Motley Fool analysts Jason Moser and Ron Gross share data that proves staying in the market is much more efficient (and lucrative) for investors than jumping in and out, and they also discuss:
- Etsy (ETSY 2.49%) increasing its seller transaction fee.
- Block's (SQ 5.58%) transaction revenue growth.
- Home Depot (HD 2.12%) and Lowe's (LOW 2.54%) getting different reactions from similar fourth-quarter reports.
- The latest from Beyond Meat (BYND 2.26%), MercadoLibre (MELI 1.93%), Fulgent Genetics (FLGT 4.64%), and Booking Holdings (BKNG 3.59%).
And Motley Fool Chief Investment Officer Andy Cross talks with Jeff Green, CEO of The Trade Desk.
Jason and Ron answer a listener's question about how to build a portfolio. Jason's radar stock is Zoom Video Communications and Ron unveils his "Resilient Basket" of stocks!
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 Feb. 25, 2022.
Chris Hill: The urge to time the market is a strong one. It's also the wrong one, which is why we never time the market. Motley Fool Money starts now.
It's the Motley Fool Money radio show. I'm Chris Hill and I'm joined by Motley Fool senior analyst Jason Moser and Ron Gross. Good to see you as always, gentlemen.
Ron Gross: How are you doing, Chris?
Jason Moser: Hey.
Chris Hill: We've got the latest headlines from Wall Street. We'll talk with Trade Desk CEO Jeff Green, and as always, we've got a couple of stocks on our radar. But we begin with what was looking like another rough week for investors before a surprising turnaround on Thursday. We're recording this while there are still a few hours left in the trading day on Friday. But as of right now, both the S&P 500 and the Nasdaq are positive for the week. Ron, when you consider everything in the market, Russia's invasion of Ukraine, this is one more reminder of why we never try to time the market.
Ron Gross: That's exactly right, Chris. Believe me, I wish I could time the market. [Laughs] That would be awesome. I'm not against having superpowers, that would be really cool. But I don't see how it's possible and I think history shows us that it's not possible. You mentioned the Ukraine conflict, did anyone out there really predict that the Nasdaq would be up 3% on Thursday? The day the war began, the largest conventional military conflict since World War II? I did not expect the market to be up let alone up 3%. Now, there is plenty of theories why it was up. We had some solid economic data, we believed that maybe the Fed would trend a little bit more lightly, reports that Russia may come to the negotiating table. My colleague John Rotonti pointed out that maybe buy algorithms kicked in when the Nasdaq hit the 20% decline level. Who really knows? On the other side of the coin, who expected the COVID correction to rebound so quickly? How many people sold out of the market in early 2020 and didn't get back in time for this incredible rebound that happened when vaccines came into play? My point is, who really knows? History has proven we do not need to know. Buy great companies, stay in the market, don't trade, don't have money at risk you need over the next three years. That way, you can just sit tight, you can watch it all unfold in front of you without any major financial impact to your life.
Chris Hill: Yeah. Jason, you and I spend a decent amount of time on Twitter and it seemed like, particularly on Thursday, so many people were scrambling to come up with how and why this was happening, and fortunately, there were a few people, to Ron's point, making the point on Twitter like, "Hey, look, nobody knows why this is happening." Again, this is why we don't time the market.
Jason Moser: Yeah. I feel like every time we run into these stretches, my mind immediately just goes back to this is why we invest the way that we do. I know that sounds like a broken record, but it's important, it matters. We need to keep reiterating it. There are plenty of studies out there that show over the course of decades, if you exclude the 10 best and the 10 worst days of the market in any given decade, that alone can have a profound impact on your returns. But then think about that from the perspective of how likely are you to be able to predict any of those days, 10 days within a decade. [laughs] Think about that for a second. You're not going to be able to do it. It really does just all go back to what Ron said, find great businesses, invest in them, and you can afford to be patient in times like these understanding that over time, those good businesses will continue to perform, market dynamics will change as situations change.
Chris Hill: Let's go to some companies then, and we're going to start with Etsy. Fourth-quarter profits were much higher than expected and the company is raising its seller transaction fee from 5% to 6.5%. A 1.5% increase may not sound like much, Jason, but shareholders appear to love this decision.
Jason Moser: Indeed, it was a strong holiday quarter for Etsy. This was really what the doctor ordered for this company. Gross merchandise sales for the quarter $4.2 billion, it was up 16.5% from a year ago that resulted in revenue of $717 million. That was up 16.2%, and so that gives them a take rate there of 17.1% which is really what helps guide this business forward. They continue to grow that gross merchandise sales number and that revenue just continues to follow along because they provide such a valuable service for so many of their merchant customers. For the year, they pushed through $13.5 billion in gross merchandise sales. Most of that was Etsy, but I was really pleasantly surprised to see that Reverb, that acquisition of the music space they made a little while back, that was responsible for $950 million, so very impressive. They continue to grow the seller base and the buyer base, they have now have 7.5 million active sellers, 96.3 million active buyers. A lot of those buyers are repeat buyers. This is a mobile company, 65% mobile gross merchandise sales for the quarter. As you mentioned, raising that seller transaction fee just a little bit, 5-6.5%. But that is going to give them additional capital to reinvest back into their network and continue building out the services and tools that their merchant customers value so much.
Chris Hill: Transaction revenue for Block rose in the fourth quarter. The company formerly known as Square also highlighted the growth of its Cash App as a driver behind strong guidance for the year ahead, and shares of Block up more than 20% on Friday, Ron.
Ron Gross: Strong results, strong rebound. Stock is still off 60% from its 52-week highs, so we've got some work to do to get back to those levels. But I think they are on the right track with some good numbers here. Total revenue up 29%, that's pretty strong. Revenue from Bitcoin purchases in the fourth quarter, were almost $2 billion, that's almost half of Block's total quarterly sales. But those transactions don't really contribute much to profit $46 million is in gross profit for the Bitcoin part of that business, so not really a contributor here. If you exclude Bitcoin total revenue, revenue was actually up 51% for the year, so again, a very strong quarter. They processed $46 billion in gross payment volume that was up 45%. Gross profits were up 47%. If you look at the different parts of the business as you said Cash App growing nicely.
The gross profit of that business up 37% with the overall Square ecosystem business, their gross profit up 54%. Things look like they're really on track. The Cash App had 44 million active monthly users at the end of December that was up from 40 million. Adjusted EBITDA of 184 million was better than expected. You may recall they made their acquisition of the buy now, pay later platform, Afterpay. Interestingly, that acquisition was originally valued at $29 billion, but with the drop in Block's share price, there was a stock deal, it closed at actually $15 billion versus the $29 billion originally cited. That's just an interesting note. Better-than-expected guidance, Cash App looks strong. They expect gross profit growth each quarter for both Cash App and the seller business, so that's pretty strong. Stock's at 60 times still, 60 times for a business though that will put up strong growth numbers into the future. That's still a little pricy for me, I'm a shareholder. It's a little pricy, but we're going to see them grow into that valuation, I think.
Chris Hill: Big week for the home improvement industry as both Home Depot and Lowe's issued their fourth-quarter reports. Both companies saw profits and revenue came in higher than expected, but the reaction was much worse for Home Depot which had its worst post-earnings stock drop in 20 years. Jason, I'm not sure where the pessimism is coming from, but it should not overshadow the fact that Lowe's just continues to thrive under the leadership of CEO Marvin Ellison.
Jason Moser: Indeed. This is a great time to be a company named Lowe's or Home Depot. I wouldn't read too much into that market reaction there regarding Home Depot because that was a strong quarter as well. But we've got a tight housing market and we've got an aging housing market. They continue to reiterate that statistic there that 50% of our homes in the U.S. are over 40 years old, and that just means that they're going to require repair and maintenance for a lot of years going forward and that is really both of these companies' bread and butter, so to speak. When you look at the actual numbers, Lowe's just tremendous total sales for the quarter, $21.3 billion that grew modestly from a year ago. But they grew earnings per share 34%. You look at the comparable average ticket that grew 9.4% while the actual transaction count fell 4.4%. They actually saw a little gross margin expansion there encouragingly enough, and particularly in inflationary times, that can be a little bit difficult to achieve. But it just goes to show the pricing power that they have in the value proposition that they bring to the table. I think Home Depot, much of the same really, sales grew 10.7% for the core of $35.7 billion. If you look at the actual tickets versus transactions, their comp average ticket grew 12.3%, while comp transactions fell 3.8%. It's a very similar dynamic to Lowe's. They grew earnings per share 21%. Actually, Home Depot interestingly enough saw a little gross margin compression. Not much, just a modicum, but something just to keep an eye on there as we move into 2022.
Chris Hill: More after the break, so stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Ron Gross. Beyond Meat's loss in the fourth quarter was bigger than expected and revenue was lower than expected. In response, CEO Ethan Brown said he expects Beyond Meat to "Substantially moderate the growth of operating expenses." Ron, I'm a little surprised by this, in part because of all of the optimism we've seen recently around their partnership with McDonald's.
Ron Gross: Yeah, although I hate the name McPlant, I must be honest with you. But yes, there's some excitement surrounding McPlant going into 600 U.S. locations. There's actually some excitement around their joint venture with Kentucky Fried Chicken for the Beyond fried chicken nuggets, which sounds to me personally better than the McPlant. But they're moving in the right direction with respect to these trials. But they don't necessarily mean they will translate into growing revenues and profits in the future. We're still in the very early stages of some of these things. Stocks off 74% from its 52-week high. A lot of excitement in the early days have clearly come off. For the quarter, not so great. Nothing to really get so excited about, fourth-quarter sales down 1%.
U.S. food service international channel, net revenues were offset by reduced U.S. retail revenue, which fell almost 20%. It's a pretty big number, that reflects softer demand. Five fewer shipping days in the fourth quarter, increased trade discounts, and as I said, to a lesser extent, loss of market share. Which if you're a Beyond Meat shareholder, I think that comment should be troubling to you, and we got to keep an eye on what that actually means. Gross margins got slammed, they're down to 14% from 28%. That's due to product mix revenue per pound decreases, trade discounts again. The company had increased manufacturing costs, they had to write off some revenue. They ended up losing about $80 million for the quarter. Some things they've got to work through here. Management noted a temporary disruption in U.S. retail growth for its brand and the broader category. Something again to watch out for and continue to watch out for these somewhat interesting and exciting joint ventures.
Chris Hill: I'm not saying this to make you feel better. You're not the only one who has a problem with the name McPlant. [laughs]
Ron Gross: Good to hear. [laughs]
Chris Hill: MercadoLibre lost $46 million in the fourth quarter, but investors seemed more focused on the fact that revenue for the Latin American e-commerce company grew more than 60%, year over year. Shares of MercadoLibre up 15% this week, Jason.
Jason Moser: Yeah, they can run into some currency exchange issues there, given their Latin American roots. That's always worth remembering when you consider the bottom line with the business like this. But this is one that really does require that Amazon-type mindset for investors. Thinking probably a bit more long-term than you might with other companies. But if you could do that, I think this is still a very compelling story. Latin America remains one of the fastest-growing e-commerce markets in the world. Then so, the numbers, again, like you said, that sales growth net revenues for the fourth quarter, they were $2.1 billion, which was up 74% on a currency-neutral basis. Gross merchandise volume grew to $8 billion.
That was up 32.2% currency-neutral. Again, a company that's really executing on the mobile front, mobile gross merchandise volume was 75.5% of total gross merchandise volume. Really making a lot of progress on the mobile front. You can't really talk about MercadoLibre without talking about Mercado Pago, their payments solution. The total payment volume through Mercado Pago hit $24.2 billion. That was up 72.8% currency-neutral and a lot of that growth, really, it's amazing the off-platform growth here, that was up 96.5%, $16.1 billion for the quarter payment transactions up 69.4%. A business that really continues to execute, do what they say they're going to do. Stock has gotten hammered here recently, and it does look like it could be an opportunity for folks willing to stay patient.
Chris Hill: Fulgent Genetics posted better-than-expected results for the fourth quarter. While shares fell in after-hours trading, the stock bounced back up on Thursday, along with pretty much everything else in the market. Ron, forget about the stock, what do you see when you look at Fulgent's business?
Ron Gross: Some context here will probably tell listeners everything they need to know. Fulgent is a genetic testing company whose business got a huge boost from COVID. Post-COVID, things are starting to settle back down to earth and will likely see a reversal to pre-COVID levels of business. That's very important to understand. The stock's off 50% from its 52-week high. But because of this huge boost, it's actually up 300% still over the last two years. Depending on your term as a shareholder, you're either happier or a little troubled here. The changing of the business shows up in the numbers, total revenue down 15%. Their core testing revenue grew to over 200%, but that only represents 15% of revenue, which is $40 million for the quarter. That's the part of the business that will remain once COVID subsides and starts to go away even more. That's what we'll be left with, that base of business. Billable tests were up 13% from the third quarter, but down 22% year over year. Again, you're seeing some of those trends. They are still profitable, but a lot of those profits, again, are due to this COVID boost that they're seeing. They expect their core business to grow by 20%. That'll equate to about $120 million in revenue. But that's against 600 million of total revenue that they actually have, again, because of COVID. When we look at the stock, when we look at valuations, we have to, I think, remove COVID from the business and see, yes, it's trading only at around 8.5 times, but those earnings are not sustainable. In reality, it's trading at a much higher valuation than that.
Chris Hill: Booking Holdings ramped up its fiscal year with improving profits in revenue. Despite increasing signs of optimism around COVID restrictions being lifted, the parent company of Priceline warned of negative impacts on travel demand. Jason, do you think they are just being appropriately conservative in their guidance?
Jason Moser: I think probably so. I think this was a good quarter, I'd say management, the tone seems cautiously optimistic about the state of the industry. It does feel we're setting ourselves up for a pretty strong 2022 year in the travel industry, but it's still early of course. The quarter itself though strong performance, gross bookings. Their $19 billion was up 160% from a year ago. Room nights booked for the fourth quarter grew 100% from a year ago, and they had strengthened airline tickets booked that was up 116% from a year ago as well. They're making a lot of investments in that flight part of the business. You hear them talk a lot about this connected trip mentality. This connected trip strategy that the business is focused on.
They made an acquisition recently, or are acquiring e-traveling for their flight booking tech. You also hear them talking more and more about the payment solution that they continue to build out on their platform as well. Taking advantage of that payment solution, taking advantage of their mobile presence there, and now about 30% of gross bookings were processed through their payments platform in the fourth quarter, and that was up considerably from just 2019, where it was about 15%. They're making progress there. They continue to buy back shares, the share count is down to 17% over the last five years. It feels if you are looking for travel exposure, this is one of those companies that you want to have the top of list.
Chris Hill: We'll see a little bit later in the show, but up next, the conversation with The Trade Desk CEO Jeff Green. Stay right here. This is Motley Fool Money.
Welcome back to Motley Fool Money. I'm Chris Hill. One of the highlights of our recent investing event for Motley Fool members was a conversation with Jeff Green, CEO of The Trade Desk. Our Chief Investment Officer, Andy Cross talked with him, and started with a question that Green is frequently asked about the business he runs.
Andy Cross: First, I want to kick it off with a question that came right from a Motley Fool member. We have a lot of members watching here and some who may not be that familiar with The Trade Desk and some who may know it very well. I want to give you the opportunity to explain The Trade Desk to a nine-year-old. As if you were talking to a nine-year-old, how would you break down The Trade Desk?
Jeff Green: Yes, let me probably start by just saying, historically, not done this very well. I know a bunch of family members have asked me this question which is something like, what exactly do you do? As I've heard them repeat the answer later, I've learned that I'm not very good at this. Nevertheless, but here it is. If you want to buy ads on Facebook and Instagram, you go to Facebook. If you want to buy ads on Google and YouTube, you go to Google. But if you want to buy ads on pretty much everything else on the internet, you come to The Trade Desk. Where we especially have focused in recent years is on what we call cross to buys that all starts with television. The ads that you see on Paramount+ or on Peacock, or on any of the ads that you see on any of your favorite CTV apps, Hulu, are likely coming from The Trade Desk. But also on your phone, on your computer, all the various apps, all the various websites that you go to. There's a lot of science that goes into figuring out which ad should I put in front of which user, and what does that ad worth. How much is it worth to be on the bottom of the page hoping someone scrolls versus the top of the page? Figuring out what that is for an advertiser is really hard. We've focused on helping the advertiser makes sense of the really complicated ads on the internet.
Andy Cross: Let's talk a little bit about that, Jeff. When you talk about the various players in the internet, Facebook, Twitter. You mentioned a lot of the larger players. You certainly are large one when it comes to serving ads on behalf of your clients who are really agencies, and gosh, Fortune 500 companies brand, lots of good consumer brand companies that many of us are using now. You're representing them to match them up in a programmatic way. I want you to just to break that down to explain what that means versus maybe the way it was 20 years ago when the Internet was really just starting with an advertising model.
Jeff Green: If you go back even further pre-internet, you buy an ad that is a billboard or in the middle of the paper. You look at the numbers in terms of what does the circulation of the paper and then you just assume a certain number of them look at the ad. It's not very data-driven, it's about what is the audience and what are our best guesses about how this will work out. But now, there's no barrier to creating new ads. You can almost create infinite supply. Now, it's about figuring out what's really going to be impactful. It's really coming down the the math. It used to be about hunches, Don Drapers of the world controlling advertising. Now as people that are more equities traders and portfolio managers, then it is the Don Drapers of the world. What they are doing is just to boil down the math. They're basically 13 million ad opportunities available every single second.
Think of that as an auction. We're going to run an auction that will last one-tenth of one second and there's 13 million of those every second. If you pick any brand, we represent the majority of the S&P 500. If you pick any brand, whether it's Home Depot or Nike, or Coca-Cola, and say, of those 13 million, they need to buy or just pick a number or something like 2,157. Which 2,157 opportunities are going to have the most impact for them per dollar because it will cost more to be at the top of the page than the bottom of the page will say I got into account. The cost will be in front of this user than a different user. We'll take that into account and we're trying to gain market share in specific geographies. Let's take that into account. Let's bring data and data science into the equation so that marketers can be very intelligent about the way that they spend their money. Because if they just buy random or just hope to get good stuff, they're going to lose every single time. It has to be data-science driven going forward.
Andy Cross: Yeah, that also, I know 50% of my advertising budget, there's money, I just don't know which 50% or whatever. The old line about advertising spending is you're trying to help the agencies and the consumer brands really from the buy-side, that's different, then you don't represent. I want to be clear about this. You're not a publisher, you don't represent the Washington Post or The Motley Fool, for example, on our ads. You really work with the clients who are out there purchasing on advertising space that is going to be shown on these various platforms, be it online web, mobile. Then you mentioned CTV as connected TV. I know that's a big initiative to you, and Ben and I want to get more into that. But you really represent them and you've built a business that way, specifically to give you the independence to represent the brands without having any of the conflicts with the inventory or managing that inventory. I just wanted you to clarify if I'm getting that wrong, but I want to make sure that's very clear with our people watching.
Jeff Green: I appreciate you making that clear and I don't have to clarify anything, but I will underline what you just said. I was recently in market for a house, the realtor that was representing me as the buyer, was also representing the seller. When we went into negotiations, I'm like, who do you represent, me or them? The truth of the matter is they don't represent either of us. They depend when the transaction happens. They weren't telling me the things that were wrong with the property. They were just trying to get a deal done because they make money on both sides of the equation. That happens all the time in advertising where there's conflicts of interest. We believe that the future is all about data and especially the data that informs what an advertiser should buy. For instance, if you take our brand, and I'm just picking at random, a brand like Nike.
There's a lot of Nike loyals. People love that brand. If you buy one product, you're actually much more likely to buy five products. There's a lot of loyalty there. You want to make certain that your advertising and spending more on those that have loyalty. But also Nike, I want them to trust me with their data about what does their consumer look like so that I can help them go find other stuff. Then I can help them decide, should I buy the front page of Yahoo! or should I buy the audio out on Spotify? I buy Paramount+ or should I buy Peacock? There's all these questions that, if I have a dog in the hunt, I'm a horrible advisor. By pledging to them, I don't own any inventory. I never will. Now, I can make objective decisions for you between all those various properties and now we're aligned. Most importantly, now you can trust me with your first-party data so that I can put that to work on your behalf. If I was representing both sides, even if I run a much bigger company, I will be operating at a disadvantage because I just wouldn't be able to win trust. We think one of the advantages we have over many of the much bigger technology companies is that we have objectivity and allegiance and they do not.
Andy Cross: I just want you to talk a little bit about the international opportunities. I think most of your spend businesses is concentrated. The client spend is in the U.S. I just wanted you to talk a little bit about the opportunities internationally, especially over in China, such a massive market and a lot of the walled gardens, obviously not allowed into China and what opportunities The Trade Desk has over there.
Jeff Green: You bet. First let me just the world outside of the U.S. Because we represent the Fortune 500, nearly all of them, most of them are interested in being all over the world. I imagine most of the people watching this travel outside the United States. You can't go anywhere in the world and not see signs for brands like Coca-Cola or Fortune 500 brands all over the world, McDonald's in, certain ubiquitous brands here. Those brands are interested in technology that will take them all over the world and it becomes very important that in order for us to represent them or to have a partnership with them, we have to be in the major media markets all over the world. We have offices all over the world, over 25 and of course, across Europe and Asia, and Americas and Australia. We've been especially bullish on our opportunity to help them in CTV. In 2020, we were leading the market in the US and Australia only. Very progressive in terms of SVOD and moving to online in terms of traditional content becoming available online. Many parts of the world were a little bit slower than that. But in 2021, we became market leader in both the U.K. and Germany. Part of the thing that makes me so optimistic is that when you're playbook works in one country, you can say, "Okay, but what about everywhere else?" But when it's worked in many different environments like Germany, UK, London, and Australia, and then, of course, the US, then you know your playbook, with some adaption, can work everywhere. The fact we have four X growth in CTV in EMEA last year and 200% growth in Asia and CTV were just really phenomenal. You mentioned China though, just to touch on that just very briefly.
Andy Cross: Please.
Jeff Green: One of the things that's unique about our approach to China, because there's a ton of, especially, U.S.-based companies that have just been killed trying to go into China. We think we're in a different situation, in large part because we're not trying to take money out of China. We're doing two things, Number 1, we're bringing money into China, first of all, which is the biggest brands in the world want to sell more products in China. We want to buy ads on Baidu, Alibaba, Tencent. If you compare that to like a Facebook who would want to come into market and people spend time on Facebook, that would arguably take away viewership from Tencent. China would be much less interested in something that would take away from a Chinese company versus something that's going to come bring money in. Then the last thing is we're helping Chinese manufacturers and brands be known to the rest of the world. Taking those everywhere else, once again, just helping Chinese companies do well. That helps the global economy. But with that different value proposition, it's one of the reasons why our China offices have been the fastest-growing for our company in the world.
Chris Hill: Coming up, after the break, Jason Moser and Ron Gross return. We're going to dip into the Fool mailbag and they've got a few stocks on their radar. Stay right here. You're listening to Motley Fool Money.
As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here, once again, with Jason Moser and Ron Gross. Our email address is [email protected].
We've got two we want to share, first, from Kenny Ray who writes, "I wanted to take the time to simply say thanks. I started my investing journey with The Motley Fool about a year ago after coming home from an overseas deployment with the US Army. I knew nothing about investing, and I'd taken advice from The Morning Brew newsletter to become a Motley Fool member. I listened to every podcast and watch The Motley Fool Live video stream when I can. Over the last year, I've watched my portfolio start to grow and then turn red. That being said, I truly appreciate the constant reassurance, advice, and personal experiences shared from so many people at the Fool, the community keeps me grounded and resilient.
Even with this year starting out rocky and the current situation in Ukraine, I'm comfortable staying in the market and riding things out. I'm 35 years old and realize I have plenty of time to watch my positions bounce back and grow. Thanks again for all you do." Thank you for that, Kenny, and that's awesome. That is the way to go. We love to see that. We got a question from Bruce in Tampa, Florida. "I've heard multiple analysts say they like to have 25-35 stocks in their portfolio. That's an incredible amount of stocks and it's obviously well into the six figures. How do you build that portfolio? One stock at a time or small increments across the board for all stocks? Many people have received a one-time influx of money due to the sale of their homes in the past couple of years. When investing with a one-time large sum, do you believe in dollar-cost averaging or just going all-in? Keep up the great work." Ron, a lot to get through there. But in terms of the portfolio building, what do you think?
Ron Gross: Thanks, Bruce, and go Bucs. What I would say is 25 stocks, you don't need to do that overnight. You can build up to 25 stocks over a multi-year period of time. It doesn't have to be tens of thousands or even thousands of dollars each time, $1,000 in each stock, $25,000, 500 in each stock, $12,500 can get you where you need to be. It's great if you can buy fractional shares if your broker allows that because that will allow you to buy some of the higher-priced stocks and not worry about getting a whole share or a whole two shares. Again, remember, it's not shares that matter, it's the dollars invested in each company. Just take your time, be methodical about it. Your second question, I like to dollar-cost average in, but the market goes up over time, so theoretically, if you put your money in now, over time, that money will rise as well.
Chris Hill: Jason, the second part of Bruce's email reminded me of something you've talked about before, the approach of buying in thirds.
Jason Moser: I think, generally speaking, most of us like the dollar-cost average in because we feel like we can be a little bit more in control and be a little bit more opportunistic. There's actually a study out there from Northwestern Mutual Wealth Management though that shows that the lump-sum option does work. This study looked at rolling 10-year returns on $1 million starting in 1950 and basically just compared a lump-sum versus dollar-cost average. Assuming a 100% stock portfolio, the return on lump-sum investing outperformed dollar-cost, averaging 75% of the time. Portfolio composed of 60% stocks and 40% bonds, that outperformance rate was 80% and a 100% fixed-income portfolio, outperformed dollar-cost averaging 90% of the time. There is data out there that shows a lump-sum certainly can work for you if that's an option you prefer.
Chris Hill: Let's get to the stocks on our radar, our man behind glass, Rick Engdahl's going to hit you with a question. Ron Gross, you're up first. What are you looking at this week?
Ron Gross: I'm going to do something different this week and thank you for giving me the permission to do so, Chris. I'm going to recommend a basket of stocks of my own creation. During times like this, weakness in the market, I love to buy more of my favorite stocks at discounted prices. These are companies usually with impressive management teams, strong cash flow, rock-solid balance sheets, let's call them resilient stocks. I'm not giving one radar stock this week, I'm giving my resilient basket and you can buy all of these companies at significant discounts to their 52-week highs. Costco is down 10% from its 52-week high. Microsoft down 15%, Domino's down 26%, Home Depot down 26%, Disney down 27%, and Target down 28%. I think those six companies right there will give you a nice little basket of resilient companies.
Chris Hill: Rick, question about Ron Gross' resilient basket?
Rick Munarriz: It's a very nice basket, Ron, you've got there but come on, which one's your favorite? [laughs]
Ron Gross: I love Costco, its business model, its culture. I think it's a pretty special company.
Chris Hill: Jason Moser, what are you looking at this week?
Jason Moser: Keeping an eye on Zoom Video Communications, ticker ZM, earnings on Monday, February 28th after the market closes. If you recall, recently, Zoom had the Five9 acquisition they were trying to make. That deal was called off. An interesting press release this week, Zoom contact center is rolling out now. This is, essentially, their effort at developing that Five9 dynamic to the business without actually making the Five9 acquisition. But I think it's really interesting to see because we talk about this idea of what is Zoom going to become? You can see all of these different initiatives, it feels like we're watching them become a little bit more like Salesforce in some ways here, focusing on that customer relationship management side of the market opportunity there. It could absolutely be a tremendous opportunity for the business that they execute. The stock is 70% off its 52-week high. It could be one worth keeping an eye on here for patient investors, I think.
Chris Hill: Rick, question about Zoom?
Rick Munarriz: I'm tired of Zoom in the way I'm tired of Facebook and things like that. It's just, yes, I'm tired of it but I know it's going to be here forever. Is that the story for Zoom? Are we stuck with it for the long-term future you think or is there anything going to come along and disrupt it?
Ron Gross: I think for better or worse, yeah. For some of us more than others, yeah, we're probably stuck with it. Microsoft Teams, of course, is a competitor in the space as well. Hopefully, the hybrid workforce won't steer too many people into that glass-half-empty mentality with Zoom. But I do understand exactly where you're coming from. I feel like any other Zoom meeting like getting another hole in my head.
Chris Hill: We're out of time, guys. Ron Gross, Jason Moser. Thanks for being here.
Jason Moser: Thanks, Chris.
