Earnings Season Continues: Airbnb, Home Depot, Beyond Meat, and More

In this episode of Motley Fool Money, host Chris Hill and Motley Fool analysts Andy Cross and Ron Gross discuss the stock market’s fall as interest rates rise. They’ve also got earnings news, with Airbnb  reporting a big loss, while Home Depot, Lowe’s, and Square slip on growth concerns. Beyond Meat makes two big deals, and DoorDash  declines after its debut report as a public company. They weigh in on Amazon and Chewy , and share two stocks on their radar: CuriosityStream and ResMed .

Plus, Duke professor of psychology and behavioral economics Dan Ariely talks risk, luck, and how to navigate market declines.

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 February 26, 2021.

Chris Hill: We’ve got the latest headlines from Wall Street, best-selling author Dan Ariely is our guest, and as always, we’ve got a couple of stocks on our radar. But we begin with the rising, and not the song by Bruce Springsteen. This week saw rising volatility, as well as the continued rise of 10-year treasury yields. The two combined to make it a rough ride for some investors, especially Andy, when you consider the Nasdaq at one point this week was down 5%.

Andy Cross: Yes and especially if you’re a new investor who’s just joined the market, we’ve had millions of new investors come into the market, which generally I think, is a really good thing, good healthy, as long as they have the right perspective and the right mindset to be an investor, unfortunately, I’m afraid many don’t. So, that’s why we’re here, trying to help people understand that markets are volatile. They can be what we saw this week with stocks moving 5%-10% in a given day, at the stock level, especially for some of the growth stocks that have performed so well, Chris, over the last year. The S&P itself is up more than 70%. So many of the great growth stocks are up multiple times of that. It’s having these breathers where stocks get sold off and the price falls 5% or 10% for whatever reason. It could be earnings, it could be macro conditions, it could be political conditions. You have that in the markets and it’s very important that if you are investing in stocks, you take that three to five year perspective because if you don’t, your chance of getting spooked out of a great company because of the near-term volatility can be very real and you have to be careful about that.

Ron Gross: Things were a bit frothy. We’ve had a good run, especially in the Nasdaq and with technology stocks, with growth stocks and that’s wonderful and it’s also fine that we take a step back periodically, and it’s not something to panic over. It’s actually healthy. Things can’t go up all the time, it’s just not possible. So things stagnate sometimes. When I say things, stocks stagnate sometimes, sometimes they go down and correct, you want to make sure if your particular stocks are selling off rather significantly, that there’s nothing wrong with the company, that it’s just a general market malaise if you will and time to take a step back. As interest rates rise, other financial assets become more attractive relative to stocks, and that causes outflows as well. But again, as Andy said, we’re long-term investors. You make sure your companies are rock solid. You’re happy with owning companies, not markets and I think everybody is going to be fine.

Cross: Remember the prices are just back to where they were like a month ago or so. That’s just what happens. You have to really understand that, have that right, healthy, long term perspective.

Hill: All right, let’s get to some earnings. Shares of Airbnb were up 12% on Friday. After coming out of the gate strong, it was Airbnb’s first earnings report as a public company and revenue was higher-than-expected. Sure, Andy, they lost nearly $4 billion in the span of 90 days. [laughs] But come on, this is a growth company. Let’s focus on the top line here.

Cross: What’s $4 billion among friends? Listen, Chris, it was a roller coaster ride for Airbnb over the last 12 months. Its valuation got as low as $18 billion by some valuation estimates in some reports, before it went public and now it’s at $108 billion. It just got crushed during the quarantine, they had to lay off the staff, they had to really reposition their website, really think about how they are selling their services, and how they are targeting audiences, and what kind of hosts they are recruiting. They have really climbed out of a very tough pandemic situation. While revenues in the fourth-quarter were down 22%, and $859 million adjusted EBITDA was negative at $21 million, but that was $250 million better than in the fourth-quarter of 2019, Chris, when revenues were $250 million higher. So, they’ve really managed the cost structure. The nights and experiences were down 39% in the fourth-quarter, gross bookings down 30% in the fourth-quarter. So, I guess the only bright side was that the average daily rate was up 13% in the fourth-quarter. So what they charge versus the average nights that they book.

So overall, when you look at the quarter for Airbnb, it was a slow step of progress that we saw from the lows of April as they really have cut costs, repositioned, tried to reposition their marketing. A fun fact they talked about is that in the fourth-quarter, more people stayed in Sicily than stayed in Florence and Venice combined. What that tells us and how they have positioned their business will start to focus less on the cities and much more on the rural opportunities to be able to attract people who want to just drive as opposed to fly.

Gross: Andy, I’m sure that they meant to talk about the vaccine opening things up and how that will obviously improve the business, but that would also improve the hotel business at the same time. So did they have any discussion about once everything opens up, competition is going to be pre-COVID levels and where they stand with respect to that?

Cross: Well, Ron, their revenue dropped, they expect their fall in the first quarter to be lower than what it was in the fourth-quarter. So again, continuing to make progress. I think they do expect that competition to kick back up as people start to explore different options and where they want to travel. That’s why they’re going to spend a lot in marketing in Q1 and Q2 that will hit the profitability even further as they start to attract more and more people for the summer holiday season. But I really do applaud their team for making that transition in a really very tough spot when people were wondering why they were burning a lot of money last summer. There were a lot of questions about what the future is for Airbnb, and right now is looking a lot brighter than it was a year ago.

Hill: Home improvement might be slowing down. Lowe’s and Home Depot’s fourth quarter reports featured higher than expected profit, but shares at both companies down this week on lowered expectations for 2021. Ron, Home Depot down 7%, Lowe’s down 10%. Do those moves make sense to you?

Gross: They’re both similar stories and if you’re looking at the stock’s performance to gauge how the quarter was, I think you’re doing a disservice. If you’re looking at the stock’s performance to think about the future of the company, I think you’re also doing yourself a disservice, because there are some real strengths here and we can go through some of the numbers. Let’s take Home Depot, for example, first. Sales up 25%, comp sales up 25% as well. If we remove the impact of the HD Supply acquisition that they brought back into the fold, adjusted earnings were up 20%. Specific to Home Depot, investors were focused on the future guidance. That’s typical. The market is forward looking, investors are forward looking and management said they’re limited in their ability to forecast demand for fiscal 2021. I guess that’s not surprising. It’s hard to understand what’s going to happen in a post-COVID, a post-vaccine world. But they said if the demand environment during the back half of fiscal 2020 were to persist, it would imply flat to slightly positive comp sales growth and slightly positive comp sales growth is exciting to no one. But again, that’s just in the very near term. It doesn’t impact my opinion of Home Depot as a strong business. They increased their dividend 10%, I think to send some signals that we’re a strong company, that 2.6% yield is nothing at all to sneeze at. That’s a nice yield for a company like Home Depot. Lowe’s, similar story. Sales up 27%, comp sales up 29%. Management was a little bit more forthcoming though with guidance, they said they expect to grow market share and drive further operating margin expansion. They’re planning a $9 billion share repurchase program. So things are a little bit more clear there, but they’re clearly in the same boat. From a stock perspective, it’s the same old story. Lowe’s, a little bit cheaper on a relative PE basis than Home Depot, but they’re both fine companies. I don’t think you need to choose between the two of them. It’s fine to own either or both.

Hill: Square’s fourth quarter profits and revenue came in higher than expected. But shares of Square down nearly 20% this week because the growth is slowing down. Andy I get the slowing growth. But this really seems like a nice buying opportunity for anyone who has Square on their watchlist.

Cross: Chris, I would agree with that. There were two really important announcements or announcements and facts that got the most attention. That is one, that they are further, they are investing into Bitcoin and supporting Bitcoin, and also their cash app continues to kill it. So they announced another $170 million purchase of 3,300 Bitcoins on top of the $50 million that they bought in Q4. That’s now about 5% of the cash on Square’s balance sheet. So, three million cash app customers purchased or sold Bitcoin in 2020 and one million cash app customers purchased or sold Bitcoin in just January 2021. So Jack Dorsey, the Founder and CEO of Square, said, “We believe that the Internet needs a native currency and we believe Bitcoin is it.” So they continue to make this investment in Bitcoin. But their cash app, Chris, which is the peer-to-peer money sharing app and platform, now has 36 million monthly active users. That’s up 50% from last year. The cash app ecosystem generated gross profits in the fourth-quarter of $377 million. That was up 162%. Gross profit per monthly transaction of active customers on the cash app platform was up 70% to $41. So, really building out the cash app ecosystem, and if you think and you believe that the digital money system is evolving and changing, and you look at a company like Square, that is building this cash app ecosystem along with their other businesses, looking ahead they continue to double down on the commitment to Bitcoin, looking at their profitability, looking to be able to gain more and more members and grow those members and grow those transactions, you got to say, this opportunity to buy Square at cheaper price is pretty attractive.

Hill: Shares of Etsy (NASDAQ: ETSY) rose more than 10% on Friday, after a monster fourth quarter report. Profits and revenue were higher than expected, and new buyers, Andy, Etsy has been around since 2005, but 2020 really seems like it’s the year that tens of millions of people shopped on Etsy for the first time.

Cross: Chris, you’re right. CEO Josh Silverman called it a transformative year with gross merchandise sales, the value of everything Etsy sells across its platform and revenues more than doubling to levels that they targeted in 2023. Basically, what they expected in 2023, they did in 2020. Etsy grew 2.5 times faster than the e-commerce growth, which as we know, was all very attractive. Now it’s 85 million items for sale. Active sellers were up 64% in the year. Gross merchandise sales per seller during the year was up 22%. Active buyers, just in the fourth-quarter, Chris, was up 70% to 81 million, with 6.5 million as habitual buyers, which means they buy more than once. 73% of customer contacts in the fourth-quarter, Chris, through voice or chat, and that was up from 22% just a couple of years ago. So not only are they attracting more buyers, but they are spending a lot more attention on those buyers than the sellers. So when you look at the gross merchandise sales, up more than 118%, the revenue up 129%, driven mostly by their marketplace revenue, which is up 150%, and that’s listing fees, transaction fees, payments across the platform. You guys, and looking at the holiday season, Etsy has really built a marketplace that, forgetting masks, because masks was a big part of their business, they are much beyond masks. They have massive reach and they are reaching more and more buyers and sellers to help entrepreneurs out there connect.

Hill: Papa John’s (NASDAQ: PZZA) and Domino’s (NYSE: DPZ), both out with fourth quarter reports, both put up strong same store sales numbers, yet shares of both Papa John’s and Domino’s are down around 10% this week. Ron, what is going on?

Gross: [laughs] I think in a COVID-related world, people were just expecting to see just bigger numbers than they put up, and it’s not like the numbers were bad, they just didn’t meet investors expectations. We can take Domino’s first, global retail sales up 12%, excluding the benefit from the 53rd week, if you include that, it’s a little bit misleading. U.S. same store sales growth up 11%, international up 7%. This was the 108th consecutive quarter of international same store sales growth, and the 39th consecutive quarter of U.S. same store sales growth. They continue to put up impressive numbers. The stock has been unbelievable over the longer term. They added net 388 stores in the fourth-quarter, 624 for fiscal 2020, earnings up about 10.5%. New repurchase program authorized a 20% increase in the dividend yield, you get a 1.1% yield now at that level. Things are great, and they’re just a little bit lower than folks expected. They put a new two to three year outlook in there, which includes 6%-10% global retail sales growth. The same for Papa John’s, although Papa John’s has had its own problems self-imposed over the last year or two, with the new CEO taking the reins in August of 2019, but for them, total revenue up 12.5%. Adjusted earnings were up $0.40 per share versus a loss this time last year. They’ve turned things around too, but these things need to take a breather, and they sold off a bit because investors just wanted more growth.

Hill: Beyond Meat reported a loss in the fourth-quarter that was bigger than Wall Street was expecting, but that news was overshadowed by Beyond Meat’s announcement of a three year deal to be the preferred supplier for McDonald’s plant based burger, and Andy, they also struck a deal with Taco Bell.

Cross: Yeah. The McPlant for McDonald’s, a new plant-based burger being tested in select markets globally, and also will probably help produce and develop other plant-based foods, like maybe for chicken, pork, and egg. As you mentioned, the other one with Yum! Brands, too. That really trumped what was a meh quarter, Chris, with sales up 3.5%, driven almost all by the retail sales, which was up 85%. The food service sales, or the commercial sales, was down 54%. Those continued to move in the opposite direction as they have been for most of the past year. They had an increase of 7% on the volume side, and that was offset by a lower price per pound. Retail sales doing well, service sales doing poorly, but they continue to invest back very heavily in this business. Operating expenses were up 45%. That means the operating expenses as a percent of revenue was at 50% this quarter versus 35% last quarter, so they’re spending on headcount, marketing, IT, international expansion, that’s really hurting the bottom line and their cash flow, Chris. That’s something to watch with Beyond Meat, but overall, a $9 billion company playing in a massive market and in a differentiating way, and that’s getting more attractive as the valuation gets a little bit more normal here.

Hill: Shares of DoorDash fell 16% on Friday after the company’s first earnings report as a public company; revenue was higher than expected, but DoorDash lost hundreds of millions of dollars, Ron. Shouldn’t a business like this be doing well at a time when food delivery is higher than normal?

Gross: [laughs] They’re doing well, but it’s an expensive business to run, and they just haven’t reached the level yet that they expect to see, that path to profitability that relatively early stage companies like to talk about. A little context, the IPO in December was priced at $102, it went up around 80% in the first day, if you recall, was somewhere in the high $150s today. As you said, the first quarterly report as a public company, it was mixed. Results were solid, guidance was soft, revenue up 220%, total orders up 230%. Obviously, COVID is the main driver there, reported a loss of these, as you said, of several hundred million, $312 million for the quarter. That was bigger than last year’s loss of $134 million. Increased expenses, lower profitability there. They did have adjusted EBITDA that was positive, so cash flow was positive at $94 million. That’s one bright spot. The guidance expects fewer customer orders, reduced order frequency, smaller average orders in the back half of the year as the vaccine rolls out and allows people to get back to restaurants. Again, I don’t think we should be surprised about that, there was some artificial growth here built in because we were all stuck at home. It doesn’t mean that DoorDash isn’t relevant, and doesn’t have a business model that will make sense in the future, but it’s going to go back to what a more normal business looks like for them.

Hill: Unlike the similar percentage drop that we saw with Square, this doesn’t scream buying opportunity to me. Does it to you?

Gross: I like my companies profitable, quite frankly, [laughs] or at least getting close, a $300 million loss is a bit high for me, so I’m going to keep an eye.

Hill: He’s a founding member of the Center for Advanced Hindsight. He’s the author of several best-selling books, including Predictably Irrational and The Honest Truth About Dishonesty. If that’s not enough, he’s also the Chief Behavioral Officer at Lemonade. Earlier this week, I got the chance to catch up with Dan. Here is part of that conversation.

[…]

Hill: You and I were chatting before we started this interview. There are a lot of people who started investing just in the past year, even in less than a year.

Dan Ariely: I feel for them. [laughs]

Hill: The people who started investing at the bottom last spring? It’s been a rough ride for them.

Ariely: Terrible. I’m serious. You can say they’ve made so much money. But no, I’m really seriously sad for them.

Hill: This goes to my question, because it goes to the idea of risk, which is something I know you have studied. Because when people start investing, a lot of times, particularly if they’re working with a financial advisor, they try to get a risk profile for this person and they ask questions like, “How would you feel if your portfolio fell 25%?” That’s a genuinely important thing to try and understand, but it seems like a very imperfect way to get that answer. So what is a better way for people to think about risk?

Ariely: First of all, I hate these risk surveys. I think they are stupid and misleading and they’re cheap. Nobody should be using them. I think it’s regulatory required for some ridiculous reasons, but I think it’s irresponsible, and I can tell you many reasons why they’re irresponsible. But I’ll just give you two, maybe three. The first one is that when we do risk surveys of this type, and we show people three portfolios, low risk, middle risk, high risk, people choose the middle. Now imagine, what we do is we take the high risk out and we add the lower risk in. So now we have low, middle, and high. But we just shifted, they’re all low risk. What happens? People choose the middle.

Hill: Choose the middle.

Ariely: It turns out, if you give me risk profiles, I can get people to generate lots of different things, it’s a meaningless answer, that’s the first thing. The second thing, which is more serious, is that people don’t take risks with money. At the end of the day, people take risks with their consumption of life. So I can ask you, how would you feel if you lost 20% of your stuff? But the reality is that money is means to an end. I need to ask you, how would you feel if your kids can’t go wherever you want them to go, and how would you feel if you had to downgrade your house? I mean, these are the real questions. It turns out that there is nothing to connect those two. You ask people about their risk in life, and they tell you a very definite answer. You ask them about the risk of the money, they tell you how they would feel. Financial advisors are supposed to be like doctors, they’re supposed to know something. This is my third thing. Imagine I was your financial advisor, and I said, “Hi Chris, how do you feel about risk?” You say, “I really hate risk. I don’t sleep well at night and so on.” What should I do? Should I tell you, “Why don’t you be poor for life?” [laughs] No. If I was your doctor, and you came to me and said, “Hey Chris, how do you feel about pain?” You say, “I hate pain.” I would say, “You know what? I’ll do this treatment for you […].” Or I’ll give you Valium or I’ll give you a painkiller. I don’t say, “Just live with pain. I’m not treating you.”

So, if I was your financial advisor, and you came to me and you said you hate risk, I will say don’t look at your portfolio. Take value, study meditation. It’s unclear to me that because we feel about risk differently, people should be condemned to being poor. In fact, if somebody’s an expert on risk, they should tell you what risks you should be taking. Risk is not about the feeling. Risks should be an outcome variable, and not an input variable. That’s the last thing I would say about this. If I was your financial advisor, I would say, “What are you trying to achieve in life?” You would say, “I want to retire in Florida and I want a boat and I want this.” I will calculate for you how much money you need, and your risk will be an output of how you want to live. In what world would we take money, and say instead of optimizing your future life, we’re going to optimize your feelings at the moment? Anyway, when you think about it, it’s a crazy thing. It’s a crazy thing that we got to that terrible, terrible system.

Hill: So let’s go back to something we touched on earlier, which is the people who started investing last spring, who have known in their short investing life nothing but success in general. How should people set their expectations? Because if you’ve only been investing since last spring, there’s a good chance you have outsized expectations for what your investing outcomes will be.

Ariely: The worst thing that can happen to somebody who goes to Las Vegas is to win the first time. There’s lots of experiments in human psychology about how our first experience really defines us; if you’re a little duck, the first thing that you see moving, you figure it’s your mother and you follow that. If you initially take a risk and it worked out, you become addicted to that risk. The people who started investing for the last year, or 11 months, had nothing but success, that basically created with it the expectation that things would always increase. It would be incredibly hard for them when reality settles. Imagine, if somebody is 70, not so bad, but if somebody is 20 and this is going to be with them for the rest of their life, they will remember that first year of investing and the odds that there will be another year like this is very, very low. This is really setting them up for expectation.

Now, I really don’t want people to lose a lot of money. So it’s not that I’m wishing things are bad for them. But what people need to do is they need to realize that investing has a huge component of luck. Yes, things were lucky, and it was not that they were smart, it was not that the world is like us. So you could play with yourself and you can say what would happen if I invested the same thing in the beginning of 2007? What would have happened to my money? Get some other prospects, saying, “Okay, I just happened to be born in 2000, and then I started investing in 2020. What would have happened if I was born 20 years earlier or 19 years earlier. What would have happened now? People need to recognize that it’s luck and not skill. Because if people think that it’s going to be skill, they’re going to keep on chasing returns. We all know that that’s one of the most dangerous things, is to think that you are smarter than the market and you can chase returns and it’s about you. It’s a recipe first of all for unhappiness because you keep on chasing something, and then the second thing, it’s a recipe for a lot of financial losses.

Hill: We have just a few minutes left, so two questions before I let you go. First, when the inevitable decline comes, what are a couple of things investors can do to diminish the odds they make rush decisions?

Ariely: Yeah. One of the things that we know that people are better at is if we write a specific contract and we remind ourselves about that contract. If you say to yourself, “When things start going down, I will not sell anything within the week, here’s my cooling period.” If you want to make it more powerful, get a friend to sign it as well. You want to make it even more powerful, give them an authorized signature on your account. But the point is that the way that emotions work is that emotions kidnap our brains, both good and bad sides, and you don’t get deep quality thoughts and emotions at the same time. It just doesn’t work. The moment emotion takes over, it takes over. Some decisions, it’s fine to make about emotions: love, poetry, not so much in the stock market. What we need to do is we need to recognize that emotions flare up, they also die quicker than we think. We need to create a cooling period so that we don’t let our emotional highs dictate our financial futures.

Hill: Last thing, and then I’ll let you go. One of the economic ripple effects of the pandemic has shown up in a niche retail category, and that’s board games. Sales of board games and card games are up dramatically over the past year. I just learned you have your own. Please just tell me about it, and this is the official title, Dan Ariely’s Irrational Game.

Ariely: What is the game? In physics, if you think about physics, what you’re trying to do is to predict the movement of an object like, A threw […] it’s a ball, it’s running, where would it stop? In social science, it’s the same. I give you a new situation, I say, “Hey, you meet three people, one of them is short, one of them is tall. Which one would you like more?” Which one will people, on average, like more? We describe a little experiment and then we give people four answers, and the people who win are the people who understand human nature better and on the other side, we tell you what the real answer is and it’s something about the implication. It’s a game that is really designed to test our intuition about how people behave and then teach us a little bit about that. I will say that many people wrote to me and said that they ended up using this game as a dinner conversation. They said the game is long but what we do is we take one card and we discuss it and we use it as a dinner conversation, not in the way that I intended it, but that’s fine as well.

Hill: That’s probably just as well, because I can’t imagine your friends would want to play this game because it’s got your name on it. If I went over to your house and you said, “Hey, let’s play this game.” I would just assume it’s rigged for you.

Ariely: [laughs] It is rigged for me. I came up with it, so yes, I know the answers.

Hill: [laughs] Dan Ariely, always great talking to you. Thanks so much for taking the time to be here.

Ariely: Same here. Take care. Talk to you soon.

Hill: Our email address is radio@fool.com. Question from Mike in Canada who asks, “What do you think of Chewy, specifically when considering Amazon? Do you think there’s room for both, or does either stand out as the stronger pick for consumer pet needs?” Obviously, Andy, Chewy is all-in on pets. Amazon does have a pet business though.

Cross: Well, Amazon has a bazillion other businesses, so yes, you can definitely own both of these businesses. Chewy all in is a $40 billion business, much smaller than Amazon. All in on pets and the pet market is booming, two thirds of Americans now own pets. It’s growing like gangbusters. We care a lot about spending money on our pets and importantly, Chewy has that auto-ship, 70% of their sales are really tied to recurring shipping and that’s just really powerful. So, yes, I think you can own both of those because they are similar yet different enough businesses.

Gross: I think Amazon, its strength is in its breadth of products, they’re not as good as when there’s a certain niche to focus on, that’s why I do like companies like Chewy. Also, buy or beware on Amazon, you’re not always sure because it’s a marketplace that you’re getting the appropriate price, so it requires you to do some research versus if you’re going to Chewy, I think you can be more sure.

Hill: One more question, this time from Wilson Lee. “Can you talk about what paths or actions one should most likely take in order to have a career doing what you do, whether it’s to become an analyst or to research stocks or investment ideas for a firm or a fund or a subscription service? After eight years in the culinary industry, I’m in the middle of a career change and I’m starting school again. I’m curious if you have any suggestions. Ron, what do you think?

Gross: I would say read, learn, and repeat. It’s about increasing your knowledge of companies. Certainly, there’s a certain amount of understanding of markets that you want to have, but really understanding companies and the way they make money, that does require some accounting and finance knowledge for sure. But the more companies you look at, the more sectors you look at, the more comfortable you’ll end up feeling about giving your opinions on companies and you just got to keep doing it, and doing it, and doing it. Even after decades in the business, there’s still more to learn, always. But I think reading and learning is where you start.

Hill: Let’s get to the stocks on our radar and our man behind the glass, Dan Boyd, is going to hit you with a question. Andy Cross, you’re up first, what are you looking at this week?

Cross: Dan, I’m going with CuriosityStream. An $800 million company that is specializing as a video streaming and on demand platform of documentaries. It has 3,000 titles, including 1,000 original programs. Their headquarters just down the street from me here in Silver Spring, Maryland, founded by John Hendricks who started Discovery Channel back in 1985. His goal with this company is to be a lifelong learning academy. He owns more than 40%. It has 13 million paying subscribers, ranging from $3 per month to $10 per month, or $20 per year to $70 per year depending on your quality. It’s available in 175 countries. Sales are growing 80%-100% a year. Dan, it’s a very new young company but I like the prospects Curiosity, CURI.

Hill: Dan, question about CuriosityStream?

Dan Boyd: Absolutely, Chris. [laughs] Andy, would you say that CuriosityStream has piqued your curiosity? [laughs]

Cross: Dan, it wouldn’t be a radar stock if it did not pique my curiosity, so yes, it has a lot of different revenue streams available from this company, from subscriptions, sponsorships and advertising, so it’ll be very interesting to see what John Hendricks built with CuriosityStream.

Hill: Ron Gross, what are you looking at?

Gross: I’m hoping I get an easy question like that. I’m looking at ResMed, RMD, manufacturer of continuous positive airway pressure systems, CPAP systems, most of you are probably familiar with that term, and related accessories, they’re the global leader in sleep related breathing disorders. It’s a razor, razorblade model which has really nice strong margins, growth opportunities and adjacent markets for treating COPD, asthma. They acquired a cloud based software company in 2016, which allows them to pursue the opportunity of linking home based patients to hospital systems. I think that’s going to continue to be a nice growth area, 0.8% dividend yields, which is on the low side, but the stock has almost doubled over the last two years and they’ve increased that dividend for the past eight consecutive years. So, I think you have a nice total return potential here if the company continues to execute.

Gross: Dan, question about ResMed?

Boyd: Listen, Ron, [laughs] I understand that CPAP machines are important and sleep apnea is a very dangerous thing. But I had to share a hotel room once with a guy with a CPAP machine and I got two words for you: never again.

Gross: But if that guy had snored instead of CPAP, you would be saying a triple never again. I think from what my understanding is, CPAP is better than snoring. But you do you.

Hill: Dan, two very different businesses. You got a stock you want to add to your watchlist?

Boyd: Andy said that CuriosityStream is growing, I think, its revenue by 80% or 100% in the last year or last several years.

Cross: Yeah, that range.

Boyd: That is extremely compelling, Chris. [laughs] I think I’m going to go with CuriosityStream this week.

Hill: Yeah. I don’t know that sleep apnea is growing at that rate.

Cross: Dan’s also a lifelong learner, so I feel the curiosity with him.

Gross: There you go

Hill: Andy Cross, Ron Gross, guys, thanks for being here.

Gross: Thanks, Chris.

Cross: Thanks, Chris.

Hill: That’s going to do it for this week’s edition of Motley Fool Money. The show is mixed by Dan Boyd, our producer is Mac Greer. I’m Chris Hill, thanks for listening. We’ll see you next week.