← Motley Fool Hidden Gems Investing
Motley Fool Hidden Gems Investing
Your “Portfolio Wrapped”
00:38:54
Some stocks defy gravity, others drive Warren Buffett to sell in less than a year. We wade through them all and put our own twist on Spotify’s annual Wrapped release.
Loading summary
Transcript90 lines
- [00:05]
Dylan Lewis
We've got some musical stocks and musical numbers. This week's Motley Fool Money radio show starts now.
- [00:19]
Jason Moser
Everybody needs money. That's why they call it money the.
- [00:23]
Dylan Lewis
Best things in life are free but you can give them to the birds and be like.
- [00:30]
Jason Moser
From Poole Global Headquarters, this is Motley Fool Money.
- [00:33]
Dylan Lewis
It's the Motley Fool Money radio Show. I'm Dylan Lewis. Joining me over the airwaves, Motley fool senior analyst Jason Moser and Asit Sharma, Fools. Great to have you both here to be here. We've got some wicked stocks for moviegoers this holiday season. Our portfolios unwrapped and of course, stocks on our radar. We are going to start out with some end of week earnings and we're going to start in the cosmetics department. 2024 has not exactly been a great year for Ulta Beauty. But asit, based on the earnings report this, it looks like things might be getting a little bit rosier.
- [01:07]
Asit Sharma
Dylan I think investors were just relieved that the numbers didn't decline further. We had a small net sales increase here of 1.7%. Not a lot on the top line. Earnings per share came in at $5.14, a little bit above what some analysts were expecting. I want to note here that comparable sales, this is the sales versus the prior year quarter, those only increased by 0.6%, which makes sense in an economy where people are pulling back a little bit on their spends. The stock is up today. I think this is partly because investors like what happened below that top line. I think Ulta managed the quarter pretty well. When you look at gross profit, it grew just a little bit. They controlled shrink. That's inventory loss. That can come from mishandling inventory. Let's admit it, in this day and age, some inventory theft that helped the line right below the sales. Then on overhead costs. One of the things that stood out to me is that management got less money in terms of their incentive compensation because they didn't hit their targets. The company did a good job managing its selling, general and administrative expenses. Overall, you have a picture of a company that's doing what it needs to do in this type of environment, which is run a tight ship and frankly lastly opening new stores. They opened 26 net new stores during the quarter versus 12 stores in the comparable period last year. I think this is an execution based quarter and Wall street and other investors.
- [02:50]
Dylan Lewis
Were relieved to see that one investor that people are paying attention to in particular when it comes to Ulta is Warren Buffett and Berkshire Hathaway. Jason Ulta was a Berkshire stock for about 20 minutes. They built up a stake about a quarter ago. Then we found out recently that they have sold out the majority of that position. That is highly unusual behavior for Buffett and his team.
- [03:17]
Jason Moser
That is. That is very unusual. I was surprised to see that. I think probably when we thought about this purchase from the beginning, it seemed like it was right up their alley in sort of the vein of a value investment. Right. I mean, it's a stock that was trading at a pretty depressed multiple. And I think for a lot of reasons that ASIT just told us about there, right, growth has really kind of hit a wall and they are kind of having to recover from that pandemic boom that they witnessed. So I understand maybe given the numbers that we're seeing today, if they feel like the thesis really wasn't playing out the way they thought it would, maybe they saw an attractive valuation with some attractive growth prospects going forward. If only one of those two things is coming true, then I guess it makes sense that they decided to go ahead and move on. You look at the stock today with the market's reaction to the quarter, you've got it now valued at close to 19 times full year earnings estimates. Definitely the picture has improved from the market's perspective. I guess he's probably wishing he was able to still be on board today. So it goes in the world of investing.
- [04:27]
Dylan Lewis
I never thought I'd say it, but Warren Buffet, you got to think long term, man. You can't be in and out on these things quarter to quarter.
- [04:35]
Asit Sharma
One of these days he'll learn.
- [04:39]
Dylan Lewis
A monster day at the end of the week For e Signature company DocuSign shares up 20% on earnings. That actually struck a pretty similar tone to what we saw from Ulta. Jason ahead of estimates management saying the bar for full year results also going to be a little bit higher too.
- [04:55]
Jason Moser
Yeah, this was a good quarter. There are signs that things are starting to pick back up for Docusign's business. Remember, there was a leadership change here not all that long ago. They outperformed guidance that they set last quarter across the board. That's encouraging as well. They saw the number of large customers which are spending over $300,000 annually with business that increased both year over year and quarter over quarter. That number came in at 1,075 this quarter versus 1066 from just a quarter ago. Very encouraging there that they're bringing more customers in, those customers are spending more. All of the metrics that matter really reflect a business that is starting to see better days. Total revenue was up 8% subscription revenue up 8% saw billings up 9% dollar net retention rate increased to 100% coming off of its low of 98% from quarter four of fiscal 2024. All in all, it does feel like they've got this business going back in the right direction, guiding for around $760 million in revenue at the midpoint here for this current quarter. That would represent close to 7% growth from a year ago.
- [06:01]
Asit Sharma
Yeah, Jason, I really like the comeback that Docusign has made in the past couple of years. I think they're executing well. The one question I have that's overhanging all of this newish management really wants to bring the company back to its basics and they've succeeded in doing that. Being more of this E signature company with some add ons before they were trying to be a total agreement platform and that just didn't work out. But I do wonder over time and we'll watch this. The effect and threat of Adobe, which is its rival competitor in the space and very big competitor, we should say, if that ultimately provides sort of a crimp on the ability of DocuSign to grow that top line.
- [06:40]
Dylan Lewis
Something I'm mindful of looking at Docusign and maybe a little bit surprised by. Even though I'm a shareholder. Shares of the business up 75% year to date. This is one that I have radically adjusted my expectations down on because I've gone through the highs and lows. I'm a shareholder from 2018 and 2019 pre pandemic, but I've been on the rollercoaster ride at this point. Jason, where does this stock sit for you in terms of expectations and your excitement about building to a position or adding to a position?
- [07:10]
Jason Moser
Yeah, I think that's fair. I'm in the same boat you are. I've owned it for about that same period of time. It's obviously been a good performer. I think that that stretch during the pandemic warped all of our expectations. We saw so many things happen and saw so many of these companies just fly to the moon. I think that raised our expectations overall, perhaps unreasonably so I don't think my expectations were quite that high pre pandemic when I initially purchased the stock. I'm having to reset my expectations as well. It's a good business. I continue to own it. I have no plans of unloading it. I think that keeping those expectations in check, if this is a business that can grow that top line at around 10% annually. I think that's a good thing. The stock will reflect that over time, but it will take some time.
- [07:57]
Dylan Lewis
Wrapping us up on the earnings beat. Healthcare cloud company Viva Systems, also in the green post earnings this week. This is one that is widely recommended in the full universe, but not exactly a household name. I want to dig into the earnings results asit, but first we probably need to provide a little bit of an explanation. Healthcare cloud company Unpack that one for me.
- [08:15]
Asit Sharma
What does that mean in this context, Dylan? It means that Veeva provides a lot of stuff for pharmaceutical companies and biotechs to run their business. The thing they're known for is customer relationship management. They help pharmaceutical teams market their products, engage in developing promotional materials, but they also have a regulatory side. This is called VIVA Development Cloud that helps companies manage clinical trials, it helps them comply with regulatory requirements, et cetera. You can think of this as a toolkit to run your pharmaceutical or biopharma business.
- [08:51]
Dylan Lewis
Let's dig a little bit into the results that they posted. Market obviously liked them. What did you see?
- [08:56]
Asit Sharma
Yeah, I thought this was very healthy. Subscription services, which is the biggest part of the company's top line, increased about 17% year over year. They came in with great operating income that jumped 41% year over year. I think for me, what stood out, Dylan, was the fact that this transition that Viva has been undergoing for a few years now to break away from salesforce.com and offer its own solution, which is called Vault CRM, is really succeeding with its major customers. There was some trepidation in the marketplace in past quarters that maybe some big customers wouldn't come on board with this new solution. But now Viva has a lot of major pharmaceuticals all to itself. It's not sharing that revenue with salesforce.com anymore. It looks like the transition, which is really going to occur mostly in 2025 and beyond, is going well. The other thing that's notable here is that we were a little negative about viva's CEO Peter Gassner maybe about a year and a half ago when he was asked by analysts how they were going to compete in terms of generative AI, and he didn't have a great answer. But I have seen them come on board with some great new solutions. They've got a CRM bot, they've got overall gen AI assistant. The most interesting thing I think is they've got this large language model which helps with medical, legal and regulatory reviews. The bot can tell you if you're about to put some content in your promotional materials that isn't kosher with the fda. I think this is pretty good. They've come very far away in a short amount of time to get on board with what's now table stakes in the software industry with that strong Genai offering.
- [10:38]
Dylan Lewis
We're in the age of bots. Everyone's got to get on board.
- [10:41]
Asit Sharma
You need them. I need one myself.
- [10:44]
Dylan Lewis
We all do. Coming up after the break, we've got a special twist on an annual favorite, and we're checking in on why the future might be so bright for Airbnb. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis, here on air with Jason Moser and Asad Sharma. A big week for events in the investing world. New York Times had its DealBook Summit in New York. Wired had its big interview event in San Francisco. All to say, a lot of interesting CEO soundbites out this week, including Airbnb CEO Brian Chesky saying that the upcoming year will be one of the biggest reinventions of a company in recent memory. Jason, what should investors be expecting from Airbnb next year?
- [11:32]
Jason Moser
He's definitely playing his cards close to the vest here, but you do have some ideas. It was interesting. He had talked about in the most recent quarterly call about how they plan to grow this business beyond just a place where you can book rooms. He said for the last 17 years, basically just sold one thing, which is vacation rentals, Airbnb homes by the night. But there are a number of complementary ways that they can go with that in order to expand this business. The plan is. And he said this as well, he said, what I expect is every year now, for the coming years, is to launch one to two businesses that will generate $1 billion or more of revenue per year. I think that makes a lot of sense. They're really diving more into the experiences side, which is clearly very complimentary. Maybe taking a little bit of a page from something like a TripAdvisor book there. I think that one of the great qualities of Airbnb as a business is just the size of its network. That's one of the reasons why we like it so much here at the fool is the size of the network and the power. Those network effects come from that. But then also he said this. If you could bet on one company to expand internationally, then he thinks it would be a global travel network. That makes a lot of sense. I think that that's the direction that they're headed. They're trying to basically turn Airbnb into a global travel network. And offer travelers everything really under one roof.
- [13:05]
Dylan Lewis
As you noted, no shortage of adjacent markets for a company like Airbnb. Experiences are a big one. But you think about it, we have travel booking you have accommodations for while you're travel at your own home, things like pet care, whatever it might be. Asit as you're trying to size up some of the optionality and some of the potential futures for a company like Airbnb, what are you paying attention to?
- [13:25]
Asit Sharma
I'm paying attention to the tech side of the business, Dylan. I think what Jason highlights is so important here. As investors we tend to over index on the single business model we're familiar with. Is Airbnb going to have supply in different cities? Will it be able to meet demand? But they pay so much attention to the tech on their platform. It really opens it up for them to then have these lateral revenue streams like experiences because they've already built the infrastructure. I think this is going to show or be demonstrated by management to be one of the virtues of the platform that most investors really don't have on their radar screens.
- [14:01]
Dylan Lewis
We got another update from another fool favorite, Spotify. Their annual wrapped hit users this week. This is the user guide to the user itself, a look at all of the data on listening activity that users have had over the past year. And Jason, we are going to have a little bit of fun with this, but I want to start with the listening that you were doing in 2024. What's something that was in your ears this year?
- [14:27]
Jason Moser
Well, I probably sound like a broken record. Anybody who knows me knows that I'm a big Widespread Panic fan, have been for many, many years. And it's neat because you get old music but it's new music. They released these concerts, these shows that they played in and their soundboard recordings that sound really good. They just put out this one from the Warfield Theater in San Francisco on July 4, 2000. It was night four of a four night run. That's what we call in the business a heater. It's really good. I've got that thing on repeat.
- [14:59]
Dylan Lewis
Asit, what was top of the charts for you in Spotify?
- [15:02]
Asit Sharma
Top of charts for me is a Turkish singer named Melis Fiess. I'm going to spell that M E L I s last name F I S. She's a great young artist. Check it out if you have time. One that came on my list out of my top five who was probably in the number one spot last year is an Italian pop diva. Her name is Nina Zilli and this year she had. Well, she recorded a number of years ago, but I discovered it this year. A great cover of you Can't Hurry Love. So danceable. I got so much exercise whenever this would come across my Spotify and I would play it and repeat it, I just couldn't help dancing. So check that out. La Mora by Nina Zilli.
- [15:47]
Dylan Lewis
Wow. I think you have slightly more sophisticated taste than me.
- [15:51]
Asit Sharma
I didn't want to go through my lowbrow stuff. It would be too embarrassing. Maybe next week.
- [15:57]
Dylan Lewis
We are a money and investing show. In addition to the music recommendations, I want to dig into our own version of Wrapped and that is our portfolio wrapped for 2024 listeners. I asked Jason and Asit to dig into their brokerage accounts and look at two things. Their heavy rotation, the most added to position for the year and a discovery pick. A company that was new to their portfolio this year. Jason, you're up first. What was your heavy rotation and discovery pick?
- [16:25]
Jason Moser
Well, surprise, surprise, surprise, Dylan. It's Axon Enterprise. We've talked about Axon before here on the show. I know it's a very popular stock in our universe and I had opened up a position a while back, added to it over the course of the year, added to a winner. Like David Gardner says, it's really fun to do that.
- [16:45]
Dylan Lewis
What about over on the Discovery side?
- [16:48]
Jason Moser
Yeah, actually just introduced two new stocks to my portfolio this year. Not many, but Prologis is one. Matty Argersinger talks about this one a lot. Strong conviction here in our universe. I like the dividend, the focus on warehouses and distribution along with the burgeoning data center opportunity. Then I added Viva. Believe it or not, we just talked about it. Strong global demand for this cloud based solutions company in life sciences. In the most recent quarter you saw strong growth and it looks poised to continue. Feeling good about those two Asa, you.
- [17:18]
Dylan Lewis
Were deep tracks when it came to the music side of things. Are you also going to be deep tracks when it comes to the companies that entered your portfolio and the ones that you were buying this year?
- [17:26]
Asit Sharma
A little bit here. Dylan, just as I would advise people not to follow me wholeheartedly into my musical tastes. Same with these Heavy rotation for me was a bit of a speculative company which is Upstart Holdings. Many people know this company. It's an artificial intelligence based platform lender. It was down and out during the peak of the interest rate cycle. I did some cash flow analysis and decided look, they'll stick around. I think perhaps they've got some destiny here that could be a little better. I was buying steadily through the year. As the year wore on, they did announce some more things to shore up their capital base. I think they'll perform well as interest rates decrease. I think they've made it through a really tough interest rate cycle. Be careful with that one. You can nibble on it. In terms of a new company on my playlist, Jason's heard me talk about this, but I added GE Aerospace. It's a company with a wonderful razor and blades model. They make these advanced jet airplane engines, but they also sell a heck of a lot of parts and provide a lot of service and that's really where the bulk of their profits come from. So a solid, interesting play symbol.
- [18:38]
Dylan Lewis
GE What I like there is two different versions of buying in bits. Axon, a company on its way up, offset you being a little bit more opportunistic with upstart as the market gives you chances. Guys, we are going to come back to you in a little bit, but the stock ideas are going to continue. Up next, we've got some stocks based on musical Wicked. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Dylan Lewis. Wicked first debuted on Broadway more than 20 years ago. This holiday season, it came to a new generation of fans and return to many longtime ones on the silver screen. This week, my podcast co hosts Ricky Mulvey and Mary Long dug into the early holiday box office numbers for the book turned musical turned movie and offered up some Wicked inspired stocks.
- [19:30]
Ricky Mulvey
First off, let's kind of zoom out and look at how Wicked actually did over this weekend because anticipation is one thing and this movie certainly had it. But did that anticipation actually translate into people get into the theater to see it?
- [19:43]
Mary Long
So let's break out two things. One is the overall box office and then also Wicked. We're here because we are fans of wicked. Even though Moana 2 kind of ruled the day for the Thanksgiving weekend, Wicked 2 is still helping out a lot. So it made about 373 million since its release. That was on a budget of 150 million. We don't know how much marketing plays into that. There's been a lot of Wicked ads out there, but over Thanksgiving, movie theaters, they might be back. This was the biggest weekend for theaters in North America ever, 100 million more than 2018. However, people are only going for these big events and that included Wicked, Moana 2 and Gladiator 2 over this weekend.
- [20:24]
Ricky Mulvey
You're a fan of movies. I know you saw Wicked. Did you all see Gladiator 2.
- [20:28]
Mary Long
I did not see Gladiator 2. I did not See Moana 2. I did see Wicked, and I really liked it. Like, I was ready. I was ready to be a hater. I'll be real honest. I thought it was a half hour too long, but I thought it was excellent. I loved the music, was great. I thought it was really interesting how they brought in these very large physical sets. And while they did use CGI in the movie, I liked that there was a big physical element of it that made it sort of wondrous and feel more real. How about you?
- [20:50]
Ricky Mulvey
Yeah, I totally agree with you. I was also ready to be a hater. I'm a massive fan of Wicked, the musical. I grew up doing theater, and Wicked came out when I was really young, and it just totally cemented a love of theater within me. So I was always going to see this movie, but I didn't have super high expectations because I didn't know that anything could really hold up to the actual stage production. I don't think that it's comparable to the stage production, but I was wildly and very happily impressed with what they were able to do. I felt like a lot of the cinematography, the choreography, the beauty and fantasticalness of the set paid homage to the fact that it is a stage production to the Broadway roots. But they also added in kind of more conversation, more scripted moments, rather than just pure music. That made it really fitting for a movie. And I was surprised at how much I enjoyed the movie as well.
- [21:44]
Mary Long
Let's get to the business side of this. I know you. I haven't seen the musical. I've only seen part one of the movie. And Wicked was really. We talk about legacy sequels going on a lot in the movies right now. You think of Beetlejuice, Beetlejuice Studios trying to bring back things that were popular in the 80s and 90s. And really, Wicked was the first kind of Legacy sequel when it hit Broadway. Now it's been the most successful Broadway musical commercially. I'm not in this space as much as you are. What do you think made Wicked so commercially successful?
- [22:12]
Ricky Mulvey
I see three kind of main things. One is that it's great music. Every single song is a banger. There's fantastic melodies, and that just makes it so easily lovable. That said, there's still a lot of great art that doesn't have Wicked's commercial success. So what else? Okay, great music being the first piece of this formula. The second piece, I would say, is like, you have two things moving together. One you have a universally known story, and then you have a new perspective on that story. Everybody knows the wizard of Oz. This is especially true when Wicked came to Broadway. Every generation at the time was familiar with the wizard of Oz. So this is a musical that's born with Universal brand recognition, but you also have a story that is pretty early to an idea that I think now is pretty commonplace in culture, like the story of the antihero telling the story of the villain and offering it a new perspective. Wicked was super early to that trend that, again, is now kind of like everywhere you turn in popular culture. So that second piece is, okay, you've got this one, two punch where the story behind the show is operating in a fantastical world that people are. That's very visually appealing and that people are already incredibly familiar with, but you're telling a whole new story and offering a whole new perspective on that world. And also, Wicked was doing this like the musical. Wicked was doing this at a time when that kind of continuation didn't feel as commoditized as it might today. And then the third piece, and I think that this applies more to the movie rather than the Broadway production, is that you kind of got what I'm going to call the Taylor Swift effect. You have a lot of the audience that Wicked initially catered to, and perhaps I'm speaking for myself a little bit, but like, teenage girls, especially theater kids that loved Wicked when it came out and were early fans to it, are now decades older, and they're going to see this show in troves. And who are they bringing with them? Their kids. And I think that's. I call it the Taylor Swift effect because it kind of hits the same demographic that Taylor Swift cornered. And so you have millennial women that really, really latched onto this. That said, Wicked is not only for that target demographic, but I think that is certainly a thing that contributes to the commercial success of the movie thus far.
- [24:27]
Mary Long
I mean, it was not a predominantly male crowd in the Alamo in Denver when I was going. We've got a few stocks for Wicked, though. Now we're getting into the business. And I think it's an interesting time to kind of talk about Comcast, Universal, because people want to talk about the media side of Comcast as a way to talk about the business. And there are fun questions. What can the Parks do? What can the media business do for this, especially as they're doing spinoffs? But the thing I keep reminding myself of is this is such a small part of that company or a relatively Small part of the company. When you look at Comcast, if you're a stock investor, it's fun to ask questions. How many people are going to go to the Universal parks, that kind of thing. But this is a business where the business and residential connectivity part of it, the cable and Internet side, made up about $8 billion worth of earnings in the third quarter of 2024. 8 billion. When you look at theme parks, media and studios, that's 2 billion. And that's where investors are finding the growth year numbers. But if you're approaching Comcast, Universal and you're interested in the parks and the media side of it, the real questions you have to ask are about the cable and Internet business.
- [25:31]
Ricky Mulvey
Wicked is as you just mentioned, it's a massive brand, but it's a small piece of Comcast's actual business. It's a small piece of their parks business and a small piece of Comcast itself. What real questions should investors be asking themselves?
- [25:45]
Mary Long
So I should be clear, you can ask some fun questions. There's really fun parts of this business. And for example, Universal is going to open up Epic Universe next year. And for the first time Universal Studios is going to have more of a multi day offering for people going to Orlando. They can go to more worlds from Harry Potter and How to Train youn Dragon and even this big Monsters Unleashed type ride which is going to feature incredibly technically advanced audio animatronics. That's fun. And there's also growth questions for Peacock especially, you know, are people going to cancel after the Paris Olympics? How's that going to play out into next year? But for me, if I'm looking at Comcast, one less fun question that I'm asking is how are people going to get their Internet in five to 10 years? Because there's a chance that some of that could come from low earth orbit satellites. If we can put more of those up there or not, we. I'm not running these rocket ships but if these space companies can more of those up there and there's a more competitive offering for Internet, that could hurt the dominance of a lot of these cable providers and Internet providers.
- [26:45]
Ricky Mulvey
I want to take us back to Parks really quick because I know you said that that's a much smaller part of the Comcast business. But you say Parks, my head immediately goes to Disney. Why isn't Disney building more parks?
- [26:56]
Mary Long
It's a good question. I mean when you look at Bob Iger's memoir, the real feather in his cap is the opening of Shanghai Disneyland. And right now they're really focusing on cruises and their media business. I think they're trying to find growth elsewhere though.
- [27:08]
Ricky Mulvey
We promised some stocks for Wicked. Here's one that kind of plays to one of the songs. One of the more famous pieces of this musical. Ricky, you've got a stock that's defying gravity, I believe.
- [27:18]
Mary Long
Yeah, we talked low Earth orbit. How about Rocket Lab right now? And this is one where I'm having to remind myself of foolish investing fundamentals. And there's a lot more excitement into the business of space. We saw a couple of days ago, for example, Jared Isaacman leave his post its shift four payments to head up NASA. And he said something on X that gave me some optimism writing quote, space holds unparalleled potential for breakthroughs in manufacturing, biotechnology, mining and perhaps even new pathways to new sources of energy. There will inevitably be a thriving space economy, one that will create opportunities for countless people to live and work in space. One of the companies that's central to this right now is Rocket Lab. And right now they have a rocket called the Electron. And this can pool about £660 to low earth orbit. You can think of a few people that are able to hop on even though it's not carrying people. A few people in terms of its payload. They're working on a rocket called the Neutron though, which is planning to pull about £29,000. This is about two adult elephants plus a juvenile, depending on the sizes of the elephants, but significantly more. And this is one where I'm really having to remind myself when you hold a rule breaking stock where it's hard to apply those traditional valuation metrics, this is one where don't get involved with it, let your winners run. Because ultimately what I'm thinking with this company, it's not next quarter, it's not next year. This is a thought and a thesis around a space economy that's five to ten years from now and it's still a $10 billion market cap company.
- [28:48]
Ricky Mulvey
I know that you've long been interested in space, but how long have you been following and invested in Rocket Lab specifically? Have you been along for the ride for a really long time or are you kind of newer to this game?
- [28:58]
Mary Long
No, the stock that's done the best in terms of percentage of my portfolio and I've only been invested in it for less than a year. So that's part of my concern with it where I'm like this thing's going really high, really quick. But also I've had plenty of losing stocks and losing ideas that have lost Me money. So this is making up for some of those losses.
- [29:19]
Dylan Lewis
Okay.
- [29:19]
Ricky Mulvey
To round us out, we each picked a stock that pays homage to the original King of Oz, L. Frank Baum, the author of the original books. I decided to go with L Cosmetics. That's because the name alphaba, the protagonist in Wicked, the creation of that name. The author of the book Wicked, Gregory Maguire, said that he came up with it by thinking about L. Frank Baum. How could he kind of like give a nod to him in the book and Elphaba elfb was his way of doing that. So I thought, hmm, what could be a fun way to nod to Bomb as well? And Elf was kind of the first point that got me there. But beyond that, I think if you think of Elf as a company, just the cosmetics piece. Okay. We can also connect this back to Wicked. There's a lot of green makeup that goes into Elphaba on the Broadway production each day. So not that Elf is actually the company behind that, but that was a nice little tie in for me too. Beyond that kind of more fun stuff, the actual stock stuff. Elf has been a little bit volatile recently, but the company is still generating big time growth. So it's got about 50% gain in sales in the most recent quarter. This is less, to be fair, than the 70 to 85% growth rates the company saw in kind of quarters past, but I don't view that as terribly worrisome to the longer term story. Gross margins are expanding too, and Elf continues to gain market share and it does know its audience. I find this maybe one of the most exciting pieces of the story here at a time when a lot of legacy makeup makers are struggling. I like Elf's accessibility. It's up to 80% less expensive than Estee Lauder and L'Oreal products. And its seeming flexibility and responsiveness to its audience. It plays a lot on TikTok, caters to a massive audience there. They take reviews from users and then use that to change their products in the future. And just that responsiveness, that nimbleness, I think sets it up for long term success.
- [31:08]
Mary Long
Well, I'm glad you mentioned marketing because L. Frank Baum was really, he was a great marketer and that was his job before he was successfully publishing these novels. The stock that I went with is Dick Sporting Goods and I'm going to connect it to there in a little bit. But L. Frank Baum is a great American dream story. There's a documentary on PBS called American Oz about his life that I enjoyed watching. And earlier in L Frank Baum's career, he went to Aberdeen, South Dakota, kind of hoping that this would be the next Chicago. And what he did is he opened this sort of exotic goods and novelty store where he would get like little trinkets and toys from all across the world and try to present them in interesting and beautiful ways simultaneously. He tried to make that store sort of a community center. So he would sell bicycles, but then he would also have a, like a bicycling club, hoping that he could start these like community groups that would go in, buy their products and then enjoy like meeting new people there. This kind of fell apart when a drought hit and you had these farmers that were buying these toys and gifts for their children when they're not selling their crops. That becomes an incredibly easy thing to cut out. And the business went under. I think of this with Dick's Sporting Goods because this is a company that's really understanding experiential retail. Right now they're opening these large house of sports stores in Minnesota. They have an ice rink there. They are trying to get more people in for golf simulators. Trying. They've even used the word third place in some of their investor presentations. And the reason I'm thinking about this is because they're doing exceptionally well right now. I think it's a very well run store and when you go in, you're taken back by the merchandise and it really is beautiful when you walk in Addict Sporting Goods. But my question is, what happens in a recession? Are people going to cut back on some of those higher end purchases for things like sporting goods?
- [32:50]
Ricky Mulvey
Let's close this out with not a stock but a song. Ricky, favorite song from Wicked.
- [32:55]
Mary Long
You know what I've been listening, I've been listening to for good from Part two. And honestly that's, that's a pretty good one. How about you?
- [33:00]
Ricky Mulvey
I think the wizard and I, that's the third song in the movie slash musical and oh my gosh, defying gravity is great and that gets all of the attention. But the wizard and I gives me chills like none other.
- [33:12]
Mary Long
It is so amazing and I'm excited to hear Dylan sing it in the next segment. Thanks all.
- [33:16]
Ricky Mulvey
It's strange.
- [33:21]
Asit Sharma
Chewy.
- [33:22]
Dylan Lewis
Strange listeners. I think I'll try to find a way out of Ricky's setup there. Looks like we've got a commercial break coming to save me. And let's be real, you don't need to hear this seventh grade chorus dropout sing. But you do need to stay right here because Jason Moser and Asit Sharma will be back with me in just a few minutes. With stocks on their radar, you're listening to Motley Fool Money. Must be the season of the witch. Must be the season of the witch.
- [33:50]
Asit Sharma
Yeah.
- [33:54]
Dylan Lewis
As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell anything based solely on what you hear. As always, all personal finance content follows the Motley fool editorial standards and is not approved by advertisers. Motley fool only picks products it would personally recommend to friends like you. I'm Dylan Lewis, joined again by Asit Sharma and Jason Moser. It's the holiday season and ChatGPT maker OpenAI is getting in on the fun with their 12 Days of Shipmas asit. The team is pushing out new products, new features, new demos, and also a new Product tier A $200 monthly subscription, their pro version that gives you unlimited access to some of their tools and advanced voice mode.
- [34:36]
Asit Sharma
What do you make of this, Dylan? I think there's room for pleasant surprise and unpleasant surprise here. I'm pleasantly surprised by the amount of stuff that OpenAI and competitors like Anthropic have put out over the last year. And here we're headed to the year end. They're still churning out new stuff for us to look at and so much of it has been useful. Unpleasant surprise a little bit in that commerce has to come in somewhere. This seems like a very high price tag. You can get the now premium version of ChatGPT for 20 bucks a month and you get so much with that. Here we have what promises to be a pretty interesting reasoning module, but is it worth an extra 180 bucks a month still untested? I'm not so sure.
- [35:19]
Dylan Lewis
Well, I mean, somebody has to pay for those server costs, asit. We can't just be throwing billions and billions of doll in here with all of these prompts and expect to be able to get it for free.
- [35:29]
Ricky Mulvey
True.
- [35:29]
Asit Sharma
And I'll note that on the sidelines there's word that OpenAI is trying to renegotiate a clause they have with Microsoft which says that if they ever develop AGI. So this generalized Artificial intelligence, the big, the holy grail of artificial intelligence. Right now, Microsoft doesn't have any economic interest in it, but they need money. OpenEye needs money. So they're trying to renegotiate that clause and say, okay, if we develop the killer application, you can keep investing in us. Yeah, money is a consideration here.
- [35:59]
Dylan Lewis
Let's get over to this week's stocks on our radar, our man behind the glass, Rick Engahl is going to hit you with a question. Jason, you're up first. What are you looking at this week?
- [36:07]
Jason Moser
Yeah, going with Block Ticker sq. Just recent news here. Wealth management firm Bernstein named Block its best idea for 2025. I thought that was interesting. It certainly had a nice back half of the year. Shares up now around 24% year to date. Recent press release noted that for Black Friday Cyber Monday, the Block ecosystem of commerce tools broke Records. Dylan. With 144 million block consumer transactions globally, up 17% from a year ago. I also like the fact that Dorsey is starting to wind down the TBD efforts, focusing less on things like title, getting back to the core of the business, focusing on what they do best in commerce, software, payments and lending. I think better days ahead for Block.
- [36:50]
Dylan Lewis
Rick, a question About/Ticker SQL.
- [36:53]
Jason Moser
Any truth to the rumor that they're.
- [36:54]
Asit Sharma
Changing their name to Cube?
- [36:57]
Jason Moser
It reminds me of our market foolery from years ago when I came up with the trapezoid. That was a good April Fools episode.
- [37:04]
Dylan Lewis
That will be their entrance to the metaverse. Right? You get things in virtual reality. It's the Cube Asit. What's on your radar this week?
- [37:11]
Asit Sharma
On my radar is Wingstop. This is a company that took a hit after its latest earnings report. It's been growing extremely fast. The company is trying to take its unit volume, average unit volume of each store north of 3 million bucks. And it's well on the way to doing that. But what I really like about Wingstop is the fact that investors, the franchisees get a phenomenal cash on cash return 50 to 70%. That's really created this huge development pipeline of franchisees wanting more locations. Wingstop is unstoppable in this regard and they're also teaming up with the NBA. They are the official wing of the NBA just now. I think between a really good marketing budget and a lot of store expansion, there are brighter days ahead. I see this as an opportunity this hit. They took about 20% after the latest earnings report to get in on a franchise that wants to glow global.
- [38:03]
Dylan Lewis
Rick, a question about Wingstop Ticker wing.
- [38:07]
Asit Sharma
Mild, hot or atomic? Or do you go for the weird.
- [38:10]
Jason Moser
Hawaiian or lemon pepper wings?
- [38:13]
Mary Long
What are you ordering?
- [38:14]
Asit Sharma
Where it's possible to mix or melt a teriyaki with an atomic type of spice level. I go bananas for that man.
- [38:22]
Dylan Lewis
Ozit's taste on today's episode on full display and absolutely fantastic across the board. Rick, you have a record breaking company on one hand and the NBA's official wing on the other. Which one are you going with? Which one's on your watch list?
- [38:34]
Asit Sharma
It's almost lunchtime. I'm feeling hungry.
- [38:37]
Ricky Mulvey
Gonna go with.
- [38:37]
Dylan Lewis
Can't go wrong with wings.
- [38:38]
Jason Moser
Yeah.
- [38:39]
Asit Sharma
Yeah.
- [38:39]
Dylan Lewis
All right. That's gonna do it. For this week's Spotlightful Money Radio show show is mixed by Rick Engahl. I'm Dylan Lewis. Thanks for listening. We'll see you next time.