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Buy, Sell, or Hold the Latest From Dick's Sporting Goods and Google Nest?

By Chris Hill - Mar 22, 2021 at 4:19PM

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Do these developments look like something worth getting in on?

Dick's Sporting Goods (DKS -1.99%) launches a new apparel line aimed at taking on Lululemon (LULU -0.93%). Alphabet's (GOOG 1.70%) (GOOGL 2.14%) Google unveils the newest version of the Nest Hub. In this episode of MarketFoolery, host Chris Hill is joined by Motley Fool analyst Bill Barker to share why he's buying, selling, or holding these topics as well as the BEACH stocks.

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 March 16, 2021.

Chris Hill: It's Tuesday, March 16th. Welcome to MarketFoolery. I'm Chris Hill, with me today, Mr. Bill Barker. Thanks for being here.

Bill Barker: Thanks for having me.

Hill: We got something different in store for the dozens of listeners. We're going to be talking about the news of the day through the lens of a little thing we like to call buy, sell or hold. So I'm going to spot up these new stories and you tell me if you're buying, selling or holding, and we can go in a few different directions, really on all three.

But let's start in the world of retail. Dick's Sporting Goods is launching its own line of men's athletic apparel and they are aimed at competing with Lululemon. This is available online starting today, and they're starting in 400 locations at Dick's Sporting Goods across the country, so buy, sell or hold, their new line of athletic apparel for men?

Barker: I'm going to hold because there's a mix of positives and negatives that I see here. First of all, you didn't announce the name of the brand?

Hill: VSTR. Is that it?

Barker: Close, it's VRST.

Hill: I had the letters.

Barker: All caps. Go ahead and pronounce that the way that we'll be pronouncing that when it's truly a monumental thing. They have paid people to brand this. This wasn't arrived at within seconds.

Hill: VRST? Is that how we're pronouncing it, VRST?

Barker: You're the expert, sure. Why not? Are you saying that in all caps, by the way? Because I think it's a little different than if it were all lower case.

Hill: I don't want to yell.

Barker: This is a thing that, look, Dick's probably would prefer, in the world of branding, to not have its own name at times, and to have some other name, but I can see wanting to brand away from the parent company name. They've got other brands. CALIA, I think, is the women's athleisure brand, which is done with Carrie Underwood and it's been very successful and I've been in Dick's Sporting Goods and seen it and didn't realize it was an in-house thing. I think that given the success that they've had under current management, I'm a fan of what they are trying. But I don't think that the men's division is going to be as successful in the athleisure world for them as the women's seems to have been. But I don't know, they're one of the few remaining players in the sporting goods category. There was a bit of carnage there. I don't know, five, eight years ago, something like that. A lot of the national brands were wiped out and Dick's has got the playing field more to itself than most other companies in retail that I can think of.

Hill: I get that they are positioning this new brand as competing with Lululemon. But I think if you're Nike or Under Armour, and I'll add the further CALIA had, especially if you're Under Armour, I think they should be more worried than Lululemon. But you tell me, who should be the most nervous of those three?

Barker: I don't know if any of them is going to be nervous about this. Lululemon is doing so well in women's athleisure. What Dick's has done there is just a very small competition, I think, compared to Lululemon. Can Dick's compete in the men's division against Lululemon? Yeah, I think they can if they've got the styling right and all that. Nike and Under Armour are first and foremost, performance brands which then extend a little bit into, "Why don't you just wear our stuff all the time, whether you're competing or exercising or not?" And Dick's is coming at it from the opposite perspective, "Why don't you just wear this? If you feel like breaking out into a run while you're wearing this, go ahead." Did you go to the VRST, or however you choose to pronounce it, website which opened today?

Hill: I did not. I'm not looking to buy any apparel at this point in time.

Barker: The first thing that they've got and it just opened up is the thing that I guess would be most appealing to people, is the category of commuter pants. I didn't know that was a thing.

Hill: Me neither.

Barker: Commuter pants. Yes, if you're going to commute, apparently, you need specifically designed pants for that.

Hill: You got to wear the special commuter pants.

Barker: Well, actually, they're chasing people who have a job and might go to work in a place and commute to it. But beyond that, I don't know what the pants do for you.

Hill: This is going to be, like you, I look at this move, I think it's a smart move in part, as you said, they've had some success with the CALIA line for women. So, it'll be interesting to see where they go with this. But I think it's a hold at this point. Let's move on to Google. Because also today, Google unveiled the second generation Nest Hub, which is a smart display and speaker. Because it's the second generation, this one comes with the ability to track your sleep using built-in radar. It sells for $99. It is available on March 30th, but you can order it today. Buy, sell, or hold this new generation that Nest Hub being a hit for Google?

Barker: I'm going to hold that as well. I don't think it's an obvious sell. I think that the ability for ambient computing to improve your sleep is actual, and is needed by a lot of people. A huge number of people, depending on what surveys you're looking at, have some levels of sleep disruption, sleep apnea. I think that if it is a system that learns what sounds return you quickly to sleep, or what times you tend to wake up and can work with you in the corner of ambient computing, which is probably most useful, which is when you're completely unconscious, but you're not fully conscious when you're asleep. I can see the use for it. I got to say last night, my dogs got me up at 4:30 in the morning. If there were some system that would help them get back to sleep at 4:30 in the morning, I would pay a lot of money for it rather than have to get up and let them outside at that hour. The thing may not be programmed for that in the 1.0 version. But I'm telling you, 2.0, dog lullabies.

Hill: Well, let's be clear. This is 2.0. This is the 2.0 [laughs] version of the Nest Hub.

Barker: 2.1 then. 2.1 needs to have dog lullabies.

Hill: I think this thing is a sell, and I'll tell you why. I think Google, for all of the success that that business has had over the years, it is worth pointing out that Google bought Nest seven years ago for $3.2 billion in cash. I'm pretty sure they went through their sofas at the office and found that cash. It's not a question of whether or not they could afford it. But at the time, it was seen as OK, this is a lot to pay based on the private market valuations at the time for Nest. It was seen at the time, rightfully so, as Google is making a big push into the smart home. This is Google making a serious investment in the smart home, and holy cow, let's see where they go with this. Here we are, seven years later and the next generation of this device, the big headline is, oh, it tracks your sleep with radar. You don't have to wear anything on your wrist, it'll track your sleep from across the room. God knows what else it's going to track. Don't even think about that, but it's going to track your sleep from across the room wherever you put it. I just look at this and I think, really, this is a big innovation? This is the big upgrade that's going to make people say, well, I didn't want to buy the old one. But now that this creepy thing can track my sleep from across the room, put me down for a couple.

Barker: Well, the company, from what I understand, it is not marketing and branding it as a creepy thing. That's one thing to keep in mind, is that they're going to market it to a different audience than those that prefer to be creeped out in their sleep.

Hill: Smart.

Barker: Now, as I said, I'm a hold, I'm a hold because the transition of Nest into Google Home in and out and then finally, that united everything under one brand, is taking a lot longer than probably anybody thought it was going to need to. I'm possibly in the market for doing some sort of smart home thing when I do some renovations on my house, but I can't put my finger on what it is that I really want in that category. So, I think that the ideas of the SmartHome are still out there, but I'm not sure that they're marketing very well yet.

Hill: Let's move on to our last, or this requires a little bit of explanation -- BEACH. BEACH is the acronym for category of stock. [laughs]

Barker: I'm buying. Is there a beach for sale? Because I'm not making more of it.

Hill: Let me get through this. So B-E-A-C-H stands for Booking, Entertainment, Airlines, Casinos/Cruises and Hotels. This acronym, I'm embarrassed to say, has been around for a year and I'm just learning about it today. So buy, sell or hold the acronym and the category of stocks right now.

Barker: I'm not buying the acronym because, as you say, it's not gaining ground out there and there you're using C twice and the E is confusing and I think you can use a G in there for gaming instead of casinos, if you want. I think there are other acronyms out there. So, I'm selling that. This one is not going to take hold, but the concept is already out there. It needs something to unify these things that everybody wants to get back to doing when it's safe to do them. That's to book a trip, get on a plane, go to a hotel, be around a casino, go to live events, and with all the stocks, obviously, it's too late to buy them anywhere near the bottom. They've all rebounded quite a bit, especially since the vaccine news first came out and as the vaccine rollout in this country takes hold in a pretty good manner compared to what originally could be expected, but internationally, I'm not sure that any of these ideas are taking traction right now for international travel, at least for Americans.

Hill: Let's just take one part of this category of stocks. When do you think about lodging, hotels, resorts, obviously, you can put Airbnb in there as well, is there any in particular that you think looks particularly attractive? As you said, none of these can be bought at the bottom, that time has passed, but I'm wondering if you look at that group and think some have better long term prospects than others.

Barker: I think that it is possible that with good reason, cruises are still closer to their bottom. They're opening up, and really being able to function at anything close to what they were doing prior to this pandemic is further away. The nature of the cruise to be a captive audience, they are built to be high-density things. I think that in terms of buffet dining, that's the thing that's going to be very tricky to reimplement. I think that just by virtue of your discounting further out a return in normalcy for that enterprise, the prices may be still more attractive for the group. They've got a lot of debt. Now, a couple of the cruise lines have refinanced, they've sold some equity, they put us more convertible debt out there. I think that their balance sheets are not calamitous right now, but other things have rebounded more and are maybe factoring in. Good times ahead in a way that the cruises can't yet.

Hill: I hadn't even thought of that until you mentioned that just the idea of buffet dining and how of course, for the cruise industry, logistically, they just [laughs] have so many more things that they have to figure out how to get them right, and do so in a safe manner, as opposed to even just a basic hotel business.

Barker: Yeah, I've been in hotels in the last year, very little, but I've had reason to travel and stay in a hotel, and just wait to be the only one on an elevator or something like that, and they had not opened up restaurants when I was in a hotel back in the fall. Just eat somewhere else and hotels aren't able to do that part of the business and shut it down. You don't have that option with cruises. I mean, that's actually one of the great attractions for cruises, is come and eat as much as you want all the time. It'll be great. The way that they're able to do that is by offering some sit-down meals, but a lot of buffet options. I think they've got logistical issues that are going to be tougher, and, of course, the audience is largely older for cruises. So you've got a much higher risk category in their audience than these other entities have. Airlines have done a good job from what little I understand about the science of pumping fresh air in and out and making that a safer travel experience in people at first thought. People could just [...] hotels, I think how cruises get from here to the next-generation of cruises, I don't know, but it's going to be bumpy.

Hill: Two quick things before we wrap up. First, just on the hotel front. Do you think this actually results in more people using what I have to assume is a high-margin part of the hotel business, the minibar? If people are just like, "Well, you know, the bar isn't open I'll just avail myself in the mini bar," which, of course, is quite expensive, [laughs] much more expensive than an actual bar. I can't imagine Marriott or any hotel business breaks that out, but it wouldn't surprise me if more people started availing themselves at the minibar.

Barker: A little bit. I think you can distance yourself at a bar. Not really when you're sitting right at the bar, but the tables outside. So yeah, incremental, I guess, a little bit, good margins as you pointed out, great margins for the hotels. I don't know where they get the majority of that business. Is it just people coming back to their rooms after already being out and grabbing one more drink?

Hill: Yeah.

Barker: I mean, [laughs] the prices are so alarming that if you are aware of them at all, you'll make an effort to, like, leave the hotel to go buy a six-pack or something, and that will cost you as much as the one beer from your room.

Hill: A six pack, that's just gluttonous. Most people just want a single-night cap. Just crack open one beer, one little bottle of wine.

Barker: But it's the principle of the thing, go out and buy yourself a fifth. You probably are not going to have all of it, but it's the same price as a little bottle.

Hill: You definitely don't want to polish off a fifth of anything [laughs] other than water in a single night. Real quick from long time listener Bill King, he writes, "I'm still getting caught up on MarketFoolery episodes from last week but I have to question Bill's comment about Babe Ruth versus Pete Rose. While it's true that Pete Rose did not steal as many bases as people typically think, he is well ahead of what Babe Ruth did."

Barker: It was really more of a metaphor [laughs] that I was talking about.

Hill: God, I would love it if a CEO during the next wave of earnings calls just broke that out. You said this about your revenue projections. Well, it was really more of a metaphor.

Barker: Yeah, and what it was a metaphor for, of course, is that Babe Ruth who's actually a lot faster in his youth than people give him credit for, and that Pete Rose was not, although tried to hustle [...]. The stat that I'll lean on now to attempt to prove that point is Babe Ruth, in a shorter career, actually had more triples than Pete Rose did. Not by a lot, 136-135 I believe, but advantaged Ruth there. I would say the triple is probably more of a measurement. If you can measure them apples-to-apples on somebody's speed and hustle then stolen bases are. That said, Ruth was playing in an enormous stadium at the time. Short right field ports, of course, for his swing designed to accommodate him, but left-field was insane, 450 feet, 470-something in [...]. So there are a lot of opportunities to have a ball go for a triple in a way that the smaller stadiums that had started to appear by the time Rose was playing. But I think at his peak, Ruth would have beaten Rose at the footers. Now, at its peak being his peak racing, not his peak as a player, which was more in his thirties when he was not as late on his feet.

Hill: Bill Barker, always good talking to you. Thanks for being here.

Barker: Thanks for having me.

Hill: As always, people on the program may have interest in 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. That's going to do it for this edition of MarketFoolery. This show is mixed by Dan Boyd, I'm Chris Hill. Thanks for listening, we'll see you tomorrow.

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Stocks Mentioned

Alphabet Inc. Stock Quote
Alphabet Inc.
GOOGL
$2,224.84 (2.14%) $46.68
Marriott International, Inc. Stock Quote
Marriott International, Inc.
MAR
$157.39 (1.39%) $2.16
Lululemon Athletica Inc. Stock Quote
Lululemon Athletica Inc.
LULU
$271.49 (-0.93%) $-2.55
NIKE, Inc. Stock Quote
NIKE, Inc.
NKE
$107.51 (-0.45%) $0.49
Dick's Sporting Goods, Inc. Stock Quote
Dick's Sporting Goods, Inc.
DKS
$75.98 (-1.99%) $-1.54
Alphabet Inc. Stock Quote
Alphabet Inc.
GOOG
$2,223.38 (1.70%) $37.12

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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