Retail, Real Estate, Software, Cybersecurity, and More

In this podcast, Motley Fool senior analysts Matt Argersinger and Jason Moser discuss:

• A strong jobs report, the latest housing data, and contrary indications from the retail industry.
• Ulta Beauty continuing a standout year.
• VICI Properties increasing its share of properties on the Las Vegas Strip.
• Signs of life from Okta.
• The latest from Salesforce, Five Below, and CrowdStrike.

Deidre Woollard talks with Ben Miller, CEO of crowdfunding investment platform Fundrise, about commercial real estate and the trends he's watching for homebuilders and office space.

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 Dec. 02, 2022.

Chris Hill: We've got retail, real estate, software, cybersecurity, and a limited-edition holiday item we can't wait to get our hands on. Motley Fool Money starts now.

From Fool global headquarters this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill joining me in studio Motley Fool Senior Analyst Jason Moser and Matt Argersinger. Good to see you both. We've got the latest headlines from Wall Street. We will take a closer look at the commercial real estate market. As always, we've got a couple of stocks on our radar. But we begin with the big macro. The US added 263,000 jobs in November, much higher than economists were expecting. We also got housing data that pending home sales in the US fell more than 35 percent year over year. The largest declined on record. Earlier in the week, Fed Chairman Jay Powell made comments indicating future interest rate hikes might be lower. Matt, where do you want to start?

Matt Argersinger: I'll start by being confused.

Chris Hill: I will join you.

Matt Argersinger: Because that is always. I say that facetiously because we are always confused as investors when it comes to macro because it's stuff that's out of our control. We'd much rather talk about earnings and companies. I will say this though. I think the reason the market was a little concerned on Friday was not really about the jobs that were being so much higher because we know more jobs tends to be, the Fed is going to keep on its inflation hunt. But I think it was more about the average hourly earnings number, which was up 0.6 percent. That was double the estimate. It's also a five percent from a year ago. That I think is the number that's keeping inflation stubborn or is going to keep it high for longer. My other concern though with the jobs report, specifically, if you look at where the jobs were added, the sectors like leisure, hospitality, which is rebounding from the pandemic, healthcare government. Those are places where you probably would expect jobs to keeping added. Where it's concerning is that you've lost 30,000 retail jobs and 15,000 jobs in transportation and warehousing. Those are not places normally if we're going into a holiday season where you see job losses. I think that tells probably this macro stuff confusing. But I think that tells me a bigger story about the economy going forward than all the other things you mentioned.

Chris Hill: Well, and the growth that we saw Jason in those sectors that Matt mentioned. We need that. They're basically at or around where they were pre-pandemic. It's not like they're way above where they were in 2019?

Jason Moser: No. I feel very conflicted on the way to Oregon, do you see the jobs report and you're like, oh, market's going to tank on that. Because unemployment is at a great place. As investors, I guess are we rooting for unemployment, or we want that to take backup? I guess, because that seems to be the only catalysts that will turn this market around. Obviously, it's much more nuanced than that. The Matt's point, that just doesn't seem like those areas of jobless, those that doesn't seem like where you want that data to exist, particularly in this time of year. It just a unique time right now with so much going on in the world.

Matt Argersinger: I think the whole idea of refining the fed on the way up or find the Fed the way down, so don't fight the Fed. Unfortunately, that's our trigger points. It's every piece of data we look at even at the micro level, is what is the Fed going to do with this this data? I think this is going to transition really quickly. I think once inflation even rolls over, we're going to start talking about earnings again. But also the idea that if we are in a recession a lot of the earnings estimates for 2023 are likely to come down. That could be another thing that the market starts worrying about as we get into the new year.

Chris Hill: Further adding to my confusion, Jason, is what we're seeing in holiday retail because we had record sales on Black Friday and on Cyber Monday. Most years, that's a recipe for a relatively strong retail season across the board, you look at all of the inventory glut that we've been talking about for the past six months, and I'm just not as optimistic as those headlines would have me.

Jason Moser: I think that's a fair point of view. When you look at the numbers tell a story of a very healthy holiday season. A record number of holiday shoppers is 196.7 million went back to stores and shopped online, shopper spent an average of $325 this year on holiday-related purchases over cyber weekend, which is up from last year's $301. More than 122.7 million people visited brick-and-mortar stores over the weekend. It was up 17 percent from a year ago. That's all great news. Let me counter that though with some facts here. You look where are the consumers today and going back to conflict and confusion. You saw over this past earning season, a lot of the big banks CEO's talked about the consumer being in this great state. The health of the consumer, the consumer is in a good place. I want to understand exactly where that's coming from and maybe it's a bit backward looking because when you look at the facts of the matter of the personal savings rate right now, 2.3 percent. It is low as low can get. Credit card balances are set to hit $1 trillion, not adjusted for inflation, going to hit $1 trillion for the first time ever. Cyber week buy-now pay-later orders grew 85 percent from the previous week and 60 percent of Americans now we're living paycheck to paycheck. That's up $0.50, up from 56 percent from a year ago. While maybe the backwards-looking view is that the consumer has generally been in a pretty good place and maybe they're pegging that more to employment. Maybe they are pegging that to the employment situation right now because everybody is working in you have a paycheck coming in. The consumer certainly doesn't seem like we're in a much better spot than we were last year. In fact, it seems like it's starting to see some of those clouds on the horizon.

Chris Hill: By the way, all these credit card balances are records at a time when interest rates are at multi-year highs. If there's any, I think you hit it right, as long as employment stay strong. It's consumerism probably by if that changes at all. People actually can pay their credit card balance every month, a lot of Americans don't. They're paying these high-interest rates. When does that, that's a downward spiral. That can come pretty quickly.

Jason Moser: When you their credit card balance starts going up and you start running out of their limit, what do you turn to? Well, it sounds like a lot of people are turning to buy now pay later, which is being seen as that lifeline of last resort, or yeah, maybe you can help me get your holiday shopping done. But it puts consumers and it puts the retailers at risk. We're seeing concepts like Target. Obviously, they ratcheted down guidance recently and they've seen a lot of benefit from that buy now pay later space recently. This is going to be a very interesting holiday season as yet as retail picture shakes out.

Chris Hill: Let's zoom in on some individual companies. Ulta Beauty continued its gravity defying ways. Strong third-quarter results push shares of Ulta Beauty up five percent this week, and up nearly 15 percent for 2022. Matt we've seen so many stocks in negative territory this year. It's all the more impressive to see Ulta performed like this.

Matt Argersinger: I am no cosmetic experts, but man, these are impressive numbers, Chris. Net sales up 17 percent to most impressive to me if you look at their comp sales up almost 15 percent compared to a year ago. But in the year-ago, quarter, year-ago, third quarter, 2021, they were up 26 percent. Ulta's doing something. A lot of retailers aren't doing their building on those huge growth from a year ago. By the way, the comps, if you look at where it's coming from, 10.7 percent increase in transactions, 3.5 percent increase in average ticket. The average ticket. We seen that because a lot of retailers price increases are flowing through. But we're not seeing the increase in transactions. Here's ULTA with double-digit growth in transactions, it's incredible. They also don't have the inventory problems. I was looking at their inventory levels only up about 10 percent from a year ago, not the same inventory problems a lot of retailers are having. Then finally, if you look at the 27 percent growth in operating profits, the company is operating margins are actually up 110 basis points from a year ago when companies are grappling with higher-cost labor wages, it's so impressive.

Chris Hill: Strong third-quarter results from Salesforce were overshadowed by the news that Co-CEO Bret Taylor is leaving the company. This comes one year to the day after Taylor was promoted to Co-CEO by Marc Benioff. Jason, it's the second time in less than three years at Benioff has had a co-CEO leave?

Jason Moser: Yeah. I think you hit it. The big story really is Bret Taylor stepping away as Co-CEO and leaving the company altogether. I think if you saw any of the interviews with Marc Benioff, if you've heard his demeanour on the call, for a guy who is so jovial, so playful.

Chris Hill: Completely deflated.

Jason Moser: Deflated is just unbelievable. I think he's really bummed out about it because I think he feels like he's watching his preferred succession plan walk out the door. It's not to say this was around the corner [inaudible], still fairly young guy. But I do feel like he viewed Brad as potentially that future CEO of the company at some point, maybe not, but regardless, it overshadow, was a strong core. Revenue of $7.8 billion was up 19 percent from a year ago, excluding currency effects and non-GAAP earnings per share, $1.40 well-exceeded management's guidance that they set from a quarter ago. They're calling for about $900 million in currency headwinds for the year, something that they haven't had to deal with. Sometimes, speaking of operating margins, operating margin 22.7 percent up from 19.8 percent a year ago. They continue to really focus on cost controls, understanding there's going to be some headwinds to that top-line growth, but really working on bringing things back down to the bottom line. Sales Cloud up 17 service Cloud of 16 percent of the marketing commerce up 18 percent of Slack business continues to perform well up 46 percent from a year ago. If you remember, they just recently announced the $10 billion share repurchase authorization, the first one ever. They get that ball rolling. Repurchase some $1.7 billion in repurchases for the quarter. Guiding for non-GAAP earnings per share of $4.93 at the midpoint that puts shares today at around 30 times full-year estimates. I think a pretty reasonable price for a well-positioned business, but obviously one in a transition now.

Chris Hill: The biggest property owner on the Las Vegas Strip just got bigger. Details after the break. Stay right here. This is Motley Fool Money.

Chris Hill: Welcome back to Motley Fool Money. Chris Hill here in studio here with Jason Moser and Matt Argersinger. VICI Properties, a real estate investment trust, is the largest property owner on the Las Vegas Strip, and that ownership stake just got bigger. Investment firm Blackstone is selling its stake in the MGM Grand and Mandalay Bay to VICI Properties. Shares of VICI up on the deal while shares of Blackstone fell, and Matt, I am just basing this on the share prices, but it seems like VICI won this deal.

Matt Argersinger: If I had to pick a winner here, I think VICI is the winner, and I'm sure a lot of listeners probably never heard of VICI, it was before this deal, but now certainly the biggest gaining entertainment REIT in the world. Just to give you an idea of what they own on the Las Vegas Strip, Caesars Palace, Luxor, MGM Grand, Mandalay Bay, The Venetian, and there are many more properties, Excalibur. They also own the [inaudible] in Atlantic City, so it's not just Las Vegas, MGM National Harbor, which is right 10 miles from where we're sitting right here. It is a big bet on Vegas that VICI is taking. They've already got a big bet, it's a bigger bet now in Vegas. But they see Vegas that's seeing a 20 percent increase in revenue from a year ago, Harry Reid International Airport had record passengers this far, and the convention calendar for 2023 is absolutely packed more so than it's ever been since COVID, of course. The key advantage for the deal for VICI is that while they're acquiring these properties which come with great cash yields, they're assuming the Blackstone debt on these deals, and it's only a six percent rate through 2032. If they had to acquire these properties today, rates would probably be a lot higher, and that's why I think VICI is getting a little bit of benefit whereas Blackstone is selling off a bit on the deal.

Chris Hill: Signs of life at Okta. The identity management software company broke even in the third quarter, which isn't great on the service, but Wall Street was expecting a big loss, and shares of Okta up 30 percent this week, Jason.

Jason Moser: Well, you go back to the report at the end of August and remember the stock fell from 91 and changed to 60 and change over what seemed like slowing growth concerns. Remember our preview episode, that's one where I said don't let it fool you even after that sell-off, Okta looked expensive. I think based on what management is saying now and based on the business performance in regard to the profitability goals, maybe the market is starting to view this one a little bit differently now. The quarter itself was very encouraging, revenue of $481 million, was up 37 percent from a year ago, well above their internal guidance, international now makes up 22 percent of the business. They added 650 new customers, that's up 22 percent, and they added 215 customers with annualized contract value of $100,000 or greater. That now stands at over 3,700. Dollar base net retention steady at 122 percent, and they raise their full-year outlook a tad. I think what maybe has the market even more excited was the language in the call we expect to flip to positive non-GAAP net income for the quarter. That is just a next logical step for a business like this. It's not the finished line by any means, but again, it goes back think the market starts viewing this company a little bit differently now because they provide a very important and valuable service, we all use it. It's just a matter of time, I think, for these guys, and it seems like they've got this business on the right path.

Chris Hill: I just like the idea that Wall Street collectors are like you know what? I think they might actually turn a profit someday. Shares of discount retailer Five Below up nearly 15 percent this week after third-quarter profits and revenue came in higher than expected. Optimistic guidance for the holiday quarter from Five Below's management team also helping there, Matt.

Matt Argersinger: It did, because if you look at the results themselves, I didn't think the results were all that great for Five Below. Comp sales were down 2.7 percent, operating profits down 50 percent. But it was really just beating expectations. If you looked at the high-end of management sales guidance for the quarter was 619 million. They came in at 645 million. They had this wide range for earnings expectations of between four and 11 million, they came in at 16 million. So I think this is Wall Street playing catch-up here saying hey, the story here is not as bad or below as we thought, and so we're going to ratchet up our price targets and our expectations for the stock and a good guidance, but I would say I'd worry about this one a little bit. All the growth really here is coming from new stores. There's inventory issues, and also part of this rise was short covering. If you look coming into the report, about seven percent of their shares outstanding were sold short. I think this is more of a technical move. The business fundamentals themselves don't actually look that great.

Chris Hill: Third-quarter profits and revenue for CrowdStrike came in higher than expected, but shares of the cybersecurity company fell more than 12 percent this week due to lower subscription numbers. I don't know, Jason, is that an overreaction to a single metric or is there more afoot here?

Jason Moser: It's hard to say. I guess it depends on what your timeline is. I think the longer your timeline, I think the less you need to be concerned with something like this. I think this is a perfect example of what we mean when we say the market is forward-looking and investing is all about the future. This was a good quarter by virtually every metric, but the path forward is simply less certain in regard to macroeconomic conditions, and so ultimately led management to pull back a little bit on net new annualized recurring revenue guidance. I'll get to that in a second. But in regard to the quarter itself, revenue was up 53 percent from year ago to $581 million. They added 1,460 net new subscription customers, which gives them a total of better than 21,000 subscription customers as of the end of October. That's up 44 percent from a year ago. They maintained four-year revenue guidance and actually raised bottom-line guidance a little bit as a lot of these companies continue to focus on maximizing efficiencies and cutting the fat, so to speak. But they did talk about elongated sales cycles due to macroeconomic concerns and net new annualized recurring revenue. They got it down a little bit on that, based on that lengthened, that elongated sales cycle. I think that's what has the market a little concern today, but this is a company with a reputation for best-in-class solutions. They're still working toward GAAP profitability, still around 15 times sales, 45 times free cash flow, and that's before you even account for stock-based compensation, which they have a lot of as well. It never looks cheap to sell off as understandable, but I think this is still a very good business that's positioning itself for a bright future.

Chris Hill: Is cybersecurity one of those industries that you look at as an investor and think maybe the basket approach works best for investors?

Jason Moser: Personally, for me, yes. I know what I don't know and I know cybersecurity expert. I love the way these companies sell themselves and telling you they're the best at what they do. I can't really explain why that is the case, but for me, either a basket approach or perhaps even an ETF might be the optimal solution for those looking for exposure to this space.

Chris Hill: All right, guys, we'll see a little bit later in the show. But up next, a closer look at commercial real estate. Stay right here. You're listening to Motley Fool Money.

Chris Hill: Welcome back to Motley Fool Money. I'm Chris Hill. Commercial real estate loans are different from the loans for residential real estate because the debt restructures every few years. Miller is the CEO of Fundrise, a crowdfunding investment platform. He believes we have not seen the full effects of higher interest rates on that commercial debt. Deidre Woollard caught up with Miller to talk about the trends he's watching with homebuilders, offices, and more.

Ben Miller: I don't see the future, but I believe or have a strong opinion about what's coming. I believe we're headed for another financial crisis. It's not like 2008 or even like 2001. Maybe it's like 1987. The last financial crisis in 2008 was called the great financial crisis. I think this one will be called The Great deleveraging.

Deidre Woollard: Define that for us, please.

Ben Miller: I mean, so basically in the last 12 months, real estate borrowing. The cost of borrowing has doubled. Interest rates have doubled. Interest rates may end up tripling by the end of this hiking cycle. That means that most real estate companies or most companies, any borrower who has a loan that comes due during the next two or three years or has a floating rate loan is going to have to pay down their loan to size it to twice interest rate. If you were paying $100,000 in interest in 2021, and now you're going to pay $200,000 of interest by your debt-to-income ratio is too high. You have to de-lever the loan and the amount of de-leveraging for pay-downs that's going to happen across the country is going to be trillions.

Deidre Woollard: What does that mean for Individuals and you're seeing that both on the residential side and the commercial side?

Ben Miller: I think individuals are going to be much better off. Most of the people who buy homes with long-term fixed-rate loans. That's basically going to spare most of the consumer part of the market. It's really going to be the commercial or business part of the market that doesn't borrow long-term like that. The only reason people can borrow 30-year fixed is because the federal government guarantees that it's a subsidized part of the market or non-market driven term. Anyways, most companies and most borrowers, I think their average maturity for real estate is about three years. Seven hundred and 900 days is the average maturity of a bank loan. You're talking about a lot of loans maturing into an interest rate environment that is nothing like what we saw the last 15 years.

Deidre Woollard: With Fundrise you're still in an acquisition mode. You're still adding new projects. You're adding some rental townhouses, you're adding some build-to-rent. You're doing some interesting things. What do you see as opportunities from the real estate perspective here?

Ben Miller: I mean, the biggest opportunity is providing rescue money or I call it gap funding. I'm just going to use round numbers for a property at $10 million of value before there was six million dollars of debt or seven million dollars of debt, and two or three million dollars of equity. Now the blender is going to say you to pay me down and to pay down his loan by 2-3 million, by 20-30 percent. I think on average. The person who owns that property, and say, "Well, I don't have two, three million dollars lying around. I need to go get it. Then people who are willing to provide that rescue money is because it may come in the form of mezzanine debt or second trust, preferred equity, but it comes in basically senior to their equity. What you're seeing in markets right now is that's getting 14 percent yields. Much higher yields, where last year that would have been eight percent or less, depending on exactly what asset you're talking about. Then some people can't get it just doesn't matter what price. That's going to be office. Office will be unfinanceable by next year.

Deidre Woollard: Wow. Bold statement, so offices are unfinanceable. What about potential office conversion? Obviously, we know that companies are getting rid of office space at this very rapid rate. What about the real estate, the intrinsic value itself? How does that change as our situations are changing here?

Ben Miller: I've been in real estate for almost 25 years now and I've invested in office. That's why Fundrise avoids office. That's why we don't have office exposure because I have experience with office. Let's just talk about first the context before we talk about the consequences. Two factors are driving office. Everybody is seeing in the headlines that work-from-home remote work are keeping people out of office space. The physical occupancy of a building used to be 80 percent, 80 percent of people will be in a building at any point in time. Now, it's 42 percent. People are not in the building so the people are saying, the amount of leasing is going to fall because there's work-from-home is reduced office demand. Everybody has been talking about that. That's not news. But the things he people seem to have forgotten. That office is a procyclical investment. When the economy is growing, companies hire more people. People start new companies for the last 15 years. The office has been in expansion. But during a downturn, companies cut expenses, but let people go, they shutter companies and office-based contracts. Basically, you're going to have a period where you have this secular or permanent shift to work from home. Also a cyclical downturn office. Then this is where the problems really started to come together, like a vicious cycle. When office prices come down two really dangerous things will happen. One is that a lender or an investor not going to know. Is this problem temporary or is this problem permanent? I see a lot of problems.

I don't know if this is a cyclical problem or a secular problem. Then has made it very difficult to price it. That's problem one, and problem two, as offices get foreclosed on and that's happening in real-time. I can tell you a bunch of stories about office buildings getting foreclosed on it like the lenders losing 50 percent of their loan on the foreclosure, I mean a property that's worth $700 a square foot, it's getting foreclosed on at $200 a square foot. That's how big a loss you're talking about in terms of intrinsic value. It has basically those comps, those comparable prices hit the market. The appraiser is going to say, "I got to incorporate all these other sale prices as part of my comparable as part of my comps." Then the lender is not going to even know how to value there because I can't evaluate, can't get through credit committee. They just will wholesale walk away from office. They're just going to be unfinanceable. They won't lend during a period of high uncertainty and high stress. Then in that circumstance what happens is things don't price based on intrinsic value. Market failure. That's differentially market failure essentially. That's where we're headed. Offices two-and-a-half trillion-dollar of total value. Average bank at 20 percent of their book in office buildings. Office is like, we haven't talked about retail, which basically been like walking dead for a decade. There's anybody parts of the market really ugly.

Deidre Woollard: If we put up this problem with office and we've already seen a little bit of movement away from the urban core. It came back a little bit post-pandemic, but it seems to be the way you're talking about it. More of a systemwide problem. Do you think that's going forward? What we're going to see is that movement away from cities since people won't be in the office as much, and is that you guys have invested in the Sunbelt. Are you still believing that that's the place to be right now?

Ben Miller: Yes. I mean, what happens in any downturn? There's are hurting mechanism that happens where people see institutions or hurts. There really are not independent thinkers. That's the definition, but one of the attributes of an institution generally. As office and retail become essentially unattractive and unfinanceable, they have with these dollars, they'll start allocating to other areas that are financeable, that are safer. They also heard into the safer assets that are still performing. Then on your Zillows are overcrowded usually. That's basically rental residential and industrial. I think rental residential probably gets the bulk of the dollars on the ground and we own almost 20,000 residential units. We're still seeing rent growth, it was very high last year. It's come down to more normalized now, it's maybe four or five percent a year. We're seeing rent growth and office is seeing collapsing everything. The dollars will seek safety and they'll then crowd to I think the asset classes that we're in. However, during the liquidity crisis there probably will be some opportunistic transactions for people who are forced sellers or forced gap. They need Mezz to pay down their loans and that's also pretty attractive.

Deidre Woollard: You guys have been also working with some homebuilders as well. Homebuilders are in a little bit of a pinch right now. I know that we've seen a lot of housing starts or a lot of permits, but not a lot of starts. I feel like homebuilders are taking a pause there. What is your take on the homebuilders right now and what they're facing?

Ben Miller: Short-term, challenged. But long-term not as bad as you might think. In the short term, they had their pipelines. A homebuilder has to start their home, taking the land down. Building a homes, it's at least a six-month process. Their pipelines from six months ago are still coming to market. They're example of what I mean of opportunistic buys. You could probably buy those it could prices because they can't move them. That's like in the short-term think some pain for homebuilders. But in the mid to long term, they really don't have the risks they had 2008, they got a lot of the assets and lands off their balance sheets. They'll start to lay people off and you'll see like, the volume of new home construction just fall off a cliff. That basically will keep the homebuilders alive. But then it'll basically create this housing supply shortage. It'll make it more acute. There'll be even less housing. There'll be this period of a few years where people aren't building enough housing. That's going to be great for people who own housing, but it's not so good if you down the road you want to buy a house.

Deidre Woollard: Yeah. Especially since we never really recovered from the great financial crisis in terms of building the amount of housing we actually need.

Ben Miller: Right. That's exactly what happened last time. After 2008, they didn't build enough housing for 10 years because most of them late, everybody off for, went out of business, 50 percent of homebuilders went bankrupt in that period. There was an undersupply because the crisis had really structurally dislocated the homebuilding business. This time they're much more prepared. Anything with banks are much more prepared for this crisis. Dodd-Frank has made them much more conservative lenders. I think they are usually the people who are most punished in the last crisis are most protected in the next one. This time I think you're not going to see like the same systemic issues. It's going to be the non-bank lenders who are the ones to really get punished.

Chris Hill: Coming up after the break, Jason Moser and Matt Argersinger are coming back. They've got a couple of stocks on their radar so stay right here. You're listening to Motley Fool Money.

Chris Hill: As always, people on the program may have an interest in the 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. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Matt Argersinger. Shares of meal kit delivery company Blue Apron are down 85 percent this year. Maybe they need to take a page from a competitor's playbook. HelloFresh, arrival to Blue Apron is selling a limited edition meal kit inspired by the classic Christmas film Elf. The Buddy the Elf spaghetti meal kit contains everything you need to make a pasta dinner. The way Will Ferrell eats it in the movie, which is to say Jason, that the kid comes with spaghetti, marshmallows, chocolate candies, and of course, maple syrup. [laughs] They're going to sell this thing out, aren't they?

Jason Moser: Well, if you had told me about this without actually showing me the link, I would've said you sit on a thrown of lies.

Chris Hill: I love this idea.

Jason Moser: I love it. It's a brand-building effort. Obviously, Elf, I think is quickly working its way to becoming just one of the iconic holiday Christmas movies we just watched it the other night in our house and it just never fails to bring a smile to our face. I swear to the thing about pasta, that's interesting. Pasta is like tofu. It really takes on the flavor of what you cook it with. I know that it seems gross in the movie when he's doing what he's doing, I would absolutely get his meal kit and always give it a shot man, I'm not scared.

Chris Hill: It's such good timing too, because if you think about the people who are doing HelloFresh at home, like our generation, maybe a little younger, a little older. Elf was like a quintessential movie as you said, [laughs] so it's just that perfect. I have histologies is looking at that meal kit right now.

Jason Moser: That mean if you have kids, you get them this for Christmas, you've just made best friends for life. They're loving that.

Chris Hill: Yeah. You're right. It absolutely looks disgusting in the movie. It's hilarious because of that. But if you look at this like yeah, I'd give that a shot. We were talking during the break. Obviously, it is the season for the Hallmark Channel. The stats around viewership for the Hallmark Channel this time of year never fail to amaze me in terms of the tens of millions of people who just, they're not watching it the rest of the year, but they've got all Christmas movies and a few Hanukkah movies thrown in there. The economics Forbes did a story last year and the economics of the Hallmark Christmas movies, it's incredible. It's a cash machine for that network. They film them in Canada, they get tax breaks. It's less than two million dollars per film and all the ad revenue just flows in.

Jason Moser: You can't help but watch. You start watching one what I'm I sitting here for? But I got to see what happens. I got to see if Donna gets together with Bill.

Chris Hill:  You got to get to the scene with the gazebo.

Matt Argersinger: That's right.

Jason Moser: One script is good for like 30 movies. All you got to do is just change the names and the location.

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

Jason Moser: One we've talked about before here, Cerence ticker, CRNC had a great week shares up around 36 percent this week on earnings that came out earlier. It has matched the market over the last three years, but year-to-date has been brutal. That is because the company has been subject to the supply chain concerns in the automotive market. They essentially go as auto production goes. The good news is, you see this company starting to benefit from things loosening up a little bit. They had a massive leadership shift over the course of the year with new CEO and CFO among others. But bookings growth was up 16 percent for the quarter. We're seeing encouraging partnerships are getting ready to integrate their conversational AI technology with the Nvidia drive platform. Having Nvidia as a partner, Matt seems like a good thing.

Matt Argersinger: Not bad.

Chris Hill: Dan, a question about Cerence.

Dan Boyd: Leadership change, supply chain problems seems like a lot of headwinds for Cerence these days.

Jason Moser: That's, that's 2022 and I'm nutshell for this company. Dan, hopefully, 2023, we're going to see some tailwinds.

Chris Hill: Matt, what are you looking at this week?

Matt Argersinger: Chris, I'm looking at Extra Space Storage ticker, EXR. I've got to get a shout out to Anthony Schiavone, who's an analyst on our Real Estate Winner service that I work with. He sends some great work on this. Currently, owns and operates over 2,000 self-storage properties for more than 40 states. Not only is Extra Space Storage the best-performing self-storage REIT over the last 10 years. It's the single best-performing REIT over the last 10 years, returning almost 600 percent apartment success. It's got this really nice capital-light model. Rather than really develop and operate their own self storage facilities, they like to do third-party management contracts, joint ventures. These activities really help pinpoint what markets and what assets they really want to go after. Currently pays a 3.75 percent dividend and has grown its dividend by almost 20 percent a year over the last 10 years.

Chris Hill: Dan, question about Extra Space Storage.

Dan Boyd: Those are some impressive numbers, Matt, but what I want to know is [laughs] I used to play in bands. A lot of times we would have all of our stuff and our practice room in storage spaces including or at least once an Extra Space Storage facility. Is this something that other storage companies can start doing too? Let bands practice.

Matt Argersinger: I haven't heard about that, Dan, but I think that's an absolute awesome business monetization. Definitely pursue.

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

Dan Boyd: Much like practicing in a freezing cold storage unit in the middle of winter. I'm going to go Extra Space Storage this time because I don't know man, something special about those memories, right on.

Chris Hill: Tuesday season. Jason Moser, Matt Argersinger, guys, thanks so much for being here.

Jason Moser: Thanks, Chris.

Chris Hill: Drop us an email [email protected]. Hit us up with your year-end questions. That's going to do it for this week's Motley Fool Money radio show to show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening. We'll see you next time.