Netflix (NASDAQ:NFLX) slides on slowing growth, while Boston Beer (NYSE:SAM), Chipotle (NYSE:CMG), and Intuitive Surgical (NASDAQ:ISRG) serve up big earnings. Also, Johnson & Johnson (NYSE:JNJ) reports surprising results but continues to deal with vaccine issues, and automation software maker UiPath has a big debut on Wall Street. In this episode of Motley Fool Money, Motley Fool analysts Andy Cross, Ron Gross, and Jason Moser discuss those stories, weigh in on a potential increase in the capital gains tax rate for wealthier Americans, and offer up a few tips on international investing.
Plus, corporate governance expert and film critic Nell Minow talks about financial scandals and previews the Oscars. (This video was recorded on April 23, 2021.)
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This video was recorded on April 23, 2021.
Ron Gross: I'm Ron Gross sitting in for Chris Hill. Joining me today are Senior Analysts Andy Cross and Jason Moser. Gentlemen, how you doing? [laughs]
Jason Moser: Hey.
Andy Cross: Hey, Ron.
Gross: Great to see you both. Earnings season is rolling along today, we're going to talk about some of my favorite things; streaming TV, burritos and beer, but we must begin with taxes. On Thursday, the Biden administration proposed a plan to increase the capital gains tax rate on those earning more than $1 million to 39.6%. Proceeds will be used to help pay for Biden's American Family Plan, which includes spending in tax credits to fight poverty and help American families. Now Jason, this is a business show, so let's keep politics out of it. But I want to know what you think the impact will be on wealthy investors and on the stock market as a whole.
Moser: This is bold language and there is definitely a political discussion to be had, which is of course, what we don't do here, so we won't. I appreciate that, Ron. [laughs] Regardless where you fall on the political spectrum though, I think while this makes for a wonderful investing headline, it lights the fuse on Twitter for a lot of folks. It's really not terribly meaningful in the context of most retail investors. You went through a lot of the mechanics there in regards to the proposition. There's some interesting data out there. There's a FactSet chart making the rounds out there earlier showing that really there's a lack of correlation between changes in the capital gains rates and market returns. For example, you go back to 2013, capital gains rates went up somewhat meaningfully, and yet the market still had a great year returning better than 30%. I think that with something like this, yes, we could see some short term volatility with some selling now to reinvest that capital elsewhere that may be less exposed to certain tax obligations. We're following that Buffet camp. The quote that Warren Buffett has offered up before, where he says, "I have worked with investors for 60 years and I have yet to see anyone, not even when capital gains rates were 39.9% in 1976-1977, shy away from a sensible investment because of the tax rate on the potential gain." I think that's the right way to look at it.
We've got a system here where you've got short term capital gains taxes which come into play for holdings of a year or less. You got long term capital gains taxes which come into play for investments you hold for more than one year. Honestly, what I would love to see happen and I know a lot of people would agree here, I'd love to see a super long term gains rate where if you own the company for five years or more, your tax rate is zero. That would certainly encourage those longer-term holding periods that would maybe counter a lot of that day-to-day trading. But again, this is not something that was a surprise by any means. We figured that this administration would be aiming to do this in some capacity. It'll be interesting to see how it shakes out.
Gross: Andy, do you agree? Does this change any behaviors among the wealthiest investors?
Cross: Well, yeah. It might change some behavior in the short-term. I think Jason hit all the key points. It's been a heck of a ride for the past 18 months for so many investors. The 1% of the households out there in wealth, they control 30%-50% of assets in the equity markets these days, but also a lot of foreign investors who own U.S. assets, so they may not be impacted by the taxes. There's a lot of puts and takes here. Overall, if it impacts at all, it'll impact over the short-term and all Jason's points over the long term are what really matters. I think more interesting and perhaps more impactful what happens at the corporate tax rate levels and how that changes and how that might increase and what that impacts to the cash flows and the profits for the companies that we follow, that will likely be more impactful than the consumer tax rates over the long term.
Gross: On Tuesday, Netflix reported first quarter results that left some investors concerned about subscriber growth and the stock sold off as a result. Andy, is this simply the COVID bounce starting to subside, or is there something more going on here?
Cross: I think along that, Ron, I think it is a little bit of the COVID bounce starting to subside. They even mentioned this as much and talked about this pretty extensively. That they saw this pull forward over the last year as the COVID lockdown, the quarantines and our desire for entertainment really helped to juice those subscriber numbers earlier in 2020. Their global paid streaming subscribers were up 13.6% or about 4 million. Now they reach almost 208 million people around the globe, but the management guidance was more for 6 million. They think they saw this pull forward over the last year, which is not too surprising. The 2020 growth levels can't sustain forever, so a little bit of that pull-forward. They also talked about the impact of the 2020 COVID quarantines affecting the production and increasing production delays. They didn't have as many slate of new releases coming out in the first half of this year. That will change in the second half of the year, so expect that to impact rebounding in the second half of the year.
Over the year, we expect that to start to subside a little bit. Revenue is still up 24%, very impressive. That's an acceleration from what we saw last quarter. We start to see some of the price increases start to go through, revenue per subscriber was up a little bit. Their turn levels were more manageable and actually a little bit lower than what they saw last year. Overall, the subscriber additions were a little bit weak, but the rest of the business, the profit picture, the revenue structure, the churn levels are all still very strong for Netflix.
Gross: Does the plus crossing 100 million subscribers, you think anybody over at Netflix is concerned?
Cross: Well, it's interesting, Ron. They broke out specifically in their very detailed shareholder letter they published, a whole section on competition. They said they did not really see an impact there because they have seen across the globe where the competition levels all defer. They've seen similar subscriber growth numbers across the globe pretty much, so they don't really see competition as a driving impact. I guess I can't guarantee because I'm not there, but I think they are paying attention to what's happening over there, but they are continuing to invest. They're going to spend $17 billion on content this year. They have a balance sheet that is levered for that content and they are really ramping up the slate with things like Red Notice with Gal Gadot and Don't Look Up production with an all star cast of Leo DiCaprio and Jennifer Lawrence and a whole bunch of others coming out later this year. The second half of the year should be more positive for Netflix than the first half.
Gross: Intuitive Surgical reported strong first quarter results on Tuesday as the pandemic began to ease and elective surgeries started to ramp back up. Jason, is Intuitive Surgical back in growth mode?
Moser: I think at least to a degree. You said it. The little bit of a bounce back from COVID as demand starts to recover and surgeries resume. Intuitive Surgical to me, it's an excellent example of the power of a strong razor and blade model. Why? We, as investors, like it so much. You install great equipment and you do everything in your power then to keep your customers locked in. Intuitive really is doing just that. Stock's up over 70% over the last year, which clearly has been a challenging year. As far as the numbers, revenue for the quarter up 18% from a year ago, non-GAAP earnings per share of 31% from a year ago, procedures up 16%, system placements grew 26% and they actually expanded their installed base of da Vinci systems by 8%. It's interesting to know. I think the one thing to keep an eye on with Intuitive Surgical here going forward for the rest of the year and even into 2022, the instrument and accessory revenue.
What they're ultimately doing is they're building out this extended-use instrument aspect of the business. They're basically giving their instruments and accessories more life than they used to have. It results in fewer sales of those instruments and those accessories, but ultimately down the line, what they believe they'll witness is a little bit more pricing power as time goes on. Not only keeping those customers locked in, but keeping them locked in with higher-quality instruments. Accessories technology gives them the ability to launch new systems as well. They're starting to gain some traction with the new Ion lung biopsy system. All things considered, this is a company that managed the pandemic very well. Tremendous competitive position in clearly what is a market that is starting to gain traction really globally with a lot of businesses out there as robotic surgery becomes a more and more viable option.
Cross: We just added Intuitive Surgical to our April Fool's portfolio, which you can find at www.fool.com/free.
Gross: Which is not a joke. We stand behind those companies in the portfolio.
Cross: Stand behind the companies and we're investing $50,000 behind them.
Gross: On Thursday, MarketAxess (NASDAQ:MKTX) reported a strong first quarter that's slightly missed expectations. Andy, on Friday morning, the stock wasn't reacting too much to the results. What stood out to you in the report?
Cross: Not too surprising what we're seeing here, Ron. Revenue is up 16%. That's a record operating profits up 14%. Trading volumes were up 14%. They continue this in electronic trading platforms for institutional investors trading fixed income. They continue to drive their market share leadership there. Record high yield, emerging market eurobonds, high-grade U.S. market share was up a little bit from a year ago, so continued good news for MarketAxess. It's very profitable. It drives lots of free cash flow, makes little acquisitions. Their expenses were up a little bit higher, depreciation and amortization was up the most. That was a lot from some of the acquisitions they've made recently. But the big push is open trading, which is the complete trading process on their platform; from finding pricing, finding buyers, and making the trade continue to really grow, and now it's a third of their trading volumes. That's a really exciting initiative for MarketAxess.
Gross: Chipotle reported strong first quarter results on impressive growth in digital sales. Jason, results look good, as does the new case idea, [laughs] growth was strong but does Chipotle still have room to grow?
Moser: I think they do. I think the key for Chipotle going forward is going to be making sure that their staffing appropriately actually. What we're seeing is their ability to leverage the restaurant into many different distribution channels that just didn't exist before. You've got in-store, you've got pickup, you've got the delivery, all three are really performing well. Frankly, I think they could probably look at a company like Dominos for some tips and ideas, given what they've done with that store base through the years. When you look at the numbers, revenue up 23.4%, comps at 17.2%, margins continue to recover. A very interesting little investment in a company called Nuro focused on autonomous delivery, A.K.A. drones for your burritos. Digital pickup continues to really perform. They were basically half of all digital orders for the quarter and ultimately digital was half of sales for the quarter, that's about $850 million they can attribute to that digital channel. If you just look over the past couple of years, a year ago, that digital accounted for 26.3% of sales, a year before that it was 15.7% so in regard to the growth, management still sees an opportunity for 6,000 stores. They have 2,800 stores today, 6,000 maybe bold, but you can discount that and still have a very attractive, growing market opportunity. As a shareholder myself, I think going to hang onto my shares for now, Ron.
Gross: On Tuesday, Johnson & Johnson reported quarterly results that beat expectations on strong growth in its pharmaceutical and medical device segments. Andy, these results are strong, but obviously the controversy surrounding the J&J, COVID vaccine and blood class remains the headline. How did the quarter look to you and where are we going with respect to the vaccine rollout resuming?
Cross: Yeah, Ron, it was a nice quarter. They did probably what analysts expected and they guided for a little bit of nice growth 16%-18% on the operating EPS for the year, so that's nice. Of course, they didn't have too much to say more about the COVID situations, a fluid situation with them as it is in the regulatory environment, the FDA continues to review, as we're tapping this review there. That COVID shot obviously a lot of concern just with the very rare condition with the blood clotting for those shots. They are committed to 100 million doses, J&J is, so they stand by that. That was on the COVID side, on the health side, the pharmaceutical, on the medical devices for the stars. The consumer health was down a little bit, they played metrics and stockpiling last year of things like maybe listed drinking or other things. But really the pharmaceutical business was up 10%, the medical devices very similar to Intuitive Surgical's. We're starting to see a lot more procedures come back into the market, that was about 11%. Overall, a little bit of nice guidance. You have stocks that are at $165, market cap of $430 billion, maybe growing in the mid to high single-digits at a 17 price earnings multiple. I own J&J is not going to light the world on fire, but we'll probably deliver a steady market, either matching or at least making us money over the next few years.
Gross: Europe's drug regulators have concluded that the overall benefits seem to outweigh any risks here. If you were a betting man, do you think U.S. regulators conclude the same thing?
Cross: I think so. Reports by the Biden administration is pretty upset with all the challenges J&J's had with its vaccine and they really wanted this to succeed because it's a one-shot vaccine, but I think it's six or seven people have suffered from the blood-clotting out of more than millions and millions of doses given. They stand by and we'll see, I think that will probably happen, but it's also a very small part of J&J. It only contributed $100 million in sales this quarter.
Gross: On Thursday, Boston Beer reported results that beat expectations on strength in, among other things, hard seltzer. Jason, does Boston Beer need to change its name?
Moser: [laughs] Well, you said Ron, seltzer. Seltzer in fact was mentioned 38 times [laughs] in the earnings call versus beers, 27. Yeah, it's been a bit tongue-in-cheek here over the past few years, but I honestly wonder now, they don't need to consider a rebrand of sorts. There's a strange push and pull between the Samuel Adams and the Boston Beer brands too. Samuel Adams I think is what everybody just refers to it as, but really as Boston Beer, it is becoming more and more a seltzer company. Let's not forget too, as cannabis begins to push out around the country as the laws change, this is a company that's going to pursue that option as well. There's plenty of opportunity beyond beer, they continue to witness declines in Samuel Adams and Angry Orchard and Dogfish Head, but with depletions up 48% in the 12th consecutive quarter of double-digit volume growth, clearly, they are doing something right, and it has a lot to do with that truly spiked seltzer brand.
Gross: Andy, all we hear about is the alternative markets, seltzer being the hardest part of it, is the competition just too great? There's too many folks moving in here, people like the Boston Beer's products are going to fatigue overtime and they're going to have to keep reinventing themselves with the next thing and the next thing?
Cross: Well, sure. Yeah, I guess so and that's great. They've done it so far, you might see some loss in the stock price, but they've really been able to innovate and tap into a vein here, that the market is reacting to. You see corona and others going into the seltzer market but I think for right now, the company Boston Beer is trying to do is build out this diversified portfolio of offerings and the guarantee what the company looks like in three years will be seen a little bit different than what it looks like now, where it looks in five years a little bit different. I think this is one reason why we like management, we like the market they're playing into, we like that. The stock prices done very well, could be very profitable at times and they've really executed in a very impressive manner over the last year or so. I've been very impressed with the way that they've rebounded. It's clearly shown in the stock price but if they are not done, they are going to continue to innovate and continue to grow.
Gross: On Sunday night, the Academy Awards will be held. Earlier this week, Chris Hill caught up with film critic and corporate governance expert, Neil Minow, to get her preview for the Oscars. But Chris started the conversation with the most recent financial scandal.
Chris Hill: Now, let me start with Archegos Capital and the fallout from this "family office" fund, I put family office in quotes. They borrowed billions of dollars from banks like Credit Suisse and Morgan Stanley and Archegos. Apparently, unbeknownst to just about everyone was using leverage sometimes to the tune of 20-1, and then whenever we went sideways, the banks started booking these huge losses. As you were watching this multi-day drama play out, what went through your mind?
Nell Minow: Well, what were they thinking went through my mind a lot. The one thing that we hope that we can get from Wall Street is due diligence, and apparently there was none of any kind, and that is truly shocking to me. How likely would you be to go into business with somebody with the record that this guy had of financial fraud? If you were going into business with him, it seems to me you would require a lot of basics, you would require many things to be an escrow, you would require lots of independent justification. The fact that it was all put into a family business that's only one step below a spark back in terms of being a great, big, loophole. There were so many red flags in this deal. What were they thinking?
Hill: Let's stick with the family office designation for a second because this was a term I was completely unfamiliar with, and early in this story when people were referring to Archegos Capital as a hedge fund, the Hedge Fund Community came out and said, "No, they're not one of us." Apparently back in 2010 when there were regulatory reform conversations going on in Capitol Hill, the family office funds got together and pleaded their case like, we don't need to be subject to the same regulations because we're small and we manage money very conservatively. How likely do you think it's going to be now that this has blown up for businesses like Credit Suisse and Morgan Stanley? How likely do you think it is that we are going to see regulatory reform for these types of funds?
Minow: Listen, I'm always happy to blame the regulators, but in this case, I don't blame them at all. The reason that we don't regulate family funds with that same level of scrutiny that we do to other places, is simply, in theory, there are no agency costs. Regulation is there to come in when there are agency costs when you're managing my money, and therefore you have an incentive to possibly benefit yourself rather than me. The whole idea of a family fund is that you're putting all your eggs in one basket and you're watching that basket very closely because it's you and your family. I have invested in a family fund that a friend invited me to participate in, and yeah, it is quite fast and loose in some ways, but that is appropriate for something that is a small fund for a very limited number of people who are close to each other.
Hill: Before we move onto the movie industry, I realize this is a broad question, so I apologize for that, but on the plus side, you get to go in any direction you want. Across the landscape of corporate governance, what are you watching right now?
Minow: [laughs] I'm watching what I think is one of the most interesting issues that has ever come up in corporate governance, which is the pressure that Corporate America is on to do the right thing with regard to some of the political issues that are going on right now. When did you ever see 100 CEOs signing off on a full-page ad on a political issue? They didn't apply to say, tariffs or taxes or something very directly involving them. It just doesn't happen, and I think we're going to see a lot more of that. For people who say, "I don't think corporations should get involved in politics." I'm sorry, but that ship has sailed. They already give money to every politician who is in office, that's their hedge, and therefore, when they, for example, say, "In January, we're not going to give money anymore to people who didn't certify the election." Then three months later when they got that, they're going to take a hit on it. Just like everything else they do, this is about their brand, and if they want to go down as the brand that supports vote suppression or trend anti trans legislation, they're going to suffer for it.
Hill: In terms of the movie industry, it seems at this point things are back on schedule in terms of productions and release schedules. But now studios have more options in terms of where they release films and what the timing of those releases are, how nervous should the people who run movie theaters be right now?
Minow: They should be very nervous. I'm about to go back tomorrow for the first time in a year to a movie theater to see Mortal Kombat, a movie that I'm sure for whatever benefit it has, you need to see it on the big screen. But I still advise people not to go to theaters yet, and they will always want to go for the big movies, I think, for the big action movies, but I think you're going to see more and more coming to us at home. As I've said to you before, people who buy tickets to a movie theater generally are between the ages of 14 and 30. What the movie studios have discovered is that there's a whole audience for new material, not something that was in theaters six months ago, but new material that is happy to watch it at home. I think we're going to see more movies, we're going to see more middle grade, middle budget movies coming to us at home, but the big ones will still be in the theaters and theaters are going to have to figure out a way to get people to keep coming.
Hill: In a normal year with the Academy Awards, how a film did at the box office would have some level of influence over the nominating process because it's part of the narrative that the studio marketing team can use. They can say, "This was No. 1 at the box office for three weeks," that thing. That wasn't the case this year. With that in mind, I'm curious if you think the absence of that financially driven narrative has resulted in a more worthy group of nominees.
Minow: Well, the Awards show that I'm most interested in every year is the one the night before the Oscars, that's the Independent Spirit Awards. This year there's almost complete overlap between the two because the great big blockbusters just didn't appear, we didn't have a King's Speech, we didn't have a 12 Years a Slave, we didn't have those big Oscar worthy type movies. There was no box office, and a lot of movies that would normally be in that slot didn't get released. I don't think this is really a predictor of where we're going to be next year, I think we'll be back to normal in terms of nominations next year. But this year is going to be quite interesting, it's going to an independent film festival to look at these nominees.
Hill: Let's get to the three biggest awards to the night, and as always, we'll do who should win and who do you think will win and we'll start with the best accurate category where Chadwick Boseman could end up being only the 3rd actor ever to win posthumously.
Minow: Yeah. Should win, will win. All of the nominees are great but this is his last chance for Oscar, and he definitely deserves that. I had the pleasure of interviewing him twice, and the best I can say about him was that he was every bit as humble and thoughtful the second time when he was already very famous as he was the first time when he was not. He gave an extraordinary performance in Ma Rainey's Black Bottom, and also in Da 5 Bloods, so we had two incredible performances last year. I do want to see him win and I think he will.
Hill: The best actor's category seems like it might be wide open, where do you think that's going to fall out?
Minow: Well, we just could see Frances McDormand making history, she does give a fabulous performance in Nomadland. That seems to be where the consensus is, how do I know that? Because there's a little bit of a backlash against Nomadland right now, and that means that everybody thinks she is the front runner. Yeah, I'd be happy seeing her get it and I think she will get it.
Hill: There were eight films nominated for best picture, as you indicated Nomadland, it seems like it's there to lose because it is just from a betting standpoint, it is the overwhelming favorite. Do you think there's a chance for an upset though?
Minow: I doubt it. This is based on the fact that it came out ahead on the producers awards and the directors of awards, that's the best predictor that you can get. I think Nomadland probably will win if it were up to me, and this is really a very personal choice. I was a teenager in Chicago when the events of two other movies were happening. The Trial of the Chicago 7 and Judas and The Black Messiah, all those events had a huge effect on me, and meant a lot to me to see them on the screen. I think for me, I might go with The Trial of Chicago 7 with just such an outstanding script by Sorkin.
Hill: Obviously, those are just three categories, there are a lot more categories. Are there any surprises we should be on the look for on Sunday night when the Academy Awards happen?
Minow: The biggest surprise that I think could happen on Sunday is unlikely, but possible. Pixar and Disney have had a lot of animation as long as that category has existed.
Gross: Guys, we have time for one story and one email. On Tuesday, automation software company UiPath completed its IPO at $56 per share, raising $1.3 billion. While the IPO priced above the anticipated range, it's still left the company with a lower valuation than a February financing round. But strengthened the stock in the days following the IPO, it now has a value at $75 per share and almost $36 billion. Andy, I ask you, with $600 million in revenue, not yet profitable, do you like this one?
Cross: I like the company, I think it's really needed. It specializes in robotic processing, automation, software technology that helps companies and organizations build, and deploy, and manage software robots that basically emulate human activities that help us get more and more efficient, and allows those humans interact with those digital systems and software, and to take out a lot of those actions that humans have to do. I like the spirit of the company, the founder Daniel Dines, who owns 110 million shares, so he clearly is invested into the business. We'll have to see, I think if it came out in the IPO market six months ago, it probably would have been larger than Snowflake. I expect the growth rates are +80%, very high gross margins. A lot to like with UiPath. I've to look more into its recent IPO, as you said, Ron, but a lot to like with the business and the market they're serving.
Gross: Our email address is firstname.lastname@example.org. Question from Isaac, he says, "I'm a current Stock Advisor, subscriber, and I have noticed that there aren't many international stocks that are recommended. Do you have any tips to help me start diversifying internationally?" Jason, what do got for Isaac?
Moser: Isaac, thanks first and foremost for being a member of Stock Advisor. I appreciate you being a part of our Foolish family. I think it's a good question. We all want that international exposure. There are a number of different ways to get it. I think today more so than ever, you may have more international exposure than you might even realize. What I mean by that is, a lot of companies that are domiciled here actually make a lot of their money still internationally. Look at a company like PayPal, for example, only half of their revenue came from the U.S. over the last year. Nike, another example, actually generates more revenue outside of the United States than inside. Pay attention to some of those businesses that you have in your portfolio, understand exactly where they're making their money. That can give you a little bit more of an idea there to your international exposure. Also, if you're looking for some pure international exposure, an ETF is a great way to go about. The Vanguard total international stock ETF, ticker VXUS, could be a great way to get some exposure. There are some of the top 10 holdings there include Taiwan Semiconductor, Alibaba, Samsung, and Novartis. A few different ways to look at it.
Gross: I love the ETF idea. I own an ETF, ticker symbol EFA, tracks the MSCI EAFE Index, which tracks large and mid-cap stocks across 21 developed markets countries, excluding the U.S. and Canada. That's also a nice way if you're looking for another ETF. Andy?
Cross: VXUS, also part of the April Fool's portfolio at fool.com/free.
Moser: [laughs] I didn't even know that existed.
Cross: There you go, Jason.
Moser: Thanks a lot.
Gross: Okay guys, time for stocks on our radar. I'll bring in our men, Dan Boyd, for a quick question. Jason Moser, you're up first, what do you got?
Moser: Yeah. A bit digging more into Roblox (NYSE:RBLX), ticker RBLX. Roblox develops and operates an online entertainment platform. I'm sure a lot of folks out there are at least familiar with the fact that their kids use it religiously, but they've got things like Roblox client which is an application that allows users to explore those 3D digital worlds. There's Roblox studio, which helps you develop, there's Roblox Cloud, I mean, there are just ways this business goes but it all centers around this concept of the metaphor, so that concept really is only getting started. As capabilities continue to roll out, they're going to be a number of different ways for Roblox to monetize the metaphors. They have an average of 37.1 million people coming to that robots platform every day. It looks like there could be some competitive advantages there, network effects, maybe even switching costs when you consider the Roblox currency. Yes, they have their own currency, Ron, but all-in-all, a founder led business that looks very compelling.
Dan Byod: Yes. Jason, you're using a whole lot of words [laughs] that I don't understand. I'm not a particularly intelligent person, but metaphors? What are you even talking about?
Moser: Well, it's like another world, Dan, it's like a virtual world. Have you ever read that book Ready Player One or did you see the movie?
Byod: I have not read that book and I have not seen that movie.
Moser: Well, if you dig into that story a little bit, I think it'll make it a little bit more clear.
Byod: Okay, thank you.
Cross: I bought my first Roblox the other week.
Gross: Nice. Are there superheroes in these metaphors?
Moser: It could be anything you want, Ron. That's the beauty of it. The only boundaries are what you can conjure up with your imagination.
Gross: Andy, you are up. What are you looking at?
Cross: I'm going the total opposite direction. [laughs] PJT Partners (NYSE: PJT), we have a recommendation in a couple of services maybe here at the discovery landscape. A small cap company, about $3 billion, a small cap advisory and investment bank, provides strategic advisory and capital raising, mergers and acquisition, restructuring private equity, and shareholder advisory services from just 750 employees. It was founded by Paul Taubman, who was formerly of Morgan Stanley and left that to start his own bank. He has won the highest market shares of volumes in restructuring, which actually has been a very good part of their business, sadly, I guess. Over the last year, but a lot of companies have to restructure their balance sheet, and PJT Partners has specialized in that. They were involved in Schwab's acquisition of TD Ameritrade, the AbbVie and Allergan Acquisition, the T-Mobile and Sprint, their advisory on that merger. Coming off a year of restructuring and merger that was very positive, the capital raising not as strong, so I'm really looking when you report earnings, I think next week, what are they seeing in the markets? How are they evolving to address a different market than what they had in 2020? The stock, it's been public for five years, Dan. The stock did very well, they've been able to grow revenues and more than 20%. They're involved in the spark market from a consulting perspective and I want to hear what they are saying, and what they are seeing from the spark market which has softened here over the past few months.
Byod: Yeah, Andy. It's spring of 2021 now, in spring of 2020, I mean, the world has changed, the stock market has changed and the way people have invested is changing. These investment banks, are they sticking with the times? Are they driving change in investing? Or are they lagging behind?
Cross: Well, I think they are probably matching. They are consulting, PJT, which by the way are Paul Taubman's initials, which always makes me a little nervous when you [laughs] see a founder put us initials on the company. Although Walker & Dunlop worked very well, another company of ours. But Dan, I think they are just sticking along, they're very people focused, very relationship focused, very social, and they have to make those connections and they do that very well. I'm not sure if they're leading on the technology front, but they are certainly staying up with the time because that's where their clients are.
Gross: I don't know, Dan, you got a favorite here?
Byod: I actually do. Ron, I'm going to go with unlimited imagination, [laughs] and go with Jason's pick of Roblox.
Gross: Jason Moser, Andy Cross, guys, thanks for being here. That's going to do it for this week's Motley Fool Money. Our engineer is Dan Boyd, our producer is Mac Greer. I'm Ron Gross. Thanks for listening and we'll see you next week.