At The Motley Fool, we're buy-and-hold investors, but before we can hold a stock, we have to pick the stock. So our analysts are always on the hunt for excellent investment ideas. And every week, some businesses stand out from the crowd, which is why every Motley Fool Money episode includes host Chris Hill asking his guests -- this time, senior analysts Emily Flippen, Jim Mueller, and Jason Moser -- which companies they have their eyes on and why.
Their picks for this episode: Brazilian digital payments processor StoneCo (NASDAQ: STNE), socially responsible financial institution Amalgamated Bank (NASDAQ: AMAL), and medical services provider Select Medical Holdings (NYSE: SEM).
A full transcript follows the video.
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This video was recorded on March 22, 2019.
Chris Hill: Let's get to the stocks on our radar this week. Our man behind the glass, Steve Broido, is going to hit you with a question. Emily Flippen, you're up first. What are you looking at?
Emily Flippen: Right now, most of my time is spent looking at a company called StoneCo, STNE. Terrible name! If you hear it, you probably think they're in manufacturing, but it's actually Brazilian payment processing. If you like Square here in the U.S., if you like Buffett, then you'll like this Buffett-backed Brazilian payment processor. They reported earnings earlier this week, and this stock shot up, really surpassed anyone's expectations. I'm excited about this company moving forward. They have a unique business model in an expanding area. Definitely something to keep your eye on.
Hill: And the ticker symbol?
Hill: Steve, question about StoneCo?
Steve Broido: What are some challenges when we're evaluating financials in non-U.S. countries?
Flippen: The main challenge is the fact that, oftentimes, these companies are unprofitable. If you look at their financials, you're getting a snapshot as something that looks really bad. They don't necessarily have the same reporting requirements that you have here in the U.S., so it goes back to what we were saying earlier about management. I love listening to these guys on their recent earnings call. Go back, see how they talk about the company, see the view and the optionality there. It's clear that this is a well-run company with great optionality.
Hill: Jason Moser?
Jason Moser: Going with Amalgamated Bank, ticker AMAL. Speaking recently at our Austin member event with Neil Grayson, member and fellow Wofford alumnus, by the way. ... We just keep winning! What can I say? He got this one on my radar, actually. It's a small-cap bank up in New York. Total deposits of $4.1 billion, assets of $4.7 billion. This is an interesting story because it is a bank, they're trying to build America's socially responsible bank. I am going to have the good fortune to interview CEO Keith Mestrich next week. We're going to talk more about how they're doing. Looking forward to that. So this is on my radar.
Hill: Steve, question about Amalgamated Bank?
Broido: How does a bank define themselves as being more socially responsible?
Moser: I'm going to turn this back on him. I am going to include that in the questions that I ask Keith next week, Steve! How about that? You're going to get the answer straight from the horse's mouth!
Hill: That's a deft way of passing off the question. Jim Mueller, what are you looking at?
Jim Mueller: I'm looking at Select Medical, ticker SEM. They operate critical illness recovery hospitals, rehab hospitals, outpatient clinics, and occupational health centers. The most exciting company you could imagine.
They're a slow grower, about 2% to 3% on top line, but they throw off a decent amount of free cash. They don't pay a dividend. They stopped that a few years ago to reinvest into the growth. They're down about 30% from their highs last August, which is why I'm looking at them now.
Hill: Steve, question about Select Medical?
Broido: What's the biggest challenge facing this company?
Mueller: Growth, really. They're already the biggest provider for many of the services they do. How are they going to grow reasonably well to reward investors?
Hill: Select Medical, StoneCo, Amalgamated Bank. Three very boringly named companies, Steve. You got one you want to add to your watch list?
Broido: I think I'm going to Brazil. Let's go with StoneCo.
Chris Hill has no position in any of the stocks mentioned. Emily Flippen has no position in any of the stocks mentioned. Jason Moser owns shares of Square. Jim Mueller, CFA owns shares of Square and has the following options: short June 2019 $65 puts on Square. Steve Broido has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool has a disclosure policy.