hold. For those unfamiliar, I'm going to spot Jason and Ron up with a topic and have them weigh in as though if this thing were a stock, would they buy, sell or hold it. Jason, I'll go to you first on this one because there's more and more talk every year about autonomous driving. Buy, sell or hold the likelihood that a child born this year will need a driver's license in, let's call it, 2040.

Moser: The likelihood that they'll need a license, I'm going to say buy. I think that while we are making terrific progress in regard to transportation as a service, there are going to be all sorts of leaps and bounds here in the next several years. I still think that's probably a little bit early to look at self-driving for the masses. I think we'll see pockets where it's available. But I think, generally speaking, I think that kids born today, most of them will still need a driver's license by the time they're of age.

Hill: What about you Ron?

Gross: In much the same way as a pilot needs to know how to fly when he flips off the autopilot switch, thank God, [laughs] I think people will also need to know how to drive in case they need to switch off their autopilot on the autonomous vehicle. While we might not use it very often and those skills may not be necessary and may atrophy over time, I still think it will be a law that will have to be versed in how to drive a car.

Hill: Ron, lawmakers continue to speak out about the monopoly of big tech; so buy, sell or hold Apple, Amazon, Alphabet, or Facebook getting broken up in the next five years? I'll just add on to that. [laughs] You can even go the route of a self-breakup in the next five years.

Gross: The heat is certainly on, so I'm going to buy that one of them does get broken up either by the Department of Justice or on its own. If I had to guess, I would say it was Alphabet, because Google feels to me more like the biggest monopoly of them. They all have competition, but Google Search is pretty up there in terms of market share, and if anyone really has to go down, that would be my guess.

Hill: Jason?

Moser: Well, I think I'm going to run counter to Ron here, and I'm going to sell the notion that we will see any of these companies broken up in the next five years. I think that perhaps some lawmakers would like to do that. I also think that there are bigger fish to fry, and I think that they probably are better served looking at what has happened with these four businesses; Apple, Amazon, Alphabet, and Facebook, trying to ascertain exactly how they can prevent potential antitrust concerns in the future. There's some acquisitions you could argue that should not have been made. Facebook, I'm looking in your direction. It seems like the Instagram deal was really not about trying to make yourself stronger as much as it was about eliminating a competitor. I think they probably look back on stuff like that and say, "You know what, [laughs] we probably should have caught that." I don't know that they're really going to have the political capital to fully make something like a breakup happen here. It could happen. I'm just selling the notion that it will. I think it definitely will reshape how tech is able to consolidate though in the future.

Hill: Let's stick with big tech because Jeff Bezos recently announced he's stepping down later this year as CEO of Amazon. Buy, sell or hold, Ron. Buy, sell or hold Tim Cook being the next big tech CEO to step down? Not necessarily this year. Just of that group; Apple, Alphabet, Microsoft, Facebook, Tim Cook is the next one to step down.

Gross: I'm going to sell that notion. Now, yes, he is the oldest at 60 years old, but he's by no means old, and I still think he's energized by what he's doing, and he's got a lot to do. I'm going to call an audible and tell you that it's Mark Zuckerberg at 36 years old that is going to move on to executive chairman, and do other things either in the space or in the world of charity, and he will be the next one.

Hill: I like it. Bold call. What do you think, Jason?

Moser: It is bold. Ron, you must have been cheating off on my notes or something because I was going in that same exact direction. I really don't think Tim Cook has any inclination to step down. I think that he's been a wonderful operator for Apple, and he really is, I think, enjoying the role that he's serving. To me, it really does feel like, even though Mark Zuckerberg is still so young, given what we've seen with Jeff Bezos, I feel like that probably plants a seed in Mark's head, and he thinks, "You know what? I don't have to do this forever, and I can still be involved with the business in playing an integral role in its development and growth without necessarily maintaining the CEO roles." I absolutely could see Zuckerberg transitioning over to executive director at some point or another. Perhaps letting an operator like Sheryl Sandberg go in there and take care of that day-to-day. It'd be interesting to see.

Hill: Wasn't Bill Gates in his late 30s or maybe early 40s when he stepped down as CEO of Microsoft?

Moser: Pretty young, yeah.

Gross: Yeah. It sounds right.

Hill: The newest entry into the streaming wars launches on March 4th; $5 a month if you want to get it with ads, $10 a month if you want to get it ad-free. Jason, buy, sell or hold Paramount Plus?

Moser: Chris, going into Peacock. I think we were all having a little bit of fun at Peacock's expense. Part of that probably was the name, part of it was thinking you're a little bit late to the game.

Hill: All of that is true.

Moser: [inaudible] In hindsight, I've been very impressed to see what they've done with Peacock in such a short period of time. They've gotten some good content on that platform. You would think that Paramount Plus could do the same thing. It did seem like from the commercials they were airing during the Super Bowl that they do have some content out there that folks want. I just don't feel like it's a buy though. I feel like maybe they're a little bit late to the game. For me, it's just getting to be such a clutter streaming environment already. It feels like Paramount Plus might be back of mind for a lot.

Hill: What do you think Ron?

Gross: I think you come for Star Trek Picard, but you stay for SpongeBob SquarePants [laughs]

Hill: What about Beavis and Butt-head?

Gross: But I'm not staying for either. It's a sell for me, and that's because I have a 5-10 dollar fatigue on my credit card. If I have one more 5-10 dollar charge that shows up on a monthly basis, it's going to be the straw that breaks the camel's back. They do have some good programming for sure. Listen, we just can't do everything. There either has to be consolidation or maybe cheaper or I just can't put another one to this. I just can't commit. Just can't do it.

Hill: Before we get into the consolidation because I do want to talk about that, but doesn't it work to the benefit of these streaming services that the bill is not arriving at the same time? It's not like for years and years with your cable bill which came once a month, it was a big number. You would look at all the charges and think, "What am I paying for all this stuff?" [laughs] That was easier to look at. Instead, your bill for Netflix probably comes at a different time than your bill for Disney Plus, for Peacock, whatever. I feel like it's in their best interest to at least make an attempt to go it alone as a stand-alone streaming service.

Gross: You may be right. Truth be told, I don't even remember exactly which ones of these things I subscribed to. [laughs] Some my kids like and some I like, and I don't know how much money I'm spending in the aggregate. If you don't know, it's sticky. You tend to not do anything about it versus like you said, the cable bill comes and it's a couple hundred bucks or whatever it is every month, and you're constantly calling them to see if you can lower that, and they're like, "No, you can't," and you're like, "Okay. Thanks. I'll call you next month." [laughs].

Moser: You're absolutely right. One of the things though, further down the road then you do have to ask yourself that question regarding pricing power. I think when we had that discussion with Disney Plus, for example, when we say, "Wow." Setting that service, what did they started out for? 99 or something like that, something absurd. Where all of a sudden you see, "Okay, that's a brand. That's a platform," or "It's a service where I could see over time." I understand the levers they can pull to raise those prices. You look at something like a Paramount Plus. I'll lump Peacock in there too. I think a lot of these streaming services are going to be faced with this challenge. How do you raise prices in the coming years? Because that's going to be a battle that they're all going to be fighting on some front. It's going to be easier for some like Netflix or maybe an HBO Max or something like that. It's going to be easier for some, I think, than others, and that'll be really interesting to watch play out.

Hill: We talked earlier in the show about Roku acquiring some of Quibi's content. We're all familiar with the big name streaming services. There are so many more niche streaming services out there. It seems hard to believe they can all survive. Do you think at some point in the next couple of years we're going to hear announcements of some of the bigger ones, whether it's Netflix or Disney or even Amazon, instead of saying, "Here's how much money we're spending on content," maybe one of them comes out and says, "Here's how much we're going to spend on acquiring these three niche content streaming services and incorporate all of their content into our system"?

Gross: I like that idea of some of the nichier ones combining. I don't know if the big boys will. They'll probably go it alone and compete. But some of the smaller ones, Discovery Plus or what have you, I could see them combining forces, combining balance sheets, and producing content as one bigger company.

Moser: You look at the opportunity out there in connected TV, and let's go back to The Trade Desk story that we're talking about earlier in the show. They quoted some really impressive numbers on their call there. In 2020, more than 1,000 brands spent at least $100,000 on connected TV on The Trade Desk's platforms. Those brands that spent more than $1 million on the platform in 2020, more than doubled from a year ago. So it all goes back to this connected TV opportunity is a huge one. It's one where a lot of money is flowing, so I absolutely understand why these streaming services are opening up the way they are. If we look back to something like Peacock, and I imagine Paramount Plus is very much the same here, that's not a paid subscriber play, it's an ad play. That's how they generate most of their money, from advertising.

Hill: Before we dip into the Fool mailbag, guys, back on our 2021 preview show, the show ended with a round of reckless predictions. I want to go to our man behind the glass, producer extraordinaire, Dan Boyd. Dan, can you play the reckless prediction that Ron Gross went with weeks and weeks ago?

Gross: The Tampa Bay Buccaneers, under the leadership of Tom Brady, will win Super Bowl 55 at Raymond James Stadium in Tampa Bay. Also, the stock market will be up 12% next year in honor of Tom Brady wearing the number 12.

Hill: [laughs] Ron, I hope you are as correct about the stock market being up 12% this year as you were. Just so people know, you made that prediction before the playoffs had even started.

Gross: I feel fortunate. They had a great year. Tom Brady did a great job, but he also had a great team behind him. Let's see about that 12% stock market thing, that would be something. We will have to replay it again if that comes true.

Hill: Our email address is [email protected]. Got a note from Matt Conrad in Los Angeles, he writes, "When do you sell a stock that exceeds your expectations? I'm 33 years old. I started investing five-years ago. I bought Teladoc Health and Shopify in 2019, and both have exceeded my growth expectations. I still believe in both companies but I question their continued growth after such accelerated gains. Is there logical reasoning to take those gains and reinvest in other companies that I have the same 2019 growth enthusiasm for?" Jason, great question about asset allocation. Matt has a good problem on his hands, which is, "I've got these two stocks that have gone up way more than I thought they would."

Moser: Yeah, Matt. When you sell, it's right about the time you click "Send" on that email. Because clearly something is concerning you now and it's in the back of your mind, and maybe you're starting to lose a little bit of sleep over what ultimately is a nice problem to have. I'm only half kidding when I say when you send that email because it is a question you have. It clearly is a concern to a degree, and I think it's a fair concern. It's something we all hope to have to deal with. I think, ultimately, part of it is figuring out your risk tolerance and that is going to be something that's different for everyone. Younger investors should be able to learn how to stomach a little bit more risk because you have more time in front of you. Part of it I think really does depend on the business itself. Is the business performing? Can you understand why the stock is performing so well or is the stock price detached from the fundamentals? I know that's not always such an easy question to answer for sure, but it really is one of those things where you start losing sleep at night, you start asking yourself, you start worrying about it, then maybe it's probably time to reallocate a little bit at a time. I wouldn't jump in full throttle there, I think it's OK to do it a little bit at a time and get yourself back down to a comfort level. But make sure, when you have those good businesses, make sure that you keep a position in those businesses. You want to give yourself a chance to let those winners keep on winning.

Hill: Let's get to the stocks on our radar. Our man behind the glass, Dan Boyd, is going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?

Gross: How about Bluebird Bio, B-L-U-E. It's a biotech company, it's part of my personal biotech basket of stocks that I've spoken about before. They are engaged in researching and developing gene therapies for severe genetic disorders and cancer. Strategic collaborations with Bristol Myers Squibb, Regeneron Pharmaceuticals, and many others. Now, the stock got crushed this week, falling 30%. The company temporarily suspended all studies of their sickle cell disease gene therapy on Tuesday. Now, what happened is a patient treated more than five years ago with their gene therapy was recently diagnosed with leukemia. So Bluebird is investigating to see if there's any connection between the therapy and the leukemia, obviously, need to know that before we move forward. I'm going to wait out the investigation, certainly not making any moves right now. This is still a very early stage company, nowhere near profitable yet, but $1 billion on the balance sheet and plenty of money to continue to execute. But let's see what happens with this investigation.

Hill: Dan, question about Bluebird Bio?

Dan Boyd: I don't know, Chris. This seems like a disaster of a stock this week. [laughs] I'm curious as to, is Ron just like, "It's on stocks on our radar because it's doing really bad and that's interesting."

Gross: It's on my radar because it's one of the stacks I own as part of my basket. I own the basket because this is bound to happen to one or more of those companies, so I needed to diversify across the sector. It's now really on my radar because I need to see what happens here going forward.

Hill: Jason Moser, what are you looking at this week?

Moser: In honor of 12 years, I'm going to throw a stock at you. I know I've never pitched here on Motley Fool Money. I don't think it's ever made it on Motley Fool Money ever, but a company called RadNet, ticker is R-D-N-T. This is Tony Hawk's new Internet company. [laughs] Just kidding, it's not really, but it sounds like it is. [laughs] Actually, RadNet is a provider of freestanding fixed-site outpatient diagnostic imaging services. You translate that, basically it means that they are offering services like MRIs, computed tomography, nuclear medicine, mammography, ultrasound, diagnostic radiology, etc. I actually like the positioning of imaging being so far upstream in the healthcare transaction. It's one of the earlier things you do in making a diagnosis. From that perspective, it's an attractive market opportunity. Although it's a small effort of the business today, they're pursuing more artificial intelligence solutions in order to be able to aid radiologists in making better diagnoses, partnering with companies like Hologic, for example, and grown revenue at a 10% annualized clip. Neat little business.

Hill: Dan?

Boyd: I was reading about RadNet. It seems like they have a big interest in strategic acquisitions. They've been around for 40 years, Jason, but are they growing too fast or is this a company that can have some really long-term growth?

Moser: I think they definitely are going to have some real long-term growth given the demand for the services and the growing need for their imaging services. They'll make some acquisitions, but definitely a lot of growth opportunities. [MUSIC]

Hill: What do you want to go with, Dan?

Boyd: That's an easy one, Chris, I'm going RadNet. [laughs]

Hill: Jason Moser, Ron Gross, guys, thanks for being here!

Gross: Thanks, Chris!

Hill: That's going to do it for this week's show. It's produced by Mac Greer and mixed by Dan Boyd. I'm Chris Hill, thanks for listening. We'll see you next week.