2 Companies Built to Thrive in a Tight Labor Market

Attracting employees isn't easy in the current environment, but the companies who can do it well may have a leg up on the competition. In this episode of "The 5," Motley Fool contributors Travis Hoium, Jason Hall, and Demitri Kalogeropoulos discuss why Coinbase (COIN -0.34%) and Costco (COST -0.12%) are a cut above the rest in building the culture it takes to succeed in competitive markets. 

This segment was recorded on Oct. 14, 2021.

Jason Hall: I want to hit another topic here. We've also talked a ton about unemployment claims, the jobs markets, the great resignation, I think it's been called. There's all of these things that are going on with the jobs market, it's been bananas. We go back. I'm going to show a chart here because I think this is just one of those bonkers charts that's really fun that highlights. I'm guessing, guys, that you could probably look at that chart and you could probably tell when the coronavirus lockdowns happen.

Demitri Kalogeropoulos: Maybe if you squint.

Jason Hall: If you squint, if you [laughs] imagine. I hate to make light of this. Because five million Americans lost their jobs in a week, so it's not a laughing matter, but it's so bizarre that it happened. At any rate, you see unemployment claims have fallen, and we have finally fallen below the 300,000 mark, which is great. It is a definite step forward to be back in some like within shouting distance of a normal unemployment rate. We do know too, there's at least a million more jobs than there are people that are unemployed. There is work to be found.

Yesterday, Brian and the crew talked about hundreds of thousands of people that have quit their jobs recently, leaving industries, leaving jobs they don't want to work and to try to move into the kinds of work that people are looking to do, whether it's gig work or whatever it may be. I think it's a really, really compelling time to be looking for a job if you have the right skills. I think that's the case. What I thought would be fun if we could talk about today, and Travis, I'm going to ask you to go first here too, and your pictures blew my mind, but then I thought about it a little bit, I'm like, "Yeah, that makes sense." Here's the question. What's a company you think treats its workers really, really well, that will also prove very good to investors? Travis.

Travis Hoium: My pick is a little bit maybe of a surprise even myself when we started talking about this, but that is Coinbase. I'll preface that, I am not an owner of Bitcoin. I'm not a crypto person. But I really respect what they've done to create the culture that they want as a company to complete their goals. Brian Armstrong is their CEO and he made clear I think it was about a year ago now, that this is a mission-based company and basically if you are on this mission with us, come on board. That's the culture that I think investors should be looking for. Now, you can disagree with what he is building, plenty of people do. But if you think that the future of cryptocurrencies and NFTs and those products are going to be really big, which they have proven to be for Coinbase, I think they have a culture that is really built to win in this space. They've proven to be extremely profitable. I respected the way that they are building a company. He said a lot of the same things as the Shopify's CEO

Jason Hall: Tobi Lütke.

Travis Hoium: Tobi Lütke's said, and basically reinforcing this idea that, "Hey, this is our mission as a company and this is what we are going to focus on. We're going to leave the distractions at the door." I respect that. I think as somebody who's now worked for The Motley Fool for over a decade, I can relate to some of those things and go, the reason that I'm still here is because I believe in the mission, and this is ingrained, who I am fits with what we are doing, and so I just identify with that. That's why my pick is Coinbase.

Jason Hall: This is a very mission-driven company and there's no doubt about it that their CEO for a very long time. It's funny too, it's somebody that's also generally hasn't been very public. That's changed a hell of a lot over the past 45 days. He is throwing down the gauntlet and he is defending crypto assets and he is not hiding anymore. He is not being shy about his belief. I'm excited about that. We'll see what happens with Coinbase stock, but I'm very excited about that business. I really am. Demitri, what do you got?

Demitri Kalogeropoulos: I like Coinbase idea there too, just to touch on that. I did hear recently that the tech world and particularly cloud software companies I know are having trouble finding talent, so definitely, that industry is not immune to that situation. That's interesting that you say Coinbase there. Mine is a little bit of a different company. I was thinking about a big employer that's in my universe of companies that I know pretty well and I like the stock, and that's Costco.

They employ about 190,000 people in the United States, 300,000 around the world through their big warehouse retailing, super generous pay and benefits package. They just raised their starting hires get something a little over $16 an hour, which is great for that industry, and their average pay right now is over $24. Because if you look at the math, there obviously means that they tend to have people that have been around more than a year. They don't turn over a lot of employees very quickly so it is not a surprise to see people at a Costco warehouse that have been there 10-15 years, 20 in some cases, and they do a good job of promoting from within.

Low turnover is a good environment and they've really, I believe, stepped up and took care of their employees through what was obviously a difficult year, during the pandemic, dealing with massive sales growth and all that, crushing customer traffic and things like that. I like the stock too, it's just a great business. People confuse it for a retailer, but it's more of a subscription seller. They also sell a lot of products and that subscription services makes all the difference, I think, for steady sales growth and earnings over time.

Jason Hall: It makes all the money. It's incredible how they've lived the promise. You think about that mission-driven business that Travis was talking about. I think the same thing is true with Costco. Their mission is to give their members the lowest possible cost on goods, and then they make money with the membership. That's it. They make a few points of operating margin to cover the operating costs, and then they make money on the membership. It works. You look at their retention rates, it's incredible.

I just want to show a chart on Coinbase, I just want to circle back to this one. I just can't get it out of my head. Coinbase over the trailing 12 months, almost eight billion dollars in free cash flow. Last quarter, almost four billion dollars. Eventually, the commission rates are going to come down for crypto trading. But for now, they're going to make so much money. That money is going to be a major tool that they can use to innovate, that they can use to continue driving the way crypto evolves. Travis?

Travis Hoium: This week, they announced that they were getting into NFTs.

Jason Hall: Yeah, that's huge.

Travis Hoium: Natural move for them. Another area where even if the margins on crypto trading comes down, we may see that more than replaced by NFT margins. Yeah, a long runway. Not a company that I've invested in yet but I'm very intrigued by what they're doing, and they're out-of-favor with the market, which I like too.