It's a Battle Royale among eight stocks as Motley Fool co-founder David Gardner weighs in on their chances of beating the market over the next three years. Fool Max Keeler sets the stage for David in this Supernova podcast, pairing the stocks and eventually arriving at a winner.
The Battle Royale happens monthly in the Supernova universe. This special sneak peek is from March, and it gives you a good taste of the insight Motley Fool Supernova members get from David and his team.
Click below to listen to the podcast, it runs about 13 minutes, or scroll down to read the transcript. Scroll all the way down for a special invite to look inside the Motley Fool Supernova universe.
David Gardner: Battle Royale may be first up.
Max Keeler: It is. We're coming off of a really awesome launch and we've got a lot of enthusiasm, a lot of subscribers, a lot of people joining either the Odyssey or the Phoenix on their voyage through the Supernova Universe. I've heard a lot of great things out on the boards so far.
David: It's been exciting.
Max: It really has.
David: I'm totally fired up about this service, if it's not already evident. I'm happy to say the response has been outstanding. We have a wonderful and large and growing service here at Motley Fool Supernova.
Max: Yeah, we do. So let's dive into it; let's see what we've got here.
David: All right, so just citing the ground rules for anybody who wasn't here for our inaugural podcast. Max, you're going to be presenting me eight stocks picked at complete random from the 140 or so that make up The Motley Fool Supernova Universe. I don't know which eight you've selected and one of the things that's often exposed here in our Battle Royale is that I don't have perfect knowledge of every stock.
Max: Who could?
David: So I do my best and I love trying to learn as much as I can about everything, so that's the spirit of this, but you've paired them up like an elite eight, kind of like March Madness. You're going to pair them off and I'm going to pick the winner of each of those first four pairings. We take it right through to the finals and I'm going to be picking the stock each time that I feel more confident about beating the market over the next three years.
Max: Over the next three years, exactly.
David: So that's how The Motley Fool Battle Royale works.
Max: And do you remember who the last podcast Battle Royale winner was?
David: I believe that it was MAKO Surgical (UNKNOWN:UNKNOWN).
Max: That's right, so MAKO, we'll see who joins MAKO on the winner's podium today.
David: Excellent, let's do it.
David: OK, so this one is a pretty easy one for me. First of all, Stratasys is one of the 3-D printers. It's a company that has worked and partnered with HP (NYSE:HPQ), among others, and typically serves corporate clients with 3-D printing. Now if you as a member don't know what 3-D printing is, I'll say what I said last podcast, Wikipedia that term. Join us on our Stratasys discussion board on Rule Breakers or our 3D Systems (NYSE:DDD) discussion board on Stock Advisor and learn because 3-D printing is a revolutionary technology that all of us, if we're going to make good investment decisions going forward, should know about.
ReachLocal is essentially a company that is trying to sell advertising and create wins for local business on the Internet, Reach Local, so working with local businesses doing not quite the Groupon (NASDAQ:GRPN) /e-commerce thing, but a little bit more of the traditional kind of Yahoo! (NASDAQ:YHOO)-advertising thing. I believe I own shares of both. I say "I believe" because I own about 35 or 40 stocks and I can't; it's always there in our disclosure.
Real quick, Stratasys definitely advances to the next round for me. Stratasys has been a better performer. I think it has a clearer path into the future. Next up.
Max: Interesting. OK, so we have two 3-D printing stocks in the Supernova Universe.
David: We do and there might be more to come.
David: We're going to keep our eyes out there in that really important, growing field.
Max: All right, so Stratasys advances is on and our next pairing is, and you'll have to maybe correct me on the pronunciation of this but Dassault Systemes (NASDAQOTH:DASTY).
David: It's Dassault Systemes. Now I did take high school French. Unfortunately, I will admit to my membership I got a 2 on the advanced placement test for French. I was forced to take the French AP. I knew I wasn't going to do well and so as a consequence, I didn't really place out of any language when I hit college; Dassault Systemes.
Max: (French accent) Dassault Systemes, all right.
Max: All right, versus another potentially Euro-sounding name, AeroVironment (NASDAQ:AVAV).
David: Uh-huh, all right good. So first of all, we have in Dassault Systemes, we have a company that is essentially enabling graphical designers and others who are creating objects, both on the Internet and off, to do what traditionally was kind of a CAD-CAM design approach to software. Dassault Systemes, part of the reason I like the company is it's European and I like to have some geographical diversity. It's also a leader in an innovative company, up against AeroVironment, which is the company that does lots of unmanned UAV-kind of stuff and lots of Department of Defense. They're also trying to create stations where you can plug in your electric cars; both are very impressive companies.
However, for this Battle Royale, I think I'm going to advance Dassault Systemes.
David: Because I feel a little bit more in touch with what they're doing and again, this is my confidence that a stock will beat the market over the next three years. The reason a stock is in the Motley Fool Supernova Universe is because we like it, but if you talk about my confidence between the two, Dassault. What's next?
David: I love this match-up. Of course these are two of our best, longest-running picks. However, that was the past.
David: We're talking about where we are now, going forward into the future. I like both of these companies. I own shares. A lot of Motley Fool members do. A lot of Supernova members are going to own at least some eBay and/or some Disney in particular. Because I'm looking ahead to the next three to five years, I'm going to pick; I don't have to summarize these businesses. If you don't already know what eBay and Disney do, you need to go directly back to Go and do not collect $200. You're required to know that. Some stuff you have to bring to our podcast. One is to know what eBay and Disney are.
David: I'll short-circuit this and say I would pick eBay right now. I own more Disney in real life, but we're talking about kind of to beat the market and eBay I think as a smaller company than Disney, can multiply its market cap at a more impressive rate over the next three to five years than Disney might. Disney is safer, stronger, more dependable, but for this Battle Royale, Max, let's kick eBay forward to the second round.
Max: Yeah, we were discussing eBay this morning and their recent acquisition of Hunch, a website, for our members that don't know what it is, where you can basically put in your preferences, or even better, you just answer a bunch of seemingly random questions.
David: Yeah, it'll be stuff like; it'll be like "Green or yellow?" And you'll say, hmm, "Yellow."
David: And then it'll say, "Have you ever been to Europe?" And you'll say yes or no or skip the question. Hunch is a really fun site. It essentially asks you really simple questions and then starts making product and service and design recommendations to you. We think you'll like these websites, hey you should check out this video on YouTube based on people like you who are answering questions the same way. Hunch was a nice acquisition, a little tuck-in acquisition for eBay. I think it was only about an $80 million buy, which are peanuts for eBay.
David: But yeah, I like Hunch a lot.
Max: It shows that foresight that eBay has about how to grow.
David: I agree. You can see how they would take a Hunch-like tool and start to make eBay more customer-friendly and more customer-centric helping me find the right kinds of products within the eBay universe, which is vast.
[Editor's note: This podcast was recorded before the Jan. 2 announcement that Avis Budget Group (NASDAQ:CAR) intends to buy ZipCar for $12.25 per share.]
David: OK, so this is a really fun one. Both of these stocks come from Motley Fool Rule Breakers. Part of what I love about the Battle Royale; I mean I think I may love the Battle Royale more than anyone else. I fear and worry that our membership is somehow left cold or colder than I am as I look over these amazing companies and have the fun of just asking, hmm, if you hit that one up against that one, which one will deliver a better return or a more confident return three years going forward.
For this one, most people know what Zipcar is. We're talking about car sharing. Kind of an alternative to renting cars or an alternative for a lot of people to owning cars because you can just kind of go pick up that one that's over three blocks away from you because you are paying an annual fee to have the opportunity to do that. So Zipcar, a lot of people in urban areas, especially college campuses, notice it and see it today. If you don't already have Zipcar near you, take a look.
PriceSmart, most people don't really know probably. Think of it as kind of the Costco (NASDAQ:COST); this is a little bit unfair always. It's like the Elvis of Mexico. Who is that and they're probably not exactly Elvis; maybe they're better than Elvis in Mexico, so we're going to do a little bit of Elvis of Mexico here. PriceSmart is the Costco of Latin America.
David: And with those two, I'm going to advance PriceSmart into the second round. I put a post up on our Zipcar discussion board a few days ago wondering aloud when this stock is going to start behaving, when it's going to start looking like the winner that we think the business is, and I'm somebody who doesn't believe I'm smarter than the market. I think a lot of investors take a different approach and I'm not saying they're wrong. I'm just describing how I think about the stock market and when a stock is not performing, when it is lagging or losing money, and I think that it's a good business, I start to doubt myself and start to trust the market more. So I have questions about what we're missing about Zipcar because it looks to me like a true Rule Breaker. It just doesn't have; it's down for us on the scorecard.
Max: It's not breaking through.
David: Yeah, PriceSmart's down for us a little bit more, but until I really get a sense that Zipcar starts getting more radiant, and I hope our Motley Fool Supernova members will check out what we mean by "radiance." I need to see more radiance coming from Zipcar to advance it in this Motley Fool Battle Royale. Max, I think we've just finished our first round.
David: And I think that we have advancing to the second round, Stratasys, Dassault Systemes, that's an interesting pairing; and then eBay against PriceSmart. Am I right?
Max: You're exactly right.
David: All right, good. So I'm just going to kick us forward fast. First of all, I'm curious, Max, do you have any feelings about those pairings? Do you want to guide me at all? I mean you couldn't even pronounce "Dassault Systemes", so clearly it's not like you're going to come out and say, Dave, it's all about the DASTY, which is, by the way, it's ticker symbol DASTY.
Max: Oh, I like that. All about the DASTY.
David: Yeah, DASTY is nasty, like you're not going to bring that right now in this podcast I don't think, Max.
Max: Probably not.
David: But if you have some insight, I'm listening.
Max: No, on these two, I don't have to much to say. Maybe in some of the others I can chime in.
David: Oh, no doubt.
Max: But I'm interested to hear where you're going with this.
David: All right, good. So I honestly don't know because I didn't know what these stocks were going to be in the first place and I don't know what I'm going to say now, but I have to answer which stock I would pick, Stratasys against Dassault Systemes. And for three to five year returns going forward, I'm going to pick Stratasys because Stratasys is a little bit more immature in a more exciting industry that's a little less mature as well. It's an up and comer.
By the way, this could be one of those pioneers, as it's sometimes said of pioneers. Instead of being a first mover and getting a bit land grab as a pioneer, it's the pioneer that gets shot full of arrows, gets shot down. This could be one of those kinds of early movers that ends up not playing out as a real winner long term. So there's a little risk here, but I'm going to pick Stratasys over Dassault Systemes. And I apologize to my French friends.
Now we also have eBay against PriceSmart.
Max: eBay versus PriceSmart.
David: Very interesting because both of them are commercial companies using the Internet to do commerce. Between the two, I'm going to pick eBay.
David: Because as much as I like PriceSmart, which is a much more recent recommendation of mine in Rule Breakers, eBay is a more confident market beat for me. I know eBay's business better. They're domestic. There's always a little bit of uncertainty around Latin America, although truly I keep looking for stocks and finding them in Latin America because I love that sector of the world. I love the relative safety and the; it's so different from the Cold War in the 1960s where there were all these banana republics flipping every three years it seems. These days, this is some of the; they are great people. In Brazil, etc., there are some really bad countries like Venezuela, but for the most part it's a really exciting area of the world.
That said, eBay is a more confident pick. So, we're down to our finals.
Max: The finals are Stratasys versus eBay. Which one beats the market over the next three years?
David: OK, and this is going to be a stock that joins MAKO Surgical, which was our last month's Battle Royale winner. This is tough. I'm going to pick eBay.
David: And the reason is this. I am very confident that eBay will keep growing and increasing its relevance. I like the recent Hunch move. We talked about that and highly profitable and a little bit off people's radar. eBay was hot 10 years ago. Everyone was talking eBay. People don't really talk or think as much as they probably should these days about eBay, so I simply have a higher degree of confidence.
I talked about Stratasys as being possibly the pioneer that gets shot up with arrows, so let's make eBay the winner of this month's Motley Fool Battle Royale.
Max: Congratulations, eBay.
David: You win absolutely nothing.
Max: That's right, you win the recognition...
David: To the CEO and the management team, you're very welcome, congratulations. What an honor.
Max: All right, great.
David: And Max, I want to thank you, by the way, for doing the due diligence and bringing together those eight companies and randomizing and getting this whole thing going.
Max: You're welcome.
David: I enjoyed our Battle Royale. By the way, if we can do it better, or our fans want something different, let us know, but I kind of like this format and I'm glad we led off the show with it.
Max: Great, let's move on.
If you would like to learn more about David's investing ideas, take a free, personal tour of his flagship service, Supernova. Inside you'll discover the science behind his market-trouncing returns. Just click here now for instant access.
David Gardner owns shares of Walt Disney, MAKO Surgical , Stratasys, and ReachLocal. Max Keeler owns shares of MAKO Surgical and Zipcar. The Motley Fool recommends 3D Systems, AeroVironment, Costco Wholesale, eBay, MAKO Surgical , PriceSmart, ReachLocal, Stratasys, Walt Disney, and Zipcar. The Motley Fool owns shares of 3D Systems, Costco Wholesale, eBay, MAKO Surgical , Stratasys, Walt Disney, and Zipcar and has the following options: Short Jan 2014 $55 Calls on 3D Systems and Short Jan 2014 $30 Puts on 3D Systems.
Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.