Four Foolish analysts chat about this week's busy market news in this episode of Motley Fool Money. Johnson & Johnson (NYSE: JNJ) comes under fire for alleged asbestos in its baby powder, which management allegedly knew about for decades. Yikes. Starbucks (NASDAQ: SBUX) shares fall after its investor meeting despite the announcement of some creative growth plans in the U.S. and China. And 40% EPS growth wasn't enough to save Casey's General Stores (NASDAQ: CASY) from a dip after its report.
Adobe Systems (NASDAQ: ADBE) fell on its report, too, despite putting up numbers like 23% sales growth. Hmm, we're sensing a trend here. Meanwhile, Markel (NYSE: MKL) suffered the rare sell-off in light of a mysterious regulator investigation.
And, as always, the hosts share some stocks on their radar this week. Also, host Chris Hill interviews CNBC's Carl Quintanilla about the wild market year that was 2018, what investors should watch in 2019, the best Christmas movies, and more.
A full transcript follows the video.
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This video was recorded on Dec. 14, 2018.
Chris Hill: It's The Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week: senior analysts Jason Moser, Andy Cross and Ron Gross. Good to see you, as always, gentlemen! We've got the latest headlines from Wall Street. CNBC host Carl Quintanilla is our guest. And, as always, we'll give you an inside look at the stocks on our radar.
But we begin with surprising news from Johnson & Johnson. The stock fell nearly 10% on Friday after Reuters reported the Johnson & Johnson knew for decades that its baby powder contained asbestos. Jason, I can hardly believe this story!
Jason Moser: It's definitely a headline. Now, it's worth noting that Johnson & Johnson is disputing this. This is sort of a he said, she said. But I would argue even at this point, I don't know that that matters, because it's ultimately beyond any financial punishment that they may or may not feel from this. The trust factor, to me, is above all else. And I have a hard time believing that anybody who reads this story -- or, more than likely in today's society, they're going to see the tweet or the headline, and not even bother reading the story, and make judgment just from that. And if you read the headline, then you probably are sitting there thinking, "Well, they're guilty. I'm never buying that baby powder ever again." I think there is a big trust issue that could develop from this, regardless of the actual facts. And that, I think, could be a really, really big problem.
Ron Gross: Yeah. It's more wood on the fire. Is that a phrase? It is now.
Hill: It is now.
Gross: There's more wood on the fire following the Missouri trial, where Johnson & Johnson was ordered to pay $4.9 billion in a case involving 22 women and their families who claimed that talc was responsible for ovarian cancer, and them being quite sick. And now, this is uncovered. If it ends up being true, it compounds the problem exponentially, in my opinion.
Andy Cross: It was more than 30 years ago that the Tylenol scare hit Johnson & Johnson. That was an example of how to handle a terrible incident. Now, to Jason's point, they've categorically denied this. We'll see what happens. But it clearly is not good for the brand side.
Hill: Yeah. I mean, the way that they handled Tylenol back in the 80s, that's literally taught in classes about how companies can best handle a scandal like this. It'll be interesting to see how this plays out further. But, yeah, just the headline alone, as you said, Jason, is pretty bad.
At an investor meeting on Thursday, Starbucks outlined its plans for the future, including a new delivery partnership with Uber Eats here in the U.S. and doubling its presence in China. But, Andy, Starbucks management also lowered its long-term earnings guidance. That's what was sending the stock lower.
Cross: Yeah. The story in China, the last four quarters, we've seen this declining comp growth, same-store sales growth in China over the last couple of quarters. The CFO came out and said, we're looking at more like 1-3% annualized comp store growth, and most of the growth in China will come from the new stores. They're hoping to get to more than 6,000 stores. They're opening about 600 per year in China, which is their second largest market. So, the slowing growth on the comp store in their second largest market, combined with some of the issues we've seen in the U.S., sales growth guidance estimated somewhere between the double digits and about the same level in earnings-per-share growth. So, investors are saying, "Wow, the stock's had this really nice rebound over the last few months, but this news now, maybe the growth story is slowing to a level that it's not worth owning the stock." I own Starbucks shares, and I still like the stock here.
Moser: Can we draw the line at coffee delivery? Is that really necessary? I mean, I'm reading that story and thinking, "Wow, man, we're really out of shape." It's going to take you that much just to get up and walk down to your neighborhood Starbucks? To me, that's where I feel like that's just a bit too much. That may be the straw that breaks the camel's back.
Gross: Is it all hot beverages with you? Or just coffee?
Moser: Anything, really.
Gross: [laughs] Anything!
Moser: If it's a Frappuccino, by the time you get it, it's melted, the whipped cream is gone. If it's coffee, it's likely tepid by the time you get it. And who knows, maybe you piss off the driver and he spits in your coffee! How do you know?!
Gross: You're really worked up about this. Fire. [laughs]
Moser: To me, it's one of those things. There has to be a point where we have enough, right?
Hill: Just to be clear, most investors who are selling off this stock, it's because of the slowing growth. I'm not saying you're selling the stock, but the thing you're more bearish about is the delivery opportunity here in the U.S.?
Moser: I just don't like it! I don't like it! Get up and take a walk, people!
Hill: Shares of Costco (NASDAQ: COST) down 8% on Friday after first quarter sales came in lower than expected. Not a great way to close out 2018, Ron.
Gross: No. I don't know how to follow Jason there. I like 85% of this report. This is not a problem. Sales up 10%. Same-store sales up almost 9%, with the U.S. at an 11% rate, international at 4%. Traffic up almost 5%. E-commerce up 32%. These are strong numbers.
I think what the Street and investors are focused on, those who are choosing to sell off the stock, are margins. Margins are down because, hey, we have an environment where you have to lower prices to compete, especially on the grocery side of the business. Higher wages, a good thing if you're an employee of Costco. They just raised wages for 130,000 store employees, $1 per employee. That's good, but it has an effect, it takes a little hit out of margins. And, they're investing to compete in the online space, which you have to do in today's day and age. So, as a consequence, margins come down a bit.
But overall, you still have earnings per share up 18%. They're setting themselves up well to compete for the future. I still like the company quite a bit. The stock itself is pricey. You have to pay 28X to own Costco where you could pay 20X or less for Walmart, Target and BJ's. So, a little bit pricey.
Hill: I'm surprised that it's that pricey. It's dropping on Friday, it's still up about 10% year to date. It's not like it's been shooting to the moon.
Gross: Certainly not shooting to the moon. And it's not ridiculously priced, it's just a premium price. But, for an extremely well-run company.
Hill: Real quick before we move on, does this increase the pressure just a little bit for Costco, in terms of the holiday quarter and maybe doing a little bit better so that they start 2019 with a little bit more momentum?
Gross: The holiday season's always important for retailers. For Costco, the name of the game is making sure people renew that membership and giving them value. As the prices come down for things, the value that people get actually increases, even though margins take a hit, and people are actually more likely to renew those memberships.
Hill: The worst stock in the S&P 500 this week was Under Armour (NYSE: UA) (NYSE: UAA). Shares fell 20% after Under Armour held an investor day and shared guidance through the year 2023. And that guidance was definitely lower than expected. Jason, this is the first investor day they've had in three years. Based on what happened to the stock, I think it might be another three years before we see another investor day out of Under Armour.
Moser: [laughs] That may be possible. I think that concern is probably more on the 2019 guidance as opposed to the five-year, 2018-2023 guidance. I think on the bright side, Kevin Plank struck a decent tone of humility, recognizing that they made mistakes in this effort to pursue growth at virtually any cost, and it definitely has cost them, as we can see. One of the things we've been paying close attention to is the fact that Mr. Bergman and Mr. Frisk stay on as partners. And they're still there, which is a good sign. That means that he is able to work with them. I think they will continue to help him make the transition here back to growth.
But it will be modest growth in the near-term. They're targeting 40% annualized growth over the next five years for earnings growth. But for 2019, we're talking basically low single-digits, with North America essentially flat. And that's been a concern for the past couple of years with Under Armour.
The brand still holds a strong position in the market. They made some bungles with the business here over the past couple of years. It seems like they're cleaning that up, focusing on cost control and inventory. I think there is a future here, but certainly, the market is not all that excited about what 2019 is going to bring.
Cross: Jason, when you're talking about the market, they're selling into the performance gear market. It wasn't what it used to be meant. This was a business that was growing 20%, 30% sales. Not earnings, sales growth. The performance market, not what it was a few years ago. And now, their sales growth have really dwindled. Of course, that's been a big driver for the stock price.
I think the humility factor and the learnings, they have to really demonstrate that, and learn from that, and put forth a strategy and an operating manual that can actually work to take advantage of the shifting consumer landscape that they haven't been able to do over the last couple of years.
Moser: It's a stock that was priced on an entirely different set of expectations. Looking at full-year 2018 earnings, that puts the stock around 90X earnings. If you look at 2019, it's still around 56X those estimates, which is really expensive for a company that's having a lot of trouble growing both the top line and the bottom line. It's not a bad business, but certainly, the stock has had to be repriced because the expectations have changed significantly.
Hill: You know why we don't need as much performance gear? Because we're getting our coffee delivered.
Moser: Full circle!
Gross: It all comes around!
Hill: Nice fourth quarter report for Adobe Systems. Sales for the software giant rose 23%. Profits came in higher than expected. Andy, the stock still sold off.
Cross: Amazing. It's had a really good year this year. This business continues to thrive really well. Their growth continues to be very impressive as they're thinking about next year's growth, north of 20% across both their businesses. They've made the acquisitions of both Magento for e-commerce and now Marketo for online campaign management, which lets them put together an entire B2B package for corporate consumers. These are people who have a leading brand in the space. It's a $120 billion organization. Really good management. So, yeah, the stock sold off, but I would see that as a nice little buying opportunity. This is a business that is leveraging the cloud and leveraging the creating experiences of their clients and building solutions that they want.
Hill: When you think of the next five years for Adobe, is the growth going to come from those type of acquisitions? Or is it more -- look, when we talk about retailers and same store-sales, one of the things we like to see is boosting up that average ticket price. I'm wondering if one of the pathways to growth for Adobe is just selling more stuff to existing customers.
Cross: I think that's exactly right. Their bread and butter had always been on the consumer side, selling to creative types. Now, as they continue to push further and further into the B2B, business to business, and selling to corporate clients and building those solutions, they can package together a lot of different solutions. Now, they're competing against a lot of big competitors in that space. But like I said, they have the brand, the leadership team, the experiences and the solutions to be able to deliver that very profitable growth. So, when I see the stock sell off a little bit, yes, it's had a nice run, but it's a very impressive operation. This is a company that's going to be around and more relevant over the next five years than it is now.
Hill: December has been an unusually volatile month for Markel shareholders. Last week, the insurance company announced it is hiring outside lawyers to conduct an internal review after Markel was notified by unnamed regulators. Jason, this is a steady, boring business. This kind of excitement caused the stock drop nearly 10%.
Moser: Yeah, you don't see that kind of move with this stock, ever. I think the last time we ever saw that, maybe it was an acquisition from five years ago. I'd like to generally take the approach that the market's got it right; in this case, I think this is an overreaction, though, and I'll explain why.
This investigation is into a wing of the business called Markel CATCo. Essentially, it's a reinsurance business. Reinsurance and retrocession, which is essentially reinsurance for reinsurers, is a very difficult business to manage from a reserve side. You have to make some predictions and forecasts when it comes to catastrophic events and whatnot. It's difficult to do. This is a case where the concern is perhaps that this CATCo business was under-reserved given the natural disasters that have occurred.
Management was very clear to note that this investigation is only into this CATCo part of the business. It doesn't have anything to do with Markel Specialty or Markel Ventures or anything like that. I think that's the important part to remember. The bottom line for this CATCo business, they contributed about $28-29 million to Markel's top line, which is about $7.5 billion. It really is just a drop in the bucket.
But I also understand. When you see the words "investigation" and "insurance," the word "fraud" comes to the top of your mind here. I generally trust these guys. I think they've earned the benefit of the doubt here. We'll watch them closely to see how they manage this. The stock isn't super expensive. It's not super cheap. It's around 1.5X book value today. In transparency, I'll let you know that I bought shares on this dip because I felt like it was an overreaction for a business that has a very long runway ahead.
Gross: Completely agree. It's a great opportunity, I think, to pick up shares of a wonderful company that I've owned for years, as well. I'm not sure what the point is in making the regulators unnamed. I mean, let us know --
Hill: Yeah, what does that help?
Gross: I don't get that part of it. But I would absolutely give this company's senior management the benefit of the doubt when it comes to ethics. Now, if there's someone deep in the accounting department that is playing games, you can never completely ward off a problem like that. But I would absolutely give these guys the benefit of the doubt. If there is a problem, it was an honest mistake. I'm a proud shareholder.
Hill: Second quarter profits for Casey's General Stores came in 41% higher than a year ago. Stock down a little bit on Friday, though, Ron.
Gross: The stock has been on a tear since the summer. It's really been impressive. It's been a stock that's been not even on my radar, to be honest with you, but they've been putting up really impressive results.
In this particular case, I think investors are focused on the fuel segment of the company, which saw same-store gallons sold down 1.1%. That's not as strong as, obviously, folks want it to be. But total revenue still up 8%. The other divisions of the company are doing really well. Grocery same-store sales up 2.7%. Prepared food up 2.2%. Earnings per share up 40%, for a company that most people haven't even heard of. 2,100 stores. They're opening them up at nice clips. Management is strong. The company is executing very, very well.
Hill: This is one of those businesses that, unless you live in the Midwest United States, you're probably not familiar with Casey's General Store. Also, I don't know if they break out the pizza segment.
Gross: [laughs] They do not.
Hill: But, actually, a couple of years ago, Casey's climbed to fifth in the United States in terms of pizza sales.
Gross: Fascinating! Have you had the pizza?
Hill: No, I haven't. No. We're hundreds of miles away from the closest Casey's.
Gross: Well, you travel, don't you?
Cross: There are a few analysts who have visited the stores who live in the Midwest, and they love the food there.
Hill: I'm going to pivot from the pizza for a second. There was a story in Restaurant Business magazine this week. We think of McDonald's competing with Burger King and Wendy's. And they do. But the story was that, by the end of this year, Chick-fil-A is almost certainly going to pass both Burger King and Wendy's in terms of U.S. sales.
Gross: As well it should.
Hill: I would not have guessed that for one second.
Gross: It's delicious!
Moser: I believe. We have a Chick-fil-A down the road from our house. Whenever I go get dinner -- the move, really, with Chick-fil-A, you have to get the car fries. You get the meal that you're bringing back home, but you need an extra French fries for the ride home, because those waffle fries are so good.
Gross: Car fries.
Moser: Any restaurant that has the car fries shows you the power. There's still a lot of room for those guys to run.
Cross: It's unbelievable! They're not open on Sundays. Just on the store per hour served basis, they're clobbering it. They probably passed them a long time ago. And the fact that this company can have that kind of result and surpass those kinds of players, that's pretty impressive.
Hill: Yeah, and in terms of locations, both Burger King and Wendy's have at least twice as many in the U.S.
Gross: It's exceptionally well run. The throughput, how they can get you in and out, is amazing. They have employees walking the line with iPads, taking your order, so you don't have to wait until you get up to the front of the line. I know this from experience. [laughs] I've been there quite a few times and it's delicious.
Cross: My family does not eat meat, so, no chicken. I want to go there. I'm not quite sure how I can convince my kids to go there and what they could get. That's my challenge for Chick-fil-A.
Moser: I'll leave it at this. You know I love the Jangler. I'm not getting car fries from the Jangler.
Cross: Get the car fries! That's my solution. They love fries!
Gross: Problem solved!
Hill: Carl Quintanilla has a front-row seat when the opening bell rings at the New York Stock Exchange. He is the host of CNBC Squawk on the Street, which you can catch each weekday morning at 09:00 am Eastern. Carl, good to talk to you!
Carl Quintanilla: It's great to talk to you again, Chris!
Hill: Let's look back at 2018 before we start looking ahead to the next year. When you think about 2018, what stands out to you in terms of business stories?
Quintanilla: Actually, knowing we would discuss this, I tried to make a list. I ran out of paper. It ranges from the macro. Trumponomics, tax cuts, supply side stimulus and all of that. Down to the most fascinating corporate stories. All year long. CBS Moonves, Musk Tesla, the dismantling of Facebook (NASDAQ: FB), Bitcoin. Right? This was a wealth of riches all year long if you're a business reporter. I honestly can't remember a year where it was this jam packed.
Hill: Yeah, there really has been an embarrassment of riches if your job is covering business news. I am curious, though, your use of the word "dismantling" when it comes to Facebook. If you think back a year from now, some of the talk around Mark Zuckerberg was, "This guy might run for president!" And here we are 12 months later. Certainly one of, if not the most dominant question about Facebook is, how much trouble do we think this company is in right now?
Quintanilla: A lot of that has been priced in. Obviously, the stock's 40% off the highs, although it's still had a great run if you bought at the IPO. Trust levels are extremely low. I saw a survey today out of Recode. Which company do you trust the least with your personal information? And Facebook was No. 1, above Twitter by a factor of three or four.
At the same time, he's assembled an amazing conglomerate of platforms. I don't know about you, but my wife is on Instagram all the time. I'm also guilty of that sometimes. The base is so solid and large that I think we're getting to a point where a lot of money managers are intrigued by the valuation.
But in terms of growth, how much can they undo? How many apologies will be enough? I certainly don't think Congress has shown the intellectual rigor to tackle something on big tech the way the Europeans have. But I do think that they've been, if not sufficiently punished, then we're moving in the direction of being sufficiently punished.
Hill: Has there been a story this year that maybe hasn't flown under the radar, but given what we've talked about, in terms of so many big, dominant storylines this year -- whether it's macroeconomics or industry-focused, or individual companies -- has there been a story that's been of interest to you personally, that maybe didn't get the headlines of Trumponomics or Facebook in the spotlight in front of Congress?
Quintanilla: Oh, absolutely! There's two. One is, I hate to put it this way, the insane pace of the growth in government debt. There's a note out today from a D.C. think tank that we've never had a deficit this high when the economy is this strong. Normally, you run a pretty healthy deficit when you run into trouble and there's a recession. But we haven't seen something where the economy is roaring, and unemployment is plummeting, and you're still adding levels to government debt. That doesn't get talked about enough.
The second thing is, when you have an employment picture this positive, how is it that 40% of Americans don't have $400 in emergency savings? Or, half of the country rates the economy as poor? Fed chair Powell has been trying to hit on this. You can have a robust economy, and the so called trickle-down, especially to rural America, it's a very tough push. I hope that our policymakers start getting more creative in finding ways to help the less advantaged. Steve Case and some private sector guys have been working at this years, but they can't do it by themselves.
Hill: One of the things you mentioned earlier was Bitcoin. Certainly, if 2017 was the year of Bitcoin exuberance, shall we say, 2018 may be the year of cannabis exuberance.
When you think about the cannabis industry, figuring that we are here in the United States, unlike in Canada, we are years away from federal legalization. What do you make of all of the investments in and around cannabis here in the U.S.?
Quintanilla: It's been interesting. You don't want to fall into the Bitcoin trap. You see these valuations take off and the momentum players move in, and it builds upon itself. You really have to check yourself because you get caught up in the craze. We all do.
At least we have some test cases now for cannabis. We have Canada. It's a very large economy. They adopted it at scale. They have eight million willing customers. I think that's going to be a laboratory to see how deep pockets fund it. We have the Pepsi CFO on our show, or the Coke CFO, and we're like, "Are you ready to put $500 million into a cannabis company?" And the answer is, "Not yet." You see the liquor industry doing it, because beer sales have been so tortured. But we're just not seeing widespread adoption. It's really baby steps. You have to be careful not to get too enthusiastic, even though you see large-scale legalization in some parts of the world.
Hill: Certainly, the last few months, we've seen some pretty wild swings in the stock market and in individual stocks. I'm not asking you to reveal anything that's going to get you in trouble with your bosses at CNBC. But, I am curious, when you see the market roiled like this, when the market's going haywire, what does that do to your job individually? How does your job get affected when the market goes crazy? Does it just mean more time on the job? Or does it mean something else?
Quintanilla: Well, two different things. One is, when you're actually on the air, you're in the chair, you come back from break and you were down 200, and now you're down 500, certainly, you do your best to have a steady hand. One nice thing about the swings we've seen lately is, we're getting a little bit used to 500-point swings. I know it sounds dramatic. What is that, a 2% move. We've been out of practice. We are not used to this. It's been nine years of just, 50 points, record high. 50 points, record high. That's what it was like, if we forget, one or two years ago. As liquidity comes in, and the Fed is no longer there to hold our hand, we're going to have to learn how to walk again.
I think one danger is that a large percentage of the population of money managers and analysts have never seen a market like the one we're beginning to see. They really need to get their sea legs. What was abnormal was the past decade. We're getting back to the normal. We'll see if the world economies are prepared to handle the normal.
Hill: You're listening to Motley Fool Money. Talking with Carl Quintanilla, host of CNBC Squawk on the Street. He also hosts Binge, the online interview series with stars and creators of binge-worthy TV, which you can find online at cnbc.com/binge.
The Hollywood Reporter had a story this week, box office receipts in the U.S. have topped $11 billion so far this year. By the end of the year, it is probably going to beat the record that was set two years ago. When you consider the rise of Netflix, Hulu, HBO Go, all of the streaming services, are you surprised that movie theaters are still hanging in there and selling tickets at this pace?
Quintanilla: I don't know about you, Chris, but my family and I went to a theater here in New York the other night where it's restaurant service dinner and lay-flat beds. [laughs] That's really the tricks that the distributors are having to rely on now. I do think it's interesting. You think about movie distribution, or you think about retail, like Amazon. All of the legacy players, the studios in the case of media, the retailers in the case of Amazon, are starting to find ways to pick the lock. They've got their own e-commerce sites. Walmart's figuring out e-commerce and delivery. Disney's going to go direct to consumer. We have these big disruptive forces in movies and retail in Amazon and Netflix. And the sandbox is going to start to be shared.
You mentioned the box office figure, $11 billion. $7 billion of that, I think, is Disney. I think it's only the second time a studio has gotten to $7 billion in a single year, and Mary Poppins has barely opened. It really was a year where the old school started to figure out how to play with the new kids.
Hill: As the calendar gets ready to flip to 2019, what do you find yourself focused on? Is there a company, industry, or economic indicator in particular that you're watching?
Quintanilla: Jobless claims we love because it's so high frequency. You get it every Thursday. Although, this week's just happened to be low, again. Some people are starting to call for the bottom in claims, has job growth truly peaked. That's going to be the first big story to watch going into the new year.
Obviously, this trade thing is... I'm not exaggerating when I tell you that nobody has an edge on how this trade thing is going to finish. That's really caused a lot of funds to just sit tight. We're talking just, sit to the sidelines, what's the harm, you wait until March 1st and then you can reassess. But that's a very difficult puzzle to unlock.
Then, we got a bunch of big companies, Chris, that took on a lot of debt. GE, AT&T, Campbell, all these big names, highly leveraged. I think you're going to hear that 2019 is the year of corporate deleveraging. We've heard that to some degree. Which is great. Pay down your debt. The question is, can they do it fast enough? Can they do it without risking the dividend and confidence? And then, what happens if we do get a downturn? I'm not saying recession, but what if we go from 3% to 2% or 1.5%? Will cash flows be sufficient to maintain a dividend and pay down your debt? That's going to be a big story, very broad, hard to distill in a single piece. But that's going to be a big deal for market confidence, and as a result, asset prices, at least in the first six months of the year.
Hill: Because you mentioned GE, I want to ask you this. Maybe I'm showing my age here, but GE is just one of those companies. It's been around forever. It's been a blue chip forever. And the wheels completely came off the wagon in 2018. The people that you talk to, do they look at GE as being in its own bubble, and certainly they have their own problems, but those are contained unto GE? Or do they look at that as something that has ripple effects throughout the economy? Because there was a point in time in our country where, if GE was in serious economic trouble, the ripple effects were pretty big. I'm wondering if we're still relatively at that point, or if they're just dealing with their own problems?
Quintanilla: That's a legitimate question. Certainly, they're not as widely owned as a stock as they used to be. They're not in the Dow anymore. They're not as influential. They still play in certain areas of commercial paper, for example, that you could argue have ripple effects. I'm not saying it would be good if they had a serious snag, it would not be good.
But I think it's an example of three things. One is, no one likes conglomerates anymore. They're just the last of these conglomerates. Basically, fund managers say, "Look, if I want to diversify, I'll diversify. You don't have to do it for me. Give me a pure business to invest in." That was one thing.
They got caught on these long-term liabilities. They never expected people to live as long as they do now. So, their costs on liabilities, long-term care, went way up.
And then, it was an amazing example of, in mostly the case of Jeff Immelt, buying things when they were high and selling things when they were low. It was just bad portfolio management. And you mix all that together, that's how you come from, I guess a fair price, which would be, say, $30, down to $6. It's a sad story, and it's not a good reflection on how American business should be run.
Hill: Alright, last thing, then I'll let you go. Because I know you love movies, you're on the board of directors at the New York City Center, which is a hub of arts and culture. You're a renaissance man, Carl.
Is there a holiday movie that you enjoy every year? Either something you watch yourself, or something maybe you've started to sit your daughters down to watch with you?
Quintanilla: I'd love to get your answer on this, too. For us. It's a twofer. Is it a cliché? I don't know. Home Alone and Elf. They're great. They're just contemporary enough that our kids, my kids, who are nine, can figure, "OK, I'm not watching Sebastian Cabot in 42nd Street." I think those two. What I love even more is, I saw this week, Vice did a piece on the science behind the booby traps in Home Alone, what would happen if, in fact, a blowtorch were to blow on your head. [laughs] But, they both definitely get you in the Christmas spirit.
Hill: One of the sad passings in 2018 is William Goldman, the great celebrated screenwriter. I believe it is William Goldman who is credited with the classic business analysis of Hollywood, which is, nobody knows anything.
Quintanilla: [laughs] Yes.
Hill: One of the reasons I love Elf, which is the movie that my kids and I watch every year, is because the business story behind the making of Elf is proof positive that nobody knows anything. Jon Favreau had this idea with Will Ferrell, and the studio fought him every step of the way. And now, it's a Christmas classic.
Quintanilla: I think that's your next book or documentary, the making of, the origins behind Elf. I would read that book.
Hill: You can follow Carl Quintanilla on CNBC's website, cnbc.com/binge. You can follow him on Twitter. Or, like me, you can watch him every morning on Squawk on the Street. Carl, have a great holiday!
Quintanilla: Happy holidays, Chris!
Hill: If you're looking to buy something for the holidays for the investor in your life, you can check out The Motley Fool's podcast shop. We've got mugs, T-shirts, and more. And everything is on sale for the holidays. Just go to shop.fool.com. You can get something for the investor in your life. Or, you can just put that on your list and give your list to other people. Tell them to go to shop.fool.com and pick out a little swag for you.
Alright, let's get to the stocks on our radar. Our man behind the glass, Steve Broido, will hit you with a question. Ron Gross, you're up first.
Gross: Alright, Stevie, batten down the hatches. CRISPR Therapeutics (NASDAQ: CRSP), CRSP. A development-stage biotech that I own and is also a Fool recommendation. It's a Switzerland-based company focused on gene therapy using the CRISPR Cas9 gene editing platform, which I know you're very familiar with. Two other companies, Editas and Intellia also focus on this technology. You might want to own all three companies, as I do, to diversify your risk. They've got partnerships with Vertex and Bayer. This is one you buy, you hold for a long period of time. Do not let the volatility scare you.
Hill: Steve, question about CRISPR Therapeutics?
Steve Broido: Do these biotechs ever actually work out? I've heard so many. I saw the 60 Minutes piece, it looks incredible, seems like a home run, and it seems like inevitably, they never, ever pay off.
Gross: A lot of them do not. [laughs] That's a fair sentiment.
Hill: Jason Moser, what are you looking at?
Moser: They're calling for some showers this weekend, so put up that big red Travelers (NYSE: TRV) umbrella, Chris, ticker TRV, Travelers Insurance. This has been one of those stocks where the longer you own it, the better it gets. If you're going into a period of time where you've got some volatility -- we may be going into one of those periods here in 2019 -- I think good insurers are a great holding in anyone's long-term portfolio. Net premiums up 6% last quarter. They continue to maintain a very healthy combined ratio, consistently under 100, which means are writing a good book. The stock's trading at 1.4X book value today, which is actually a pretty good deal for a reputable insurer out there. Give it a look.
Hill: Steve, question about Travelers?
Broido: What do they ensure the most? Is that home insurance?
Moser: I believe it is home and auto, but they do all sorts of things.
Hill: Andy Cross?
Cross: Cintas (NASDAQ: CTAS), CTAS, the provider of uniform rentals for facilities here in our building and many other corporate clients around the country and around the globe. Reports earnings next week. Estimates for the earnings are up 31% on top of almost 6% sales growth. The stock's been a monster performer over the last decade or so. Up 26% per year for the last eight years. I want to see what is happening with wage pressure. That's a big issue with them.
Hill: And the ticker?
Broido: Why do the uniforms need to be rented? Why can't they just be purchased?
Cross: Well, you have to clean them. You don't want to deal with all that stuff. Just outsource it to Cintas, Steve.
Hill: Steve, you got a stock for your watch list?
Broido: Think I'm taking a look at Travelers.
Moser: Hey, now!
Hill: Alright. Jason Moser, Ron Gross, Andy Cross, thanks for being here! That's going to do it for this week's show. Thanks for listening! We'll see you next week!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Andy Cross owns shares of Facebook, Johnson & Johnson, Netflix, PepsiCo, Inc., Starbucks, Under Armour (A Shares), and Under Armour (C Shares). Chris Hill owns shares of Amazon, Johnson & Johnson, Starbucks, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. Jason Moser owns shares of Amazon, Markel, Starbucks, Twitter, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. Ron Gross owns shares of Amazon, Costco Wholesale, CRISPR Therapeutics, Editas Medicine, Facebook, Intellia Therapeutics, Markel, Starbucks, and Walt Disney. The Motley Fool owns shares of and recommends Adobe Systems, Amazon, Casey's General Stores, Facebook, Markel, Netflix, Starbucks, Tesla, Twitter, Under Armour (A Shares), Under Armour (C Shares), and Walt Disney. The Motley Fool owns shares of CRISPR Therapeutics and Johnson & Johnson and has the following options: short January 2019 $140 calls on Johnson & Johnson. The Motley Fool recommends Cintas, Costco Wholesale, Editas Medicine, and Vertex Pharmaceuticals. The Motley Fool has a disclosure policy.