The Fed, Interest Rates, and What This Team of Investors Is Watching

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 Jan. 14, 2022.

Earnings season kicks off with the latest results from JPMorgan Chase (JPM 0.65%), Wells Fargo (WFC 2.73%), and Citigroup (C 0.26%). Take-Two Interactive (TTWO -1.76%) plans to buy Zynga (ZNGA) for $12.7 billion. Elastic's (ESTC 0.74%) CEO moves to the CTO role. Virgin Galactic (SPCE 2.90%) needs more money. Meta Platforms (META 1.54%) shuts down its dating service. Domino's (DPZ -0.08%) makes changes to deal with inflation. Crocs (CROX 1.47%) makes a play for the luxury market. Motley Fool analysts Maria Gallagher and Jason Moser analyze those stories, discuss why they're most curious about results from Pinterest (PINS 0.43%) and Etsy, (ETSY -0.22%) and share two stocks on their radar: Adyen and Nvidia.

Financial planner Malcolm Ethridge analyzes what Federal Reserve Chair Jay Powell said on Capitol Hill and why it matters to investors. Plus, he offers a preview of the second season of "The Tech Money Podcast" and shares why he's keeping an eye on real estate, healthcare, PayPal, and UnitedHealth Group.

Chris Hill: Earnings season kicks off. We've got a few companies we're looking forward to hearing from and our guest has a couple of stocks he thinks are looking good at their current price. If you are a long-term investor, you're in the right place. We've got all that and more coming up right now.

I'm Chris Hill, joined by senior analysts, Jason Moser and Maria Gallagher. Good to see both!

Maria Gallagher: Good to see you, too!

Chris Hill: We've got the latest headlines from Wall Street Financial Planner, Malcolm Ethridge is our guest this week. As always, we've got a couple of stocks on our radar. But we begin with the start of earnings season three of Wall Street's biggest banks sharing fourth-quarter reports on Friday morning. Wells Fargo's (WFC 2.73%) profits in revenue came in much higher-than-expected. But Citigroup (C 0.26%) saw a rise in expenses cutting into their profits. JPMorgan Chase's results were overshadowed by lowered guidance for 2022. Jason, what's your headline for each one?

Jason Moser: Well, we talked about 2022 being a better year for the banks. I think it will be to an extent, but it's not like 2021 was a bad year. If you look at the numbers, JPMorgan's total return was just under 28 percent. Wells Fargo just right at 61 percent, both outpacing the market. What the bad year, I'm sure some of that has to do with the anticipatory market pulling forward some of those expectations for eventual higher interest rates. But this was, I think, a quarter that really help them set the table for 2022. Let's start. What's going to order of tangible book value from highest to lowest Chris because I think that really follows the market sentiment here overall. With JPMorgan, I think at a time when it was very fair to question whether they would be raising guidance as interest rates start to tick up, it's fascinating to me, they're actually lowering guidance. That is due in large part to inflationary pressures, higher costs, a tight labor market. 

With that said, the business continues to perform very well. They beat on both counts for the quarter, consumers have been flushed. The consumer banking average deposits were up 20 percent for the quarter and loans down just a tick. Profitability continues to drag their due to low rates. Wealth management assets under management at $3.1 trillion, that was up 15 percent, thanks to market conditions and inflows. Generally speaking, good things for JPMorgan. Wells Fargo. I think honestly, this is a good story that just keeps getting better, and hats off to Matt Frankel, my colleague, their Industry Focus. We talked about this all last year. That was his bank stock for the year and really for his many problems as they were having, particularly with the culture, but really that bled into the business itself. Another quarter or Wells beat on both counts. They released another $875 million in reserves for those allowances for credit losses.

I think a very similar story to JPMorgan in a lot of ways. Home lending for Wells was down eight percent primarily due to lower mortgage banking income, which was driven by lower originations. Then you go to Citi. In Citi, there's just not a lot to really smile about right now. The headline here is "Hit Refresh" because that's really what they're doing. This is a bank in the middle. I don't want to call it a turnaround necessarily, but it is a refresh. They find themselves in a little bit of a different bode here. They continue to divest some laggards of the business, the big divestiture of their consumer banking business in Asia. That veiled what was modest earnings growth for the quarter. But I think when you look at the way the market is viewing these stocks today, with JPMorgan valued at 2.2 times tangible book, Wells Fargo valued well under two times tangible book, and then Citi valued well below tangible book. I think that really tells you what the market's thinking and what the market is expecting this coming year.

Chris Hill: For investors like me who don't own shares of any of the big banks, did you hear anything today that provides clues to the broader economy?

Jason Moser: Yeah. I think generally the message was positive. JPMorgan noted in the release and I quote, " The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks. Generally speaking, the consumers are at a pretty good place. But I think the caveat there, inflation is real. It's something these banks are dealing with. Costs are going up across the board. Consumers will not be immune to that, so it will be something to pay attention to this coming year.

Chris Hill: Let's move on to the deal of the week which arrived on Monday. Take-Two Interactive announced its buying Zynga in a cash and stock deal worth 12.7 billion. Take-Two gets a much bigger presence in mobile gaming and Zynga shareholders get a pretty nice premium for their shares, Maria.

Maria Gallagher: It's a really interesting deal. I think it's very logical, but I think it's important to look at the history of Zynga for a second. It was founded 15 years ago as a poker game for Facebook. Prior to its 2011 IPO, it was a huge deal. FarmVille was massive. I was working with Facebook, so it was really a darling when it IPO-ed. The stock debuted at $10. It was up to $14 a couple of times in 2012. But their growth really relied entirely on Facebook. Then Facebook limited their third-party developers from promoting their services that cut their revenue in half. Their stock was down 75 percent. It still to this day has never recovered. Even with that premium that Take-Two is paying, it's still below their IPO price. 

That's really interesting to me if you look at the whole history of Zynga, who is known for games like FarmVille, Words With Friends, Harry Potter games, Star Wars games. I understand the rationale, it's really establishing leadership in this mobile area, which is the fastest-growing segment of the entertainment industry. It brings together your console and PC franchises. I think it's a really high price point. It's pretty high premium. But I think it'll be interesting to see how they integrate and then what they can ultimately grow into to get that consistent customer and consumer appetite for those games in those brands.

Chris Hill: Is that why you think shares of Take-Two took a little bit of a hit this week that some people think they're paying too much for Zynga?

Maria Gallagher: I think, yeah. I think a lot of times you see what these mobile games it's really the fad of the time. There was a time everyone was playing the Kim Kardashian game. There at the time everyone's playing FarmVille. It's about getting a company that can consistently keep those consumers interested. I think that maybe people aren't sure that Zynga can do that, and they're trying to see some clarity behind that.

Chris Hill: Rough week for Elastic shareholders, the search software company announced the co-founder and CEO, Shay Banon is stepping down to assume the role of Chief Technology Officer. Shares of Elastic, down 12 percent this week and hitting a 52-week low, Jason.

Jason Moser: It's always fascinating to me to see the market react so quickly to news like this. From a longer-term perspective, it actually seems like it could be good news. Ash Kulkarni moving into the CEO role. Shay Banon and co-founder and former CEO, he will move over to the CTO role and also remain on the Board. If you have a CEO and he doesn't really want to be CEO, Chris, do you want to be CEO? Because I don't. I want to get people where they want to be. I want to get the right people in the right places. Then it feels like that what this ultimately accomplishes. The tech is where Banon's passion is. This happens often. For a company to get to that next level, oftentimes, they need to make a pivot toward an operator to be able to do that. I would be cautiously optimistic with this, particularly when you look at the business itself that continues to do well. 

Most recent quarter they announced total subscriptions of over 17,000. That was up from 12,900 a year ago. Large customers with an average contract or an annual contract value greater than $100,000, grew to 830 versus 650 a year ago. Then buried in that press release at the very bottom, I wonder how many people caught it, but management also announced that it now expects to exceed its guidance for revenue, non-GAAP operating margin, and non-GAAP net loss per share provided for the third quarter of fiscal 2022. It looks like we've got some good results coming here shortly as well. All-in-all, I think this is a good business where the market's knee-jerk reaction could be opening up an opportunity for patient investors.

Chris Hill: Earnings season just getting started on Friday and with so many companies reporting in the coming weeks. Maria, before we go to break, what is a company that you are especially curious to hear from?

Maria Gallagher: A company I'm excited to hear about and hear from his Pinterest. What we saw from them last quarter was a slowdown in growth for some users, a decline in monthly active users in certain demographics. That wasn't surprising to me as life was more in-person, more active, traditionally, summer and fall aren't their strongest quarters anyway. But I think it's important to see that these companies that had a lot of pull-through and new customers during 2020 to see if there are monetizing those customers well to see if those customers are staying. Especially around the holidays with Pinterest specifically trying to get more shoppable to see if they saw an increase in that monetization effort and saw more engagement and users over this holiday season as they are trying to pivot to more of a shoppable app. I think that Pinterest specifically, but those types of social media in general, is something that I'm really excited to dig into a little bit more.

Chris Hill: Jason, I would put Amazon on this list just because of how big the company is. Obviously, there are a lot of companies we want to hear from in the retail space about how the holidays went for them. But when you throw in AWS, all the different things Amazon has going on, I'd put it on the list as well. What about you?

Jason Moser: Yeah, I like both of those and I'll add Etsy to the mixture as well it's stock has essentially been cut in half from its 52-week high, but the company to generate $600 million in free cash flow over the last 12 months, I put shares now around 35 times trailing free cash flow. Boy added, Chris, it's getting interesting, I think with that. It's the stock I own, you know I like it. But we saw the report here in regard to retail sales in December. It looks like those numbers, obviously you exclude autos, those sales fell 2.3 percent. Online spending took the biggest hit of that actually, and that's add it's bread and butter. But I look back to last quarter, some initiatives they've been putting into motion here particularly for the holiday season. They were focusing on fulfillment, being more communicative in regard to the arrival of those shipments. They have a store seller program that's really helping merchants up their game in rise to that next level for their customers. Then also the new gift finder feature. Listen, I sifted through that during the holiday. Chris, it was pretty clever, is very intuitive, and very helpful. All things considered, it really feels like this pullback in Etsy shares given the initiatives they've been focusing on, I'm very interested to hear how the holiday season went and how 2022 is shaping up.

Chris Hill: After the break, we've got the latest news from restaurants, relationships, and the business of outer space. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here, with Maria Gallagher and Jason Moser. Shares of Virgin Galactic down more than 20 percent this week. The space tourism company announced plans to raise up to $500 million in debt. Maria, when they went public in October 2019, they said they'd be flying customers in 2020. Now, Virgin Galactic is saying, "It's really going to be the end of 2022."

Maria Gallagher: Yeah, they've had multiple delays in their spacecraft testing and development. They've pushed back its commercial services to later this year, at the earliest. But they have sold seats ahead of the plant pace. Their ticket sales are at an updated price of $450,000 a seat, which is very reasonable, according to them. They were targeting 1,000 reservations; they've sold 700 out of 1,000. So they still have that customer appetite, but they just need more money. They need to fund it, they need to get ready. So I'm not surprised with that pushback, that they need more time before they can see consistent revenue generation. I'm curious to see what they end up using the money on, and also just, if the commercial flights start taking place as planned.

Chris Hill: We're not going to be surprised if they push it to 2023, are we?

Maria Gallagher: I wouldn't be, no.

Chris Hill: From space travel to the business of relationships; shares of Match Group down a bit this week, despite getting an upgrade from analysts at Goldman Sachs. But at least Match Group has one less competitor to worry about; Meta Platforms, the company formerly known as Facebook is shutting down Sparked, the video dating service the company apparently started last year. Jason, I got to be honest, I really forgot that Sparked was a thing that Facebook was trying.

Jason Moser: The tone of your voice, I find that hard to believe, Chris. Nevertheless, I'm with you; you could be forgiven if you didn't realize this actually existed. But I'm going to harken back to May 4th, 2018, Chris, where I tweeted in regard to this very specific issue. I said on that date, "I'm not a March owner, but I have a hard time seeing Facebook impacting their business much at all on the long run. Zuck's got a long history of trying stuff like this to no avail, and he is very late to the game where online match making is concerned." Fast-forward to today's news, you can understand, I too am not surprised.

Chris Hill: I will give Meta Platforms some credit because, apparently, when they were emailing people to tell them about this, and I'm quoting directly from the email, they wrote, "Like many good ideas, some takeoff, and others, like Sparked, must come to an end." That's a pretty harsh take on something you tried to launch, but I give them credit for it.

Jason Moser: Yeah.

Chris Hill: Earlier this week, Domino's Pizza was one of the companies presenting at the ICR Investment Conference. CEO, Richard Allison, said the company is making changes to its value offerings to deal with rising costs. Among the changes, Maria, moving some items to digital-only orders, and fewer chicken wings in orders. I feel like that second one is going to get more blowback from customers. But interesting to see a leader in the restaurant space being pretty direct about how they're planning to deal with inflation and rising costs.

Maria Gallagher: Right. So what they're saying is they're cutting the number of chicken wings in the offer from 10-8. Their $7.99 Carryout Deal is now, like you said, online only. So this new offer is a three-topping pizza, or wings, for $7.99. But what's really interesting about this is what we're seeing is something called shadow inflation, which is when the price of a good or a service stays the same, but the quality has gone down. We see this a lot in hotels and restaurants. Hotels, for example, it might cost the same, but you don't get the daily room service, or you don't get the buffet breakfast in the morning. Cleanliness is a huge one. Consumer sentiment on restaurant cleanliness fell 4 percent this year. So what we're seeing is this is a little bit harder to track. But you see, when you have inflation, you have all these different types that it impacts consumers in lots of different ways, but this is one that people are talking about and people are noticing as they're paying the same, but the quality of the services significantly decreased, or the amount of goods they're getting has decreased. So I'll be interested to see how other restaurants follow this news with their own.

Chris Hill: Although, when you think about the investments that Domino's has made in digital, and Allison being very clear about the fact that look, "We're taking orders over the phone; that's more expensive for our business than when we're taking digital orders." This could be a hidden win in some ways in the long run for Domino's. I wouldn't be surprised to see other restaurant chains doing the same thing because, ultimately, don't they want more people using their mobile app?

Maria Gallagher: Yeah, and online orders typically come with those higher average tickets than orders placed over the phone. So it's usually a better system for Domino's and for the restaurants. I think it will be interesting to see. Domino's has that technology infrastructure, they have those capabilities already built out, so I'd want to understand how that's going to impact some of those smaller restaurants that don't have those capabilities in the same way, and don't have the scale Domino's does to be able to pivot into this more profitable channel during inflationary times.

Chris Hill: Well, most restaurant chains could do far worse than just to follow Domino's blueprint with what they've done with mobile ordering. A quick thanks to a longtime listener, Aaron, in Virginia, who wanted us to weigh in on a new product offering from Crocs that's going to be available in March. Crocs has apparently teamed up with luxury fashion house, Balenciaga, I hope I'm pronouncing that correctly, to produce Stiletto heeled Crocs for just $625. Jason, let me say that again, $625 for 3-inch heel Crocs. What do you think?

Jason Moser: That's a lot of cabbage, Chris. We can make fun of this all we want. Long-time shareholders can tell us to stick it because Crocs just wins, baby. I mean, the stocks up better than 1600 percent over the last five years alone. These things may seem silly to us on the surface; they also do keep Crocs in the conversations. So I like the ideas. I like how they form partnerships. They came out with a KFC shoe at some point. But you know want to I want to see, Chris; right is this weather starts to warm up, I want to see some grill collaboration this year. Partner up with Weber, partner up with Traeger. What about big green egg Crocs, that are not only green, but shaped like eggs. The ideas are just out there, Chris. I'm presenting them for further deliberation. Just throwing it out there.

Chris Hill: Maria, you're in New York City, will you let us know if you spot anyone on the street wearing these?

Maria Gallagher: I will let you know. I recently saw people with the ugliest shoes I've ever seen in my life. Then I look them up, and they were $500 Yeezys. So clearly, I don't know what fashion is at this point.

Chris Hill: We'll see you later in the show. Up next, financial planner, Malcolm Ethridge, will analyze what the Fed Chief said on Capitol Hill this week, and what it means for investors. Stay right here. This is Motley Fool Money.

Welcome back to Motley Fool Money, I'm Chris Hill. Earlier this week Jay Powell testified before Congress, to help make sense of the Fed Chair. What he said is Malcolm Ethridge is a certified financial planner and an executive with CIC Wealth, and he joins me now from where else? His home. Good to see you, thanks for being here.

Malcolm Ethridge: It's good to be anywhere I can be virtually, I guess at this point like you said.

Chris Hill: There are a couple of things I want to get too, but let's start with Jay Powell. He testified before the Senate Banking Committee at his confirmation hearing. Look I know he's a smart qualified guy and I know it's an important job, but I just did not care enough to watch. Did he say anything that caught your attention, anything that you think matters to investors?

Malcolm Ethridge: I think the commentary about Jay Powell was more entertaining than the commentary from Jay Powell. Someone referred to him as Goldilocks in a suit. Which I thought was the most hilarious way to put it, and it was very apt too it was perfect. He made the case that inflation and its impact on us is going to be longer through the year, then he thinks people are thinking I guess is the way to say it. He made that very clear and he made the case that inflation at top 7 percent at the end of 2021. He sees that number as sticking around for longer than people probably realize. That was probably the most impactful thing of all of it. Because if that's what the Fed is predicting, than that means that that's what you, and I, and the folks who rely on us for information about the markets need to wrap their minds around. 

For context, last year we got the cost of living adjustment out of the Fed related to social security benefits and it was a 5.9 percent. We will like, " That's a whopping 5.9 percent cost of living adjustments. That's a pretty big deal. They must be being overly generous." Which we now have found out no, they actually were somewhat on target. They undershot it by a little bit, but they were expecting this thing to be pretty significant, this thing being inflation. To be pretty significant and also to hang around for long enough, to give a full year's worth of additional benefit to people on a fixed income, Retirees on a fixed income. For context the year before I think it was 2.7, and the year before that it was like 2.3 was the cost of living adjustments incrementally. We're talking more than double for 2022 is what they gave as the adjustments. All that to say the government is taking inflation seriously, we as consumers need to also take inflation seriously.

Chris Hill: I know we're only two weeks into the new year, but 2022 is not off to a good start for the market in general, particularly the Nasdaq. I'm sure I'm not the only one looking at some of the Nasdaq stocks that I own that are down to 40 percent or more. What questions are you getting from your clients and what are you telling them?

Malcolm Ethridge: The two main questions I'm getting are, do I need to hurry up and do this refinance that you were telling me about for the last three years that have been putting off? Even though in a lot of cases I answer yes, they'll probably still continue to put it off. Because just inertia in human nature and we tend to wait for whatever reason. Then the other question is, why do I keep hearing so much about interest rates and why should care? The answer in short for anyone who, this is your first time taking this class. It's OK to invest in things like tech stocks that are going to take years upon years to actually show their real value, or it's actually create real value. When interest rates are super low and companies can borrow toward that growth for very cheap. 

But in years when interest rates are a little bit higher into borrow as a corporation, it takes a little bit more money it's less cheap to borrow. Now, I need you to show growth sooner than you were anticipating, so that I can actually have some return for these dollars that I'm handing you. That's one way to look at it the other is as far as bonds are concerned. A lot of professional traders who trade corporate bonds are looking at the spreads on the yields from those bonds. They're saying if I can find an opportunity to earn about as much in the bond market as I can in the stock market for presumably less risk. Why wouldn't I not just buy those bonds? As the spreads become more attractive in corporate bonds, less reason to buy into the stock market chasing growth. You have people selling all stocks, buying bonds, and those two things happening at the same time create this perfect storm of January that you're referring to.

Chris Hill: I'm assuming that for someone with your job, 2021 was a year in which among other things, you've got a lot of questions from people about newly public companies. When do you think about the number of IPOs, the number of specs. Do you think particularly with respect to the specs on the way a lot of them played out and tepid start to the year. Is that going to come down in 2022, or are we going to see fewer public companies or companies coming public, particularly via SPAC?

Malcolm Ethridge: I think a good indication of that is going to be the number of companies who were public, and we see them now going private in 2022. For one reason or another, they just can't quite get off the ground. Rent the Runway is one that I'm paying a lot of attention to. It's a company that I looked at in 2021 and said this company has no business trying to get public, because they just don't have the financials to support it. Rent the Runway turning into once again a private company will be a great leading indicator. Another one is WeWork. They're trying their hardest to get WeWork public while the opportunity still exists, because people are interested in buying into IPO is really big splashy names. If WeWork can't make it public by the end of 2022, that'll be again a really great indicator that the party has ended. The folks who are still looking at the SPAC market, is there a way to really allocate their dollars and the stock market. That's the way that I'm looking at those leading indicators. Companies that IPO to recently and they turn around and half to go private again.

Chris Hill: I suppose the silver lining to the extent that there is one, is that there are some good and in some cases maybe even great businesses that are now available at a lower stock price. What are the one or two stocks, or just categories of stocks that you think are looking more attractive right now?

Malcolm Ethridge: I really love PayPal. Obviously not a super splashy name than anybody's unaware of. But to answer your question directly, I really love PayPal at the price it's at today. It's gotten whack quite a bit because it really hasn't shown improvement anything. One of the reasons that it's been considered disappointing, is because they didn't really do a lot in the buy now pay later movement that we saw come along with their firms as an example. A lot of folks the sentiment was PayPal is allowing our firm to take market share that it should be having. But we're seeing already the government making noise and saying things about their interest in the buy now pay later market and them wanting to come in and regulated a little bit more. Which means that there's not a lot of opportunity left there for folks who are looking at that as the space they want to be investing in. 

Which means that PayPal didn't really miss out on a ton, they just were now vindicated in avoiding that. In the meantime, they said that they anticipate generating about $5 billion in free cash in 2022. Which has got to go somewhere, because PayPal has a history of aggressively growing inorganically. They're taking those dollars they have sitting on the sidelines and they're going on buying great businesses rather than starting up new business units internally. Because they already have a history of doing that and very aggressively, I see them as being a great company that's poised to do more of that in 2022 especially in Asia. Because they've got a really strong foothold in Japan in 2021, they've announced that they identified two key targets in Indonesia in 2022 that they might be interested in. Which tells me they're going to continue to push into Greater Asia for inorganic growth, so that's the one I've really got my eye on.

Chris Hill: Before I let you get away, what else?

Malcolm Ethridge: I also really love real estate and healthcare. Although the two sectors specifically that we as a firm are focused on, I as an individual and focused on. I've got a ton of it in my own portfolio, a name I will give you that isn't necessarily an underperformer that's undervalued and has a really attractive entry point but I think they've done a lot of room to go is UnitedHealthcare. UNH is selling above $300 a share it's a pretty hefty., but we're looking at UNH as there'll be the biggest beneficiary of the pent-up demand for health services that for the last two years hasn't really been achieved. You've got how many elective surgeries that people have been sitting on waiting to get done. You've got a lot of just general maintenance type healthcare that should have been done in 21, should have been done in 20 even for some people. That they will now be going to visit their doctors in 22 as COVID starts to dissipate in the spring and summer, and look like it's finally going to leave us alone at least in a significant way. We anticipate a lot of people going to the doctors, UNH is one of the biggest beneficiaries of that just because of the market share that they have of the health insurance markets.

Chris Hill: One last thing in addition to your day job, because apparently here not busy enough. You will also host the Tech Money Podcast, season one wrapped up in mid-December. When can we expect Season two to start?

Malcolm Ethridge: Glad you asked it's January 19th, we're right around the corner from season two launching I'm really excited about it. Because of the feedback we got in season one and the way folks really loved episodes that we did around equity compensation. There'll be a ton more of that now going forward in season two. A lot of experts on the Equity Space that's becoming a way more attractive way to pay employees, especially younger employees and millennials and Gen Z years. Season two kicks off with quite a few interviews with founders and quite a few interviews with folks in Equity Comp Space. But I will say really quickly taking that break in December allowed me to checkout other podcasts that I'm interested in. I learn something interesting about you that I didn't know before, as long as I've known you which is that you are a fellow runner. I too am actually planning to do the Richmond Marathon this year in November. I didn't get to go last year because of COVID but I anticipate doing it this year in November.

Chris Hill: Maybe we can plan to meet up down in the capital city. You can find the Tech Money Podcast wherever you get your podcasts about leverage. Thanks so much for being here.

Malcolm Ethridge: Thanks for having me.

Chris Hill: Coming up after the break, Maria Gallagher and Jason Moser return with a couple of stocks on their radar. Stay right here. You're listening to Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about, and on the Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool my name is Chris Hill here, once again with Jason Moser and Maria Gallagher. If you are just starting out investing or you know someone who's looking to get started investing, we have a free investing starter kit. It covers everything from how to set up a brokerage account to 401(k) planning to buying your first stock, and it includes 15 stocks and five ETFs that were selected by our investing team. It's free, just go to fool.com/starterkit.fool.com/starterkit, all one word, will put the URL in the show notes for this episode. Check it out. 

We got an email from Tyler Cheney, he writes, ''I'm 34-years-old and I'm in a place in my career where I can invest more than I could previously. I have 47 stocks, and four ETFs that cover growth, value, dividends, tech, and the broad market. How many stocks should I have overall? I really enjoyed stock analysis as a hobby outside of work. But at this rate, I feel like I will have 100s over the next 20-30 years. Should I just amass a huge quantity and see how it goes or should I stick to a certain number or range?'' Jason, let me go to you first. We can't give specific advice, I'd like to question, I'd love to see that level of interest that you're growing in anyone out there. Great to see, so kudos to Tyler. But I understand his concern, personally, I don't think I could follow-up how many stocks?

Jason Moser: I'm with you. I mean, we're always enjoying talking about this because there's so many different answers and there's not one set correct answer. It does depend on the individual. I mean myself I own 34 different companies in my portfolio now. That's enough for me at this point to not know what is happening to any given holding on any given day, I will say that. A stock could be selling off, and I'm like none the wiser because I'm well-diversified, I just take that longer view. I feel like from that perspective I have enough. It is to the point I think I start adding more, I'm not going to really deal with closely follow-up all of them either. I mean, it's just such a tricky answer because you can certainly do very well just amassing a big collection of hundreds and hundreds of stocks through the years. In the counterargument to that is that you become a little bit more like your own little version of a fund that could ultimately drag returns down with underperformers. I think it's just always a good idea to revisit your portfolio annually and check-in on those companies that aren't performing up to your expectations because that can help you pull some of those weeds while watering some other flowers along the way.

Chris Hill: Maria, part of it comes down to the sleep factor. Like if you're losing sleep at night because you're realizing I own too many stocks and I genuinely do want to be able to follow them, there's only so much time in the day.

Maria Gallagher: I think having more than 40-50 sounds very overwhelming to me personally. What I like to do is I know that they said that they own some ETFs and I think that if you see yourself naturally going toward a certain area, a certain sector, seeing, I actually already own 15 healthcare companies, let me look at some healthcare ETFs, and then you own the ETF, then for me that's less overwhelming and so you have some of the companies you really want to follow, the ones you really want to keep up-to-date on as your personal holdings. Then you have ETFs that will diversify you in other areas of interest that you can follow a little bit more passively. I like to have a nice little balance of active and passive, but that's me personally, if you want to go up to hundreds of stocks and you think you can sleep at night and you're excited about looking at them all the time, I would think for it, but for me, I like to have a nice little balance.

Chris Hill: Let's go to our man behind-the-glass, Dan Boyd. It's time for stocks on our radar, Dan's going to hit you with a question. Jason Moser, you're up first, what are you looking at this week?

Jason Moser: Sure thing. Checking out Nvidia, ticker, NVDA, certainly a name, I don't think many members and listeners know well. I do really like this pullback from recent hires are coming off of another impressive showing at CES 2022 where they displayed a lot of really fascinating technology. Cloud gaming, really starting to gain traction represents a growing opportunity in that $300 billion gaming market opportunity. They continue to invest in the autonomous vehicle opportunity with its drive Hyperion platform. The Datacenter opportunity of course still exist and we can't forget about the metaverse. I think while we hear a lot of talk about the metaverse and what exactly it is and how companies will approach it, NVIDIA, taking the approach with its Omniverse platform. It's real-time 3D design collaboration and virtual world platform. Ultimately what they call it is the metaverse for engineers. I think there's going to be a lot of potential there in the coming years as well. On the best of all, I mean, in this world of unprofitable high fliers, Nvidia makes cash and a lot of it, they chalked up $7.2 billion in free cash flow over the last 12 months. I think this pullback really does look like an opportunity to add to this winter.

Chris Hill: Dan question about Nvidia?

Dan Boyd: Absolutely. Chris, and Jason, Nvidia sounds like it has a lot going on, but in my brain, when I think Nvidia, I still think chipmaker. There's great graphics cards a lot of people will have to put in their computers. How is the semiconductor shortage really affecting this company?

Jason Moser: I mean, it's affecting all companies in the space, but I do believe it's also a situation where we're seeing the strong gets stronger. This is a business that it's got it's handled in a lot of different cookie jar. To speak, pursuing a lot of different market opportunities there, which I think is ultimately to its benefits. Hopefully, we'll see some legislation here in 2022 that eases some of that supply chain crunch. But for now, Nvidia being one of the strongest players in the space is still weathering it nicely.

Chris Hill: Maria Gallagher, what are you looking at?

Maria Gallagher: I'm assuming my time looking at Adyen, which is an over-the-counter company with ticker symbol A-D-Y-E-Y. It's a one-size-fits-all payment platform, both online, in-person payments, other services like fraud-protection. They have customers like McDonald's at the eBay. Their revenue net income has tripled since 2018. Spending more time looking at the payment space and then this company in particular is what I'm interested in.

Chris Hill: Dan, question about Adyen.

Dan Boyd: This sounds suspiciously, Maria, like a war on cash stock. Did Jason feed you this company before the show because this is really the thing that usually write-up his alley.

Maria Gallagher: Jason doesn't have a monopoly on having a war on cash basket. I think he's interested.

Dan Boyd: I'm sorry.

Chris Hill: Dan, what do you want to add to your watch list?

Dan Boyd: I'm already in Nvidia shareholders. I'm going to go with Adyen because I don't know much about the company and its piqued my interest.

Jason Moser: That's great, you pick my idea.

Chris Hill: Jason Moser, and Maria Gallagher, thanks for being here.

Maria Gallagher: Thanks for having us.

Chris Hill: That's going to do it for this week's Motley Fool Money radio show. Show's mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.