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Inflation and Other News for Investors

Johnson & Johnson (NYSE: JNJ) announces plans to split into two companies. Rivian Automotive (NASDAQ: RIVN) records one of the biggest IPOs of all time. And Disney (NYSE: DIS) stock slips on slowing streaming growth. Motley Fool analysts Andy Cross and Jason Moser discuss those stories and weigh in on the latest from Roblox (NYSE: RBLX), The Trade Desk (NASDAQ: TTD), Upstart Holdings (NASDAQ: UPST), and PayPal (NASDAQ: PYPL).

Plus, our analysts debate the merits of Arby's Vodka and share two stocks on their radar: Sea Limited (NYSE: SE) and Unity (NYSE: U). And Motley Fool analyst Maria Gallagher talks with best-selling author Ben Mezrich about his new book, The Antisocial Network: The GameStop Short Squeeze and the Ragtag Group of Amateur Traders That Brought Wall Street to Its Knees.

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.

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This video was recorded on Nov. 12, 2021.

Chris Hill: It's a Motley Fool Money radio show. I'm Chris Hill, joining me this week, senior analysts Andy Cross and Jason Moser. Good to see you as always gentlemen. We've got the latest headlines from Wall Street. We've got a conversation with best selling author Ben Mezrich and as always, we've got a couple of stocks on our radar. But for the second week in a row, we begin with the big macro. Consumer prices in the US rose more than six percent in October. This is the biggest surge and inflation in more than 30 years. Andy, inflation obviously affects us as consumers. How should we think about this news as investors?

Andy Cross: Yeah, Chris, you can go back to my Ann Arbor days and see inflation numbers like this back in the early '90s. I think this is one reason again, while we continue to see stocks doing so well over the last few months, not just because of the unlocking from the COVID pandemic. But I think really when investors are looking at places to put money and looking for returns, the fixed income market just continues to look less and less attractive to so many investors who are trying to save for retirement building nest-egg and I think that's just driven a lot of capital into the markets. You just think about like now if you're trying to buy a fixed instrument, even going out years and years, considering where inflation is today, you're just not going to make a good return on that instrument. Whether it's five-year or 30 years, long-term, short-term. I think investors are just saying, that's just not the place I want to be and so they're piling monies into stocks. We've seen stocks just continue, they pulled back a little bit this week, Chris. But for the past five weeks, they continue to march higher and higher. You still see the price-earnings ratio on the S&P 500 is still less than right around 20 so it's not unrealistic and it's still a place to put your money into and hopefully have a return of maybe mid to high single-digits over the next few years, probably you're not going to see the 12-15 percent per year we've seen over the last few years. But again, thinking about inflation and thinking about ways to be able to protect against that. The risk of inflation and not just this year, but may be higher than what we've seen over the last 10 years. Companies and stocks continue to be the most attractive opportunity for investors. Stocks and companies have pricing power, Chris, so they can fight off and inflation, but certainly better than fixed instruments can.

Chris Hill: But Jason, I'm assuming this doesn't change your feeling about stocks in general but does the inflation news maybe affect how you look at certain industries or certain classes of stocks?

Jason Moser: Yes, I think that's a good question. You're right. It, generally speaking, doesn't change the way I view investing, particularly in stocks. I've said before the correct response to inflation for investors is not to just stop investing. You want to keep investing. But I do think it's worth being a little bit pickier. Looking for those markets where you feel like companies they're selling those goods and services that people either need or really, really want. Companies with proven track records of pricing power over time. Those are the companies where I think investors should probably focus more attention during stretches like this. We'll get into Disney later on in the show here. But I think Disney's a very good example there but business is suffering right now in the near-term because of expenses, because of some inflationary pressures. But you can also argue that over time Disney does have some pricing power that they've been able to exercise. You start looking for some of those ideas where the market may be a little bit out-of-favor in the near term, but that could represent some long-term opportunity.

Andy Cross: It's interesting, Chris, you think about Jason mentioned different parts of the market and the concern a lot within increasing inflation, which leads to eventually increase in interest rates as the Fed at some point will start to increase interest rates are going to do their tapering probably quicker than what I think they originally had thought. But that increase in interest rate is bad news for tech for companies that are unprofitable because it stretches out, looking out years and years ahead, the interest rates are going to be much higher and that's going to hurt them. Yet I think those businesses are the ones that truly have much more flexibility because their cost structure is a little bit more variable and they might be able to show that profit increasing faster than what the market long-term expects. I continue to be excited about some of these innovative tech companies because of not just the markets they're serving, but the flexibility around their business models.

Chris Hill: From the big macro to the big split. On Friday, Johnson & Johnson announced plans to separate its consumer products business from the medical device and pharmaceutical divisions. This will happen in the next 18-24 months with a number of big decisions still to be made, including who's going to run that consumer products business, what it will be called, and how the transaction will affect current J&J shareholders. But on the surface, Jason separating the regulated parts of J&J's business from the over-the-counter products looks like a smart move.

Jason Moser: Yeah, I tend to agree. I certainly understand why they're doing this. I mean, when you look at the three main drivers of this business, and pharmaceuticals, medical devices, and consumer goods. The consumer goods side of the business doesn't seem to be quite as complementary, seems to be a little bit on its own there. When you look at the numbers, I mean the pharmaceutical and medical device parts of the company together. When you put those together, they're close to $20 billion of the company's $23.3 billion in sales they just reported. If you look at it on an annual basis and go back to 2019, just because I think 2020 isn't as helpful. Consumer goods represented 17 percent of total revenue for the company, but only 11.3 percent of operating profit, and it's not like it's growing breakneck speeds either. A lot of questions still to be answered here, you mentioned a few there. What are they going to call these companies or what are they going to call this new company? Who's going to be running the show? It does sound in regard to the transaction that's going to be done in a tax-efficient way for shareholders and they were very quick to state that the dividend policy will remain intact as well. I think that when you look at Johnson & Johnson as a whole and this is a really strong business. At the end of fiscal 2020, they reported 28 platforms or products with over one billion dollars in annual sales, and of those 28, 12 of those were two billion plus. A lot of that does come from the medical devices on the pharmaceutical side, but there are some really powerful brands in that families Listerine, Johnson's Baby, Tylenol. Those are some of the really strong brands that I think the business can continue to capitalize on, and splitting up might help them allocate resources that dictate strategy a little bit more efficiently.

Chris Hill: This week, Rivian Automotive went public in the biggest IPO since 2014. The maker of electric vehicles, none of which can be found on actual roads at the moment, priced its stock at $78, ended the week with the stock closing in on $130 a share with a market cap bigger than every automaker, not named Tesla. Andy, I know they have some big investors including Amazon and Ford Motor but come on.

Andy Cross: It was a big number, Chris. They raised $12-13 billion with about 153 million shares. They issued certainly this as we've seen with Tesla, you need a lot of capital for this business so they need the capital. Ford owns about 12 percent of the business, and I think Amazon owns maybe 18 or 19 percent of the business as well. The stock has actually been performing quite well over the last few months. I think it's up like 45 percent or so and I think a lot of that is because of the ownership of Rivian. As you mentioned, has yet to sell a car and focuses on really the pickup, that's their big push with their R1T all-electric pickup that comes with a 400 miles of range and on a single charge, also a whole all host of other things you can add into it like tents and flashlights and all kinds of fun things. Received about $10.5 billion of funding over the last few years from Amazon. Certainly, a lot of excitement that Rivian is really the next Tesla.

Like you mentioned, Chris, you can't find cars yet on the road or trucks yet on the road. They also have an SUV out there and they do have a pre-order of about 55,000 of their R1S's, which is the SUV and the R1T. Certainly, Amazon has been talking about committing with them and looking to be able to buy 100,000 electric delivery vans from Rivian over the next nine or 10 years. A lot of excitement around this, it certainly puts the spotlight on Rivian to deliver. It's pretty admirable what they're trying to do as they are trying to build these cars in a very eco-friendly way and run this business. But like you say, Chris, at $100 billion market cap without really any revenue yet there's a lot of expectations baked into the Rivian stock price.

Chris Hill: Shares of Disney down nearly 10% this week after a 3rd quarter report. It was highlighted by slowing growth for Disney Plus subscribers and Jason to be fair, it wasn't just streaming video. Profits and revenue also came in lower-than-expected.

Jason Moser: Well, first and foremost Chris, it's Friday, it's November 12th, so happy Disney Plus Day everybody.

Chris Hill: And to you and all who celebrate.

Jason Moser: [laughs] I think unless we've seen how powerful Amazon Prime Day can be. Let's see, if Disney can pull the same type of lever with Disney+ Day. We talk often, I think, about how great this business is, its wonderful qualities, the assets, the intellectual property; such an ongoing presence in so many lives. But it's not bulletproof and I think for Bob Chapek, the honeymoon is over and he's going to really need to start showing his medal here. They are suffering from a bit of a one-two punch here with signs of subscription business slowing a little bit and costs weighing down on the parks and experiences side. I certainly understand the near-term concerns there. Subscribers, those still look good. Disney Plus 118 million now, ESPN Plus is tread in water there. Hulu now 43.8 million subscribers. They've a total of 179 million and they are still on track. They believe for that 230-260 million Disney Plus subscriber target by the end of 2024 and getting that streaming business to profitability. But when you look at what really makes up this business today, parks and experiences, for the most par. You've got the entertainment side as well. Attendance looks good. Attendance continues to grow. You look at Walt Disney World, quarter 4 attendance was up double digits versus the quarter ago. Good sequential growth there. Disneyland continues to come back online as that reopening continues. Per capita spending up almost 30 percent versus 2019. Not 2020 but 2019, so I think that's very encouraging. There are a lot of questions today regarding the margin pressures. There are inflationary concerns as well as general investments in the business. We're seeing, of course, supply chain constraints, difficulties there. The consumer might be a little bit hesitant. These are things that are weighing on the business in the near term and they need to make sure that you get that traffic going because that really helps them realize that operating levels that they are so good with. You've got those fixed costs that it takes to keep us parks operating. The more guests, the better. It's understandable. The markets trepidation today, but I wouldn't count Disney out. [MUSIC]

Chris Hill: There was a big week for two stocks in particular. Details right after the break, so don't go anywhere. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. Chris Hill here with Jason Moser and Andy Cross. Third quarter revenue doubled for Roblox. Daily active users for the online game platform were also up and shares of Roblox rose more than 30 percent this week. Andy, you tell me, what stood out to you?

Andy Cross: Well, the bookings, Chris, which is the cashless transactions across their platform in any given quarter was up 28 percent, a little ahead of estimates. There's some nice growth there. Daily active users, as you mentioned, up 31 percent. Again, I think both those numbers combined showed that Roblox is not just going away as kids start to get outside and do other things. Some nice growth there. Highest in the Asia and Pacific with 75 percent growth on the user side and Asia-Pacific now 20 percent of all the users, which is nice. Hours engaged was up 28 percent. Again, right in that 20, high 20s, 30s growth rates I think are pretty attractive. Fifty percent of users now, Chris, are over the age of 13. That was up from 44, 45 percent a year ago. They talk a lot about this, expanding their opportunities to move just from kids much more into tweens. The developers and creators earned $130 million during the quarter. That was up 50 percent. They really spend a lot of time focused on the developers. Overall, when I look at Roblox, I own stock myself, they continue to make these investments which hurts the profitability although there's also some nice growth this year on the gross profits. But overall, they continue to make the investments. They're building up a network, expanding their brand opportunities, and I like what they're doing. David Baszucki, who is a very large shareholder, Founder, CEO, I like the direction he's taking the company.

Chris Hill: Shares of The Trade Desk up more than 40 percent this week after third quarter profits and revenue came in higher than expected. Jason, The Trade Desk was not exactly a cheap stock before and now, my goodness.

Jason Moser: [laughs] Now is a big week, big week for sure, but very understandable given the results. Stellar customer retention, which remained over 95 percent during the quarter as it has for the previous seven years. Then you look at the connected TV opportunity, particularly as ad-supported video on demand continues to take off. It's just a big market opportunity there. MoffettNathanson recently pegged that market, growing from $4.4 billion in 2020 to $18 billion by 2025. Remember, The Trade Desk provides a demand side platform that its customers used to purchase advertising space. It really is one of the businesses capitalizing on this opportunity in the biggest way. I think one of the most powerful quotes in the call was when CEO Jeff Green said, "As we predicted, the most recent iOS changes have had no material impact on our business, and we expect that to remain the case." If you're an advertising supported business and you can say that, that's really big because it's clearly been an issue for a lot of other businesses out there. Continued to grow support for that unified ID 2.0, focused on protecting privacy while using data in the most efficient way possible. All things considered, it's not a cheap-looking start, but it's a good business that is chasing a massive market opportunity. Good leadership. I'm a shareholder myself. I feel very good about it.

Chris Hill: Not everyone had a great week. Shares of Upstart Holdings fell more than 25 percent despite the fact that 3rd quarter revenue for the AI-lending platform was higher than analysts were expecting. Andy, Upstart Holdings is a growth company. Isn't this the type of quarter we want to see from a growth company?

Andy Cross: Well, it isn't as nice Chris, and their guidance for the year for the fourth quarter at 255 million to 265 million in revenue was ahead of estimates but it's a growth of 200 percent. I think they're starting to see a little bit of that taper down, which I think is natural. I think they're starting to see these some of the new clients that bringing into their platform, and they are bringing a lot of clients onto the platform. There's some expense to that. What they call the contribution profit is a little bit less than it was the previous quarter and also over last year. They continue to make these investments in the business. They continue to sign more and more banking partners on, banking partners expanded very rapidly this quarter. Overall, they're making the right investments. They're bringing a lot of people onto the platform. There is a cost to that. I think some of the investors were looking at that, the operating expenses growing 275 percent year over year and saying, "Oh, wow, they are making those investments, the profitability may not be there". I still like a lot of what they are doing. What Upstart is building in the business that are creating and long term, I think it looks still very attractive.

Chris Hill: Paypal's revenue in the 3rd quarter was lower than expected, and guidance for Q4 was not exactly what Wall Street was hoping for. Shares down nearly 10 percent this week. Jason, 2021 has not been great for PayPal shareholders. Is 2022 going to be better?

Jason Moser: I think so. Someone asked me about this on Twitter the other day and I said, look, they're going to push $1.25 trillion through their networks this year while finally putting eBay in the rear view mirror. If you can see the forest for the trees, I think the market is offering you get today. The shares now around 45 times full-year earnings. You're right, they guided down. That earnings per share number, they guided down slightly, revenue slightly as well. But I think most of that is due to headwinds from weaning themselves off of that eBay relationship there, we've been talking about that for the past year, knew that this was something that was going to be playing out for 2021. But when you look at the numbers themselves, total payment volume up 24 percent. If you exclude eBay, revenue grew 25 percent. They added 13.3 million new accounts. They now have 416 million active accounts using their services. Venmo now with more than 80 million customers in a $240 billion run rate in total payment volume. They inked a nice little relationships there with an up and comer. Chris, you may have heard of the a little company called Amazon?

Chris Hill: Yeah.

Jason Moser: Listen, I understand the market reacts the way it does when you pull back on guidance like that. But this remains a very good business, obviously leading the way in this fast developing fintech space. To me, this is one you have to own.

Chris Hill: All right, guys, we'll see you later in the show. Up next, the conversation with best-selling author Ben Mezrich. You're listening to Motley Fool Money. [MUSIC] Welcome back to Motley Fool Money. I'm Chris Hill. There's no question that one of the biggest investing headlines of 2021 is the story of GameStop (NYSE: GME) and Reddit. It's a tale wonderfully captured in Ben Mezrich's new book, The Antisocial Network, the GameStop Squeeze, and the Ragtag Group of Amateur Traders that Brought Wall Street to Its Knees. Mezrich has written multiple best-sellers, including The Accidental Billionaires, which was adapted into the Oscar-winning film, The Social Network. Recently, Motley Fool analyst, Maria Gallagher, talked with Ben Mezrich about the rise of meme stocks and how he decided to write this book through the lens of multiple investors.

Ben Mezrich: For the GameStop story, I know we were all familiar with the main characters, which was Roaring Kitty, which was the Melvin Capital people. I wanted to get inside the story from the perspective of people on Reddit who were buying GameStop. I wanted to tell it through the eyes of people that we would recognize, but also who did something interesting. There is a college kid who ended up turning a few thousand dollars investment into a quarter million dollars playing GameStop. Then there's a single mother of two who's just trying to make enough money to pay for her kid's braces. It was a matter of just trying to find people who we might identify with who got caught up in this craziness.

Maria Gallagher: In that vein, what would you say the biggest misconception the general public has about GameStop, WallStreetBets, what happened during this time?

Ben Mezrich: Sure. I think that people don't recognize how much of a movement it is and it was. The idea was it wasn't just people trying to make a few bucks out of short squeeze, it was people who were very angry about Wall Street and about being treated poorly going all the way back to 2008, but Occupy Wall Street with the banking crisis of that time. It was really sentiment-driven. But I also think another misconception is we have this image in our head of what the Reddit buyer looks like. We're picturing a nerdy white guy in a corner of a basement somewhere. The reality is it was a very diverse group of people on that Reddit board. It was people from all walks of life who really got involved in this. That's why I like to call it a revolution because I think it was much bigger than just a bunch of dudes in their basements trying to make a little bit of money. [laughs]

Maria Gallagher: I think it's really interesting too. You really highlight the sense of community that a lot of people found in this Reddit, in this WallStreetBets crowd, especially at a time during the pandemic when everyone was so physically isolated. Do you think that that played into the factor that sense of there was no real world that you could actually physically be in so people found this heightened sense of community online?

Ben Mezrich: Absolutely. I don't think this movement could have gotten to this point without the pandemic. It was really people trapped at home sitting on their couches and they had a little bit of money because of the stimulus checks, and no one had anything to do. You couldn't go out with friends, you couldn't do anything else, and so as a society, people were turning to things like Reddit, but also the stock market. The stock market was already being gamified and turned into a casino. But suddenly than were millions and millions of people just trapped and angry, [laughs] and not just at Wall Street, but at their lives. Everybody's lives got screwed up in such a big way and this was one way of making noise, of having a voice. I absolutely think it was pandemic-driven and with the book, I definitely tried to capture this moment in time.

Maria Gallagher: Something else that I thought was really interesting that you highlight too, is that interconnectedness, not only of the people on WallStreetBets, but within the structure of the back-end. You talk about the connections between Citadel, Melvin Capital, Robinhood. Can you explain a little bit for people who maybe aren't familiar about those relationships and how they impact us as retail investors since we're now all used to a no-commission trade? Can you explain a little bit about those dynamics?

Ben Mezrich: Sure, absolutely. It gets very complex, but I'm a layman and so if I can understand it, I think anybody can understand it. But the reality is these brokers like Robinhood that appear more and more and are getting bigger and bigger, really most retail traders used something like Robinhood. They don't charge you any fees and you don't have any minimum balances, but they don't actually make their money off of you. You're not actually their customer, you're their product. They make their money off of the market-makers, people like Citadel, who sit at the center of the US economy. When you buy a stock through Robinhood, it doesn't happen instantly. Although it looks like it happens instantly, like you buy some GameStop and it appears in your account, what's really happening is a two-day process where you put up a certain amount of money to buy GameStop, Robinhood takes your trades and then essentially sells them to Citadel, Citadel makes the trade happen.

This happens over a two-day period, which is called T+2 clearing. Then they get you the best deal possible and then they essentially pay Robinhood for all of these different trades. It's called payment for order flow. In the end, everyone is happy when it works well, because you get a good deal, you don't actually have to pay any commissions. Robinhood makes money on the trade, but doesn't have to charge you anything, and Citadel make tons of money because they are running all the trades and they can see what's going to happen, they can make money off of the trades and they make money by placing the trades, they get a little bit in between. That's essentially how the process works, but it's actually very ugly when you look at it from the perspective of who's making money off of who and who has incentives to do what. That's where it gets very murky when something like a giant short squeeze happens, and that's where all the drama comes from. But that's the connection. Citadel sits at the center of it, Robinhood is between us and them in a way, and then regular retail traders all use these brokerages to move their trades back and forth.

Maria Gallagher: I feel like that interconnection is so fascinating because you feel like you have Melvin Capital and you highlighted a lot in the book that people saying, specifically, we're going to take this hedge fund down. But then you also have in the back-end, Citadel who is going to come in and help or Citadel is making money from the fact that you're doing all of this. I think just that interconnection is something that people don't understand as well because it's so confusing and when it works, you don't really have to think about it. But then went something like this happens, it really highlights that kind of relationship that happens on the back-end. I'd be curious to think, where do you think we are in terms of WallStreetBets versus Wall Street in this story? Do you think hedge funds are prepared for this? Do you think this is going to really change anything as life turns back to normal? Where do you think we are in this story?

Ben Mezrich: I think this is the beginning of the story and I really think that what happened with GameStop is just the forerunner for a massive shift in how Wall Street works. You have hedge funds and they are the enemy to the retail trader in some way, and then you have the retail trader, which previous to this moment in time was very weak, it was lots of disparate people who are all doing their own things. The idea that they can move as one is something very new. The idea that social media allows millions and millions of retail traders to work together as if they're one giant hedge fund, they really can take down Wall Street. The idea is this Melvin Capital, which was this multi-billion dollar fund, got sideswiped, got forced into this horrible squeeze situation and lost half of the value of their firm because a whole bunch of people sitting on their couches were communicating with each other. What this does is it changes everything. The idea of the meme stock is really here to stay. The idea that a whole big group of people can decide that a stock is going to go up. Once they decide that, it will go up as long as they all hold together and don't sell it. The fundamentals of a company don't actually matter if there's a large group of people who decide to stocks should go up.

It doesn't really matter what GameStop does, what matters is what we feel about GME. This is similar to what's happening in crypto with Dogecoin, which is a ridiculous thing. There's no actual value to Dogecoin, but if we all decide it's worth something, then it's worth something. I do think we're going to see this again and again and again, and I do think the Wall Street on the whole is still not accepting or understanding the movement that's happening here. They are now employing people who are going to scour the Reddit boards and try and figure out which direction things are going, and they're definitely not going to announce short positions anymore, and they're going to be as quiet as they can about things like that. But on the whole, that's just a band-aid over what's going on. You're going to see giant swings like this again and again and again. I think it's going to be very hard to be careful in a market that can swing so rapidly. In a day, nine million people on WallStreetBets can decide to move a stock, and it's going to be very hard to react to that in general.

Maria Gallagher: That's really interesting. What do you think about that break from fundamentals? We have this prevailing method that the market is mostly rational. There are places where you can get gains because people aren't looking at what you are looking at. But in general, I think most investors would say, for the most part, the market acts rationally and there are times where you can exploit that irrationality. But for the most part, if you put your money in an index fund, you will do OK. Where do you think that that disconnect between the fundamentals of a business and the fundamental value of the stock market and then this idea that, well, we care about GME and if we're all going to do it, we're all going to raise it up. Do you think that they should maybe focus on companies with better fundamentals or do you think the whole point is that they're doing it for companies that are forgotten like AMC and GameStop?

Ben Mezrich: Yeah. I think that the rationality of the market is now in question. I think it's very hard to say that people are going to act rationally when you're talking about millions and millions of 22-year-olds, each with 1,000 dollars in the bank and each one wanting to make 10 times. Nobody is trying to make 10 percent on their money, everyone is trying to get 10X on their money. When you have a market full of people shooting for the moon, it's not going to be a rational market. I totally think that over time, it's going to get worse and worse and worse from one perspective. It's going to be more and more of people taking moonshots and trying to work together to make massive fortunes. You look at what happens, again, I go back to crypto and Bitcoin, and this is something that goes from a few thousand dollars to $50,000 in a year and people are still unhappy. They're saying when is it going to get to 100,000. That's not acting rationally. That's a need to make these giant YOLO trades, which is what we're going to see again and again. I don't think that Wall Street is going to be safe, it's not going to be a safe place to invest. I think the fundamentals are more and more going to be less and less important, and more and more important is going to be sentiment, nostalgia. The idea that AMC, we love movie theaters, so we're all going to grab AMC and hold onto it, and the idea that someone would short AMC is almost offensive. Even though it might make financial sense to short AMC. People are going to be very upset at that maneuver. I think sentiment is really going to guide market.

Maria Gallagher: Interesting. Yeah, I wonder where that's going to, whether it is going to be ever maybe some balance between you have this small fringe and then mainstream. What would be your opinion on the gamification of investing? When we think about Robinhood, you highlighted in the book as well, that rush when people got confetti on their first trade and the rush of dopamine when you make a trade and really having it resemble gambling. The slot machines and the fun colors in that interest. Do you think that that's a good thing because you're getting people more interested in, we might say bad investing? Or do you think it's actually ending up doing more harm because people are not thinking, let me try and get 10 percent because I can build up a nest egg for the rest of my life. They're looking like let me get 10X in the next five minutes.

Ben Mezrich: Yeah. I think Robinhood is a wonderful app. I like it, everyone likes it, but it really is pushing us toward turning it all to a giant casino with a video game console to it. Everyone is becoming a gambler. College kids that used to gamble on sports are gambling on the stock market now. Average people are now looking at their portfolio as a gambler looks at a portfolio not as someone who is trying to make a few percentage points. I do think the gamification of Wall Street. Let's be fair. It was always a game. But now everyone gets to play. Suddenly, it's not just people in seats and ties on Wall Street playing, it's everyone can join in on this game, but it is a game and it is gambling to some extent. I think overall, this may be negative. The idea of democratizing finance is very good and you want more and more people to be in the market. But people aren't coming with the level of education. They're not coming with knowledge of how the market works. They're coming with, I'm going to hit a home run, I'm going to buy game stock it's going to go to 500.

That's where it starts to get dangerous. I think it's great that more and more people are trading. I think what Robinhood represents, it's something great. The ability to be a trader without actually having to spend years learning how to do it. But there's no warnings. There's not enough warnings. I think that it's dangerous without a certain level of education and understanding. I've always been intrigued by the idea of risks and what people's personal risk is. The reality is someone with very little money and no real nest egg or anything like that is risking a whole lot more than some Wall Street trader. A Wall Street trader loses on a trade and they get up the next morning and they start again. But if you lose your rent money, you don't get up and start again the next day. I think there's not an equitable amount of risk. When you democratize finance to everyone, there is a lot of people who are taking enormous risks with their lives, and not really realizing it.

Chris Hill: The book is the Antisocial Network, The GameStop Squeeze and the Ragtag Group of Amateur Traders that brought Wall Street to Its Knees. You can find it wherever you find books. But up next Jason Moser and Andy Cross are coming back with a couple of stocks on their radar. Stay right here, you're listening to Motley Fool Money. As there are always people on the program who 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 Andy Cross and Jason Moser. Before we get to radar stocks guys, Arby's may have the meat, but now they also have the vodka. Starting next week for a limited time, Arby's vodka will be available for $60 a bottle. It will come in two flavors, curly fry and crinkle fry. Jason Moser, if you want a little spice in your vodka, good news.

Jason Moser: Well, I don't really drink a whole lot of vodka and I don't know that this makes me want to really start. But I understand we are in a day and age where brands, particularly these quick-service brands, need to branch out and capitalize on their brand to whatever extent that they can. It feels like, and I'd love that Mac has a great phrase for this, the brand permission and Mac, I agree with you. I just don't think that Arby's has the brand permission here to pull this off, but I guess we'll see.

Andy Cross: I do like myself a little Bloody Mary Chris, and so maybe a little spice in a Bloody Mary with some vodka. That might do it.

Jason Moser: I feel like it's better with the jamocha shake. To me, that's what Arby's does so well. The fries are good, don't get me wrong, but it just, it feels like the jamocha shake vodka combo makes more sense than the fries. But the fries thing is definitely an attention-getter.

Chris Hill: Let's get to the stocks on our radar, our man behind the glass, Rick Engdahl is going to hit you with a question. Andy, you're up first, what are you looking at this week?

Andy Cross: Rick, Chris, I'm looking at Sea Limited symbol SE, $184 billion e-commerce gaming entertainment company that focuses mostly in our emerging markets, including Asia and Latin America. It's gaming business is really the driver of a lot of the growth. It's one of the largest gaming developers and publishers across 130 countries. Free Fire is the biggest gain. It's a mobile battle royale game that was the most downloaded game over the last year. Half its revenues come from gaming, but it's also really growing out its e-commerce business called Shopee. Also its payments business, which is really exciting as they merge those two together. When you look at the e-commerce market overall, Rick and I look at the growth picture growing north of 100 percent, continuing to grow very, very attractive in those markets, it's going to do about nine billion in sales, about 15 times multiple. I don't think that's too expensive. I'm still not making money, but a lot of growth baked into the price and I think it could be worth it.

Chris Hill: Rick, question about Sea Limited.

Rick Engdahl: Yeah. I've heard Sea Limited referred to as the Amazon of Asia, and I'm just wondering the obvious question, do they have a space program? Are they sending celebrities to space because?

Andy Cross: I don't think so Rick, this is like that Amazon, MercadoLibre, Activision Blizzard all kind of merged together. I don't yet see this space picture yet.

Chris Hill: Jason Moser, what are you looking at?

Jason Moser: Yeah. Taking a look at Unity Software ticker. Unity reported their earnings earlier this week, it's interesting to see how the stock was selling off after hours only to finish up strongly the next day. It's actually a great week with shares up better than 20 percent. But I understand why. I mean, they grew revenue by 43 percent, beat their internal guidance handily. Now, with 973 customers each generating more than $100,000 in revenue over the last year versus 739 a year ago. I think the big news they are acquiring visual effects company, Weta Digital, best known, I think for a lot of the stuff that you've seen in movies in the Lord of the Rings franchise. But that's going to bring a lot of talent, tools and assets under their umbrella that will enable creators around the world to continue building using Unity well beyond just games. I think they're doing a very good job of continuing to build out to other verticals, which is really the encouraging part of the story.

Chris Hill: Rick, question about Unity Software?

Rick Engdahl: Sure, Jason, you are a parent, I'm a parent. Certainly to get our kids off of playing games and into creating games with this is our MasterClass for Unity or something?

Jason Moser: Yeah. [laughs] I like that mindset. We're not a big gaming household and so consequently, my girls aren't big gamers, but you're thinking of it the right way and maybe it's just a matter of getting them invested earlier and teaching them about how these businesses work. Because yeah, it's like giving him a fish versus teaching him how to fish. Let's teach him how to fish. [laughs]

Chris Hill: What do you want to add, Rick?

Rick Engdahl: Well, full disclosure. I actually own a little bit of both of these, but perhaps Unity's more fun right now.

Chris Hill: We're out of time. We'll see everybody 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 Activision Blizzard, Johnson & Johnson, MercadoLibre, PayPal Holdings, Roblox Corporation, Tesla, and The Trade Desk. Chris Hill owns shares of Activision Blizzard, Amazon, Johnson & Johnson, MercadoLibre, PayPal Holdings, Walt Disney, and eBay. Jason Moser owns shares of Amazon, PayPal Holdings, The Trade Desk, and Walt Disney. Maria Gallagher owns shares of MercadoLibre, PayPal Holdings, Sea Limited, and Walt Disney. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, MercadoLibre, PayPal Holdings, Roblox Corporation, Sea Limited, Tesla, The Trade Desk, Upstart Holdings, Inc., and Walt Disney. The Motley Fool recommends Johnson & Johnson and eBay and recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, short January 2022 $1,940 calls on Amazon, and short January 2022 $82.50 calls on eBay. The Motley Fool has a disclosure policy.


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