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Good News From Target, a Change for Disney+, and More

Nearly 700,000 jobs were added to the U.S. economy in February. The biggest gains were in the leisure and hospitality industries. Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and other Silicon Valley companies announce plans for returning to their offices. Motley Fool analysts Jason Moser and Emily Flippen discuss employers taking an "omnichannel" approach with their employees, as well as:

  • Target's stellar results.
  • Costco's mixed quarter.
  • Salesforce focusing on Slack (instead of more big acquisitions).
  • Disney's plan to launch an ad-supported tier for Disney+.
  • The latest from Sweetgreen, Domino's Pizza, Best Buy, Elastic, and Zoom Video.

Emily and Jason answer a listener's question about whether to sell index funds in order to buy more stocks and share two stocks on their radar: Bilibili and Accenture.

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 March 4, 2022.

Chris Hill: Silicon Valley is going back to the office and Disney is going back to the drawing board. If you're an investor, you're in the right place. 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 Analysts Jason Moser and Emily Flippen. Good to see you both.

Jason Moser: Hey.

Emily Flippen: Hey, Chris.

Chris Hill: We've got the latest headlines from Wall Street. We will dip into the full mailbag and as always, we've got a couple of stocks on our radar. But we begin with the big macro. The US economy added nearly 700,000 jobs in February, with the biggest gains coming in the leisure and hospitality industries. In keeping with the reopening seen this week, Apple, Alphabet, Salesforce, and Twitter all outlined plans for employees returning to offices and Emily, when you think about the rise of vaccines and COVID cases falling all over the country. This all makes sense.

Emily Flippen: It's good to have some positive news to kick off in this week, I should say. We're still above the unemployment rate pre-pandemic, but it's definitely trending in the right direction. All the metrics you just mentioned point to an economy that is reopening relatively strong consumer base. With those businesses like Apple recently announcing their plans for office reopening. It's going to be really interesting to see what happens with labor pools and unemployment rates moving forward because there's been this collection of feelings from workers and businesses that yeah, I mean, a lot of people want to be in the office, while at the same time, a lot of people have become extremely accustomed to a certain level of flexibility and their work-life balance so try to find that middle ground of both having some sense of control and efficiency in the office, while also having the flexibility whether it be for your health, for your family or really just having a separation of work and life by having flexibility around your work arrangements. How they marry those two things together will be very interesting to see. We've seen the fallout from businesses CoStar being one recently, who tried to bring the move into the office a little too aggressively had a lot of pushback from employees. We'll see if some of these big tech businesses can find the right way to do it.

Chris Hill: Well, and Jason, you looked at something like Marc Benioff at Salesforce talking about collaboration and flexibility, flexibility for the employees, but getting people into the office for that in-person collaboration.

Jason Moser: Yeah, I think it's very telling to see all of these companies; Microsoft, Google, Twitter, Salesforce, Apple so focus now on getting their employees back. It doesn't sound like it's something that's necessarily optional, but I agree with Emily. I think what we're looking at going forward is companies are going to have to be more thoughtful about how they do this. I think ultimately, we've talked a lot in the past about the changing retail space and we've always used that word omnichannel and I feel like going forward really you need to be like the omnichannel employer. I mean, I think speaking in absolutes as far as this stuff's concerned, probably leaves a lot of opportunity on the table. If you're like up a fully remote company, that probably isn't going to work out very well in the long run. Just like if you're a company that just demands everyone to be onsite all of the time as well. I think the companies, they can basically develop that omnichannel employer of philosophy that embraces hybrid work, allowing that flexibility while also really I think honing in on that need for people to be together. I think that's really going to be the key to it all.

Chris Hill: This week, Target held its first in-person investor day since the start of the pandemic. CEO Brian Cornell talked about how the company is getting more efficient and that the average Target store has added $15 million in sales over the past few years. By the way Jason, their fourth quarter profits were also higher than expected.

Jason Moser: Yeah. This one has been just hiding in plain sight. It's very impressive to see what CEO Brian Cornell has done in his time coming in and having to implement strategy change, really building that omnichannel retailer that they envision that consumers are looking for and all of the signs here show that he's doing it. He's succeeding. The stock is up 290 percent of the last five years and that's for good reason. Success in omnichannel has translated into success in the business and they note this frequently that omnichannel guests spend four times as much. Is store only guests and even more compared to digital only guess so really driving that omnichannel identity is what's been a key point of focus here from Cornell, 19 consecutive quarters now of comps growth, which is really impressive when you think about what we've just been through over these last couple of years. For the quarter, comps grew 8.9 percent. Comp traffic grew 8.1 percent. It's impressive to see they've grown nearly $28 billion in revenue more than 35 percent over the last couple of years in and it's looking like for fiscal 2022, that will moderate a little bit. They're expecting low to mid single digit revenue growth. But again, you look back to how the stock has performed that doesn't seem to be an accident, as Ron would say this company is firing on all cylinders.

Chris Hill: Well, and we talked about capital allocation all the time about it's such an important skill and you think about Brian Cornell, and anytime there's been a question about his decision to allocate capital in a certain way and the questions are fair. Whenever you asked, is this going to work? The answer almost always is yes. When he came out and said, we're actually going to get out of the pharmacy business. We're going to sell our in-store pharmacy presence to CVS. They've got a lot of money for that and it's like, well, what are you going to do with it? We're going to invest in apparel and in both cases I was like, is this going to work? The answer is yes.

Jason Moser: Yeah, they've done a really good job allocating capital. I think you make some very good points there. I think obviously the acquisition of shipped has been a tremendous boost for this business. They continue to repurchase shares very opportunistically bringing that share count down significantly over the past five years so it really does feel like from a capital allocation perspective Mr. Cornell has nailed it as well.

Chris Hill: Costco second quarter report had a little something for everyone. For bulls, it was the higher foot traffic in stores, with customers buying high margin items like jewelry and home goods. For bears, it was Costco still battling supply chain problems. Although historically Emily, being bearish on Costco, not a great idea for investors.

Emily Flippen: Well, if anybody's driven past a Costco recently, they already probably had an inkling that this quarter was going to be decent. Revenue row 16 percent earnings even better, rising 36 percent year over year, largely because of that increase in food traffic as well as higher-margin sales. But as you mentioned, there was a good reason to be a little bit bearish on this quarter. I won't go as far as saying being added all out bear on Costco, but there are certainly worse some headwinds. We had permanent wage increases for employees that came into effect in October 2021 that was expected to weigh on this quarter, as well as those supply chain issues, logistics challenges, labor shortages. There were lots of things that could impact Costco, but those higher margin products sales combined with the foot traffic, more than made up for the headwinds they experienced over the past quarter, largely thanks to again, that capital allocation, investing heavily into their logistics and warehousing business.

But here's what I found really interesting about this quarter, Costco chose to keep its membership fee the same. Now they may increase it at some point this year they didn't promise it was going to be the same forever. But we've seen other businesses, Netflix and Amazon raise prices amid this inflation. You have to wonder what's going through the minds of the Costco management team here. Because from my perspective, I think they know their customers are a bit price-sensitive with the chip shortages as well as rising inflation, they're already seeing the prices rise on their everyday goods with the prices also rising on their Costco membership. Maybe they'd be afraid that they'd knock their renewal rates a little bit if they raise prices right now.

Chris Hill: But if you are able to bet on whether or not they raise their membership fee at some point in 2022, wouldn't you bet on that? Because if history is any guide, this is the year they're going to do it.

Emily Flippen: Yes, historically speaking, they raise their fee every 5-6 years, so they're right about in that timeframe right now. I do think they can do it and I would expect for them to do it if not in 2022, definitely in 2023, they keep their renewal rates near 90 percent pretty consistently so you know they're going to be smart about when and if they do it.

Chris Hill: It's pretty amazing when you consider we talked about businesses like Netflix or HBO Max and churn rates with customers. Those businesses would kill to have a retention rate, anything approaching what Costco has. Salesforce wrapped up its fiscal year with profits and revenue higher than expected. Two years ago, Salesforce bought Slack for $28 billion, but co-CEO Bret Taylor said on the earnings call, the company has no big acquisition plans in the near-term. Jason, it sounds like they are trying to optimize Slack as much as they can.

Jason Moser: I think you've probably heard a collective sigh of relief from Salesforce investors. It's not to say that acquisitions are a bad thing and they've had I think a successful track record thus far, but yeah, let's go ahead and take a step back and digest this Slack deal first. Always a good reminder of what Salesforce does. Customer relationship management, getting data from all of these different communications channels today, which help businesses then learn more about their target audiences. It helps them retain customers and drive sales. Based on the numbers, based on everything we've seen, customers find a lot of value in what Salesforce has to offer. The numbers again, very impressive. Fourth quarter revenues, $7.33 billion it was up 26 percent. Remember the overwhelming majority of that is subscription revenue that translated into earnings per share of $0.84. They continue to recognize the data benefits from the Tableau and MuleSoft acquisitions.

Those are the data businesses and it altogether those acquisitions, that data business now, they accelerated growth to 23.5 percent from a year ago. Sales Cloud and Service Cloud are both now $6 billion businesses on their own. In fourth quarter they grew 17 and 18 percent respectively. Back to Slack, yes, Slack continues to perform very well under the Salesforce umbrella. The number of customers spending $100,000 annually with Slack increased 46 percent from a year ago. So you put it all together, Marc Benioff, I think one of the more glass half-full CEOs, you'll hear out there. I love listening to him talk just because he lights up a room and he lights up a conference call. It seemed like he was really excited to get employees back together and have the offices open. I can imagine that's exciting for a lot of folks. It sounds like this coming year is going to be a good one. They're calling for $4.63 in earnings. That put shares now around 43 times full year estimates. So, cheap? No. But relatively speaking, it's actually starting to look like a compelling multiple for a business like this that has a stellar track record. It's growing and it continues to push those margins higher.

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 Emily Flippen. Sweetgreen's first quarterly report since it went public last November was a hit with investors. The fast casual salad chain is not profitable, but expects sales to be strong this year. Emily, salad is rarely my first option for a meal, but as a business, I have to say Sweetgreen intrigues me.

Emily Flippen: I have to say, if you've eaten at a Sweetgreen you're probably familiar with why this business had such a great quarter because the food is really pretty decent. For a salad. Now they did report a loss that was greater than expected, but revenue grew nearly 63 percent, admittedly coming off some pretty weak comparables. There's an interesting device of community behind the Sweetgreen business as an investment because more than a third of their sales actually come from the New York metropolitan area. You can see why a fancy salad chain would have a lot of success, especially with people coming back to the office, grabbing lunch in-between meetings. This model works in urban areas, but there's also been a large constituent of investors who think Sweetgreen might be the next Chipotle. When you look at their cash-on-cash returns and their unit economics for their stores, it's actually really impressive. The big question is, Sweetgreen only has around 140, 150 locations currently. Can they make a model work in the suburban areas that has succeeded so readily in urban districts? I'm not entirely sure I am sold on it. I do think their prices are a bit higher than what suburban customers may be accustomed to paying for lunch out. However, I will say the food is really decent if I can speak for myself here, and I can see an argument for a larger store count than the one they have currently.

Chris Hill: Would it make sense for them to offer some type of value salad, something that has a price point of like $8-10?

Emily Flippen: When you look at the success of Chipotle, part of the reason why Chipotle management isn't that worried about the fact they've had to raise prices over the past year is because they've consistently had an option price below $10. Their most popular item, their chicken burrito. That's been really steady. Regardless of where your price point has been, you've been able to walk into a Chipotle and know that you're going to get a reasonably priced chicken burrito. Sweetgreen doesn't have that right now. They charge per topping, which is challenging, I think for a lot of consumers. Their salads readily end up being $15-20 per salad. It doesn't translate as easily to maybe a more price sensitive market. I do concern a little bit with how Sweetgreen is going to expand. I do think having some base level option that is priced at or below $10 would dramatically helped them assuming of course they can make that profitable.

Chris Hill: The headline for Domino's Pizza is not the company's fourth-quarter earnings report. It's the fact that CEO Rich Allison is retiring after less than four years in the corner office. Allison will step down later this spring and hand the keys to Domino's Chief Operating Officer Russell Weiner. Jason, Rich Allison is 53 years old. He's not staying on the board. He sounds like someone who's just going to live the next stage of his life.

Jason Moser: I'm getting hungry. I mean, it's Chipotle and Sweetgreen and pizza. Focus up, Jason. All right. Yeah, you're right. The big story, Rich Allison calling it a day. I mean, he's with the company for 11 years, CEO for about four, obviously done a tremendous job, particularly in a difficult time. Very sensible to promote Russell Weiner who served as the COO for about four years and has been with the company since 2008. We'll have to see how he performs. That's not always a guarantee, but typically like to see that COO take the step up. As far as the quarter, it was OK. It wasn't anything really to write home about, but US same store sales growth, one percent, international same store sales growth of 1.8 percent.

That means they continue their streak of 112 consecutive quarters of positive international comps growth. Just really impressive, but not terribly surprising when you consider their global retail sales reach $17.8 billion in 2021. That's up almost 12 percent from a year ago. Even more impressively, this was in the call, when they compare it back to pre-pandemic 2019, they've grown the Domino's brand by $3.5 billion in retail sales on a global basis over the last few years. It's been a tremendous time. That said, I think going forward they're going to witness some challenges here. Inflation, I think is going to be really a key point of focus management noted on the call. They are seeing unprecedented cost pressures. They're calling for 8-10 percent cost increases there and that will likely be loaded on the front half of the year. But it's been a wonderful investment thus far because they've managed capital so well and continue to grow out in what is a very large and growing market opportunity in pizza.

Chris Hill: A story of Best Buy's fourth quarter report involves supply chain challenges, staffing challenges, and lower revenue than expected. Naturally shares at Best Buy are up nearly 10 percent this week, Emily.

Emily Flippen: Naturally. The market is just showing how irrational it is, especially when you compare it to something like Costco. But I will say the market was baking in some big headwinds here due to supply and chip shortages and maybe the market just wasn't expecting things to be not as bad as they were. I will say, my concern with Best Buy, it's an amazing business, it's consistently blown investors out of the water. But are they suffering from scope creep? Because their move into total tech, their $200 membership program, I can see that working. But getting into furniture and healthcare, it feels outside their areas of core competencies. I really want to see execution here in a way that I'm not sure is possible given their existing business lines.

Chris Hill: So when I go into a Best Buy and they've got their stereo setup and they've got those large comfy chairs, I can buy one of those? I can walk out with one of those?

Emily Flippen: That's the plan. Outdoor furniture, indoor furniture and maybe even telehealth at some point in the future. I guess everything's on the table for Best Buy.

Chris Hill: More after the break, including a closer look at Disney's latest decision for its streaming service. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here with Emily Flippen and Jason Moser. Third quarter results for Elastic were better than expected, but shares of the software as a service company basically flat this week. Jason, this was the first quarter with new CEO Ash Kulkarni, how is he doing so far?

Jason Moser: Yeah, I'd say one quarter in the book seems like he's off to a good start. Remember Elastic, they focus on search primarily for the enterprise, and they did pre-announce the results a little while back that they would exceed their guidance for the quarter. So there are no real surprises here. But as you mentioned, new CEO, Ash Kulkarni is now at the helm. We'll learn more about him as a leader in the coming quarters. Founder Shay Banon has now stepped down to serve as the CTO. He's going to help lead the company for just not in that same executive level. But the numbers continue to impress. Total revenue $224 million, that was up 43 percent from a year ago. Elastic Cloud, which the company continues to make big investments in that, becomes a larger part of the business.

That segment of the business revenue grew 80 percent, it now represents 36 percent of total revenue as compared to 29 percent a year ago. That's something to keep an eye on because they see this being accounting for more than half of overall revenue here over the next couple of years or so. Of course, still working at profitability, market that don't like these stocks too much these day, but positive operating cash flow, $5.1 million was a good thing to see. But the key performance indicators tell us they're doing something right, Chris. The total subscription customer account was over 17,900 versus 13,800 a year ago, customer account with annual contract value greater than $100,000 was over 890 versus 670 a year ago, and that net expansion rate remains just below 130 percent. The business is guiding for 30 percent revenue growth in its current quarter. Sounds like 40 percent growth for the full year. Yeah, tough time for companies like these in this type of volatile market, but it feels like Elastic is doing what they say they're going to do.

Chris Hill: I realize I'm about to throw a rock inside this glass house, but we work at a company where we call each other Fool. Did you you know that at Elastic they refer to each other as Elasticians?

Jason Moser: I had heard that. Now I've never heard someone used the word, but I had read that somewhere, I found that interesting.

Chris Hill: Just keep that in mind. If you're applying for a job at Elastic, that's the direction you're going in. On Friday, Disney announced that later this year, it will launch a new ad supported tier for its Disney Plus streaming service. The company did not say exactly when or what the price would be, only that the ad supported offering would expand internationally in 2023. Emily, I can see the bull case for this, and I can also see this as a little bit of a warning flag.

Emily Flippen: I eventually want to pass the question off to each of you. If you think this is a reactive or proactive move. But before I do, I want to rewind back to late 2019 when Disney first announced that they were going to come out with Disney Plus a streaming service. Now, I will say I was a bit of a bear on the idea. I clearly underestimated how many people adults included would continue to pay for an offering from Disney Plus for their streaming services. I thought coming in at such a low cost, there'd be no pricing power here. While I have been wrong, I do think this is a little bit of a yellow flag that maybe the second half of my original thoughts were a bit on the mark, which is the pricing power of Disney Plus as a streaming service.

Part of what made it so attractive at launch was that it was so reasonably priced, people could slip it into their budgets, but they've increasingly raised the price and it seems like in order to meet their really lofty subscriber goals, upwards of 260 million subscribers by 2024 is their intention, they're having to come out with an ad-supported tier, presumably at a lower price in order to increase the average revenue per user and bring themselves more in line with existing offerings. From my perspective, I've been so impressed with the offerings to say Netflix, which has always managed to both increased prices and retain and grow users without ever having to move toward ads. Seeing Disney so quickly pivot into the ad supported space to me says, hey, we're aware that there's a cap on how much people are willing to pay for this, so for the people who don't want to pay that much will have you pay a little bit less and you could watch some ads. If we're having to do that to me, it's saying the content on our platform isn't as appealing. But what do I know? I want to pass that question off to each of you. I've been a benefit of a skeptic on Disney Plus for awhile, but Jason, I know you've been a fan.

Jason Moser: Yeah. I mean, we're definitely fans, we were subscribers in our household. You make a lot of really good points there and I don't mean to be on the fence, but I feel like this is a bit of them playing offense and defense. I mean, I think they see an opportunity to grow the user base, the subscriber base, in the face of like we saw on Netflix recently. It seems like a lot of that success had been pulled forward perhaps subscriber growth has slowed down a little bit there. Maybe they see this as an opportunity at Disney to jump in there and offer something a little bit differentiated. But by the same token, it also feels defensive because those goals were so lofty. I even said, I've been a little bit skeptical of that 230-260 million number up to this point, just because it was so great. Now what this most recent report really for them to get there by 2024, that's 20 percent annualized growth, and that seems more reasonable at least and maybe this is an insurance plan to help really get to that point.

I think you're right. The content on Disney Plus and in its related properties needs to continue to get better if it's going to be a household core offering like Netflix is, and I think that's ultimately where they need to try to get is just be a household core offerings. When you consider services that you're going to switch off, Netflix probably isn't one of them and they want to make sure that Disney Plus isn't one of them either, so that'll take a little time to get there still, I think. But to me, it really is very curious. I feel like the international opportunity here maybe is greater than some might think, and that's just from the perspective of the advertising supported video on-demand offering is a much more popular offering outside of the United States. I think globally speaking, it's just a more popular offering because it's a better value proposition for, I think, a lot of people. So maybe they see the opportunity there. It will be interesting to see how this develops. I would imagine though, it will bring more subscribers in the door, which is what they're looking to do.

Chris Hill: Emily, my immediate reaction when I saw the news was, this is a reactive move. Now, I could very easily be wrong about that. But in the moment, that was my first thought, they are reacting to subscriber growth not being what they wanted to be and so therefore, they're going with this. They don't really share a ton of information about Hulu, and the bull case for this is they're looking at their internal data and seeing if we get people in on the ad supported version of Hulu, that's a pathway to them becoming subscribers at a higher price point where they don't have to watch ads. Maybe that they're looking at their own data and saying, we need to offer this ad-supported model because it's going to be a pathway and it may also enable them to raise the price more quickly on the regular streaming service of Disney Plus.

Emily Flippen: Let me say if this is a reactive move, I appreciate the fact that they are reacting quickly as opposed to reacting slowly, which is the other alternative.

Chris Hill: Yes, particularly you mentioned when they rolled it out, wasn't 2016 the original year they were looking to roll out their streaming service and then it got pushed back to 2017? They finally got it and they got it right. But to your point, yes, if it's reactive, at least Bob Chapek and his team are moving quickly. Zoom video's fourth-quarter results were better than Wall Street was expecting. It's shares fell a bit when Zoom management said they expect 10 percent growth in the fiscal year ahead. I get that it's not as growthy as someone on Wall Street would like Jason, but this seems very much in character with the guidance that CEO Eric Yuan has given quarter in and quarter out.

Jason Moser: Yeah, I don't think really much has changed here. I think this certainly falls in line with many of the other stay at home stocks that have been on such a wild ride for these past couple of years. Zoom shares is down, I think close to 75 percent from 52-week high. Now maybe that's an overreaction, but maybe not. I mean, one thing is for sure growth is slowing down and we see that in that 10 percent guide for this full year, hopefully that proves to be conservative. But again, I mean, it's a good business, its recording some very impressive numbers. Fourth quarter revenue, just over $1 billion. That was up 21 percent from a year ago, and you're looking at non-GAAP net income earnings per share at $1, 22 cents. I mean, the key performance indicators, again, for a business like Zoom, similar to a lot of these other SaaS type offerings. You're looking at customers and in those that are spending more, and they have 2,725 customers now contributing more than $100,000 in trailing 12 month revenue, that's up 66 percent from a year ago, they have approximately 509,800 customers with more than 10 employees, that's up nine percent from a year ago.

The net dollar expansion rate for customers with more than 10 employees is 129 percent, so that continues to be a bright spot there. Remember what not that long ago, Zoom had that five nine acquisition. That that was something that was really going to bring two companies together. Zoom focusing a little bit more on that call center side of the market and perhaps becoming a little bit more like a Salesforce focusing on that customer relationship management. We know that deal got mixed. However, that is not preventing Zoom from making investments in this space. Now they had the Zoom Contact Center offering that has rolled out, that is going to be something that they continue to invest in here in the coming year and beyond. Then I think really the longer-term, the bigger question just really is, how will they be able to leverage their technology? Their APIs, the software development kits, how will they be able to leverage that technology embedded in such a way that companies are utilizing Zoom on many different levels for all of their communication needs in the future because that's really the ultimate goal. But until we get some more clarity there, I think the pull back in the stock price makes sense.

Chris Hill: Up next we'll dip into the Fool Mailbag. We've got a couple of stocks on our 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. The Motley Fool may have formal recommendations for or against, sell or buy ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here, with Jason Moser and Emily Flippen. Our email address is podcasts@fool.com. That's podcasts with an s at the end, podcasts@fool.com. Drop us a note, we're lonely. Got an email from Fareed who says, I started listening to your show last year and looked forward to each episode. I like the mixture of opinions and points of view each member brings to the show. My question for the team is, was quality of stocks down because of recent events? Should I sell my Vanguard S&P 500 Index fund to purchase individual stocks? More than half my investment is with individual stocks. In case you're wondering why I purchased the Vanguard Index fund, when I first started investing, I didn't know any better and took the safe route. My average cost is $200 and it's around $400 now, and if it helps to answer my question better, we're young adults with a baby. Look forward to hearing your thoughts. Fareed, thank you for the email, congrats on the baby. As always, you can never drink enough coffee. [LAUGHTER] Before we get into this, the usual disclaimer that we can't give individual advice. I got to say Jason, I love starting with the Vanguard S&P 500 Index fund. I think that's as good, if not the best first step for anyone just starting out.

Jason Moser: I couldn't agree more. Fareed, you're wise beyond your years. Knowing what you don't know is really key to becoming a good investor I think. That was a wonderful first step. I applaud you for that in. As someone who's probably been investing for a little bit longer than you, listen, I own shares in the S&P 500 Index fund as well. Like you've got to protect yourself from yourself sometimes. I like the question and it's something that I grapple with sometimes as well owning that index fund. I think it depends on your risk tolerance to degree. I think it depends on what tax implications, if any, you would encounter from selling shares of that fund. The thing about index funds, I think for many of us, they're just the easiest way to gain instant diversification. The longer you own them, the more sense it makes as those returns just continue to compound. But I also understand the desire to invest in individual stocks and that is also something I grapple with. I think probably my preferred first course of action would be to focus on putting new money in individual stocks if possible, and letting that money invested in the funds just keep doing its thing. If that's not an option, then you'll have to weigh the decisions from there. But that's how I would approach the problem, at least.

Chris Hill: Emily, you and I recorded something the other day that's going to run on next Tuesday's podcast. Part of our conversation gets at this notion of selling. I think you and I are of like mind, which is, if possible, we really don't want to be in the position of selling. Since sometimes you have to, sometimes you want to because you're making a big purchase or investing in some other manner. But I think that is our inclination.

Emily Flippen: Yes. I think there's a false dichotomy that exists with some investors where they think they're either all passive or are all active. When they're ready to dip their toes into buying individual companies, they assume that they can't have passive exposure. That's not necessarily the case. I have a ton of my money in index funds personally, you can have a mixture of both. But I do agree that selling tends not to be the best way to go about reallocating, because it's a reactive instead of proactive approach. You should develop an asset allocation that works for you. Then as you have money, as you have money to invest, invest per that asset allocation. Otherwise, what you're trying to do is time the market with when is the right time to jump from asset class to asset class or investment to investment, which again, tends to be the worst time to try to reevaluate that.

Chris Hill: I'll just wrap up by saying, I love Fareed's recognition that there are quality stocks that are on sale. Keep that mindset because that is how you become and stay a net buyer of stocks over the years. Let's get to the stocks on our radar. Our man behind the glass, Rick Engdahl is going to hit you with a question. Mr. Moser, you're up first. What are you looking at this week?

Jason Moser: Yes, sir. Taking a look at Accenture, ticker is ACN. Accenture is a professional services company. They provide strategy and consulting and interactive and technology operations and services worldwide. This is seen as the gold standard in the industry, the revenue is derived primarily from Forbes Global 2000 companies, governments, and government agencies around the world, serving five core markets, communications, media and technology, financial services, health and public services, and products and resources. This is a business to me, they got CEO Julie Spellman Sweet. She's been the CEO since 2019 with the company for better over a decade though. What really caught my eye, this volatile market, Chris, I mean, this is a company that generate a better than $7 billion in free cash flow last year with a stock down 23 percent year to date. This could be some nice stability in a volatile market.

Chris Hill: Rick, question about Accenture?

Rick Engdahl: I'm sorry, I nodded off there for a second. [LAUGHTER] I know you're supposed to follow stocks that are of interest to you. What is it that is interesting about this stock to follow for someone like me?

Jason Moser: I know it sounds boring, but I think there's some interesting dynamics to business. They have an actual immersive technology division within the company, where they have expertise within the entire immersive technology and extended reality market there. As we see that grow, they're going to be able to serve companies around the world with their skillsets regarding that. Hey, think metaverse, Rick. Now, do I have your attention?

Chris Hill: I'll just add that years ago my friend Rebecca worked at this company when they changed their name to Accenture. I remember saying, "What is Accenture?" She said, "Wow, it's a mash-up of accent on the future." I said, "Look, that's just not going to work. This is totally going to backfire." [LAUGHTER] You can just add that to the long list of times that I was completely wrong about something related to business. Emily Flippen, what are you looking at?

Emily Flippen: Well, if you think Accenture is a silly name, then you've really going to have a field day with my radar stock. That's Bilibili, the ticker is BILI. It's a Chinese gaming company. I could spend the next few minutes talking about all of the very real regulatory and geopolitical risks that exist with this business that would make it potentially not an investment for many people. But instead of doing that, I'm going to focus on their most recent quarter, which was actually really stellar from just a core business perspective, revenue grew 54 percent, but more importantly, more than nine percent of all of Bilibili's users are paying subscribers now. Even interestingly enough, CEO Rui Chen is using his own capital to buy back up to $10 million worth of US listed shares. Certainly one to, maybe not buy today, but to at least have on your radar.

Jason Moser: Rick, question about Bilibili?

Rick Engdahl: Is it strictly a Chinese company as far as it's customer base? There's a lot of media out there that's made the cross overseas and not that one as far as I know.

Emily Flippen: Yes, all of their users are Chinese-based users, so it's a pure play in that sense. But they do license games and contents from other countries, Japan, as well as other countries across Asia. There is a little bit of exposure there, but user base, all Chinese.

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

Rick Engdahl: Sweetgreen. I'm sorry. It's lunchtime.

Chris Hill: All right. Jason Moser, Emily Flippen. Thanks for being here.

Emily Flippen: Thanks, Chris.

Chris Hill: That's going to do it for this week's Motley Fool Money radio show. Show is mixed by Rick Engdahl. I'm Chris Hill. Thanks for listening. We'll see you next time.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Hill owns Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Chipotle Mexican Grill, Costco Wholesale, Microsoft, Target, and Walt Disney. Emily Flippen owns Bilibili. Jason Moser owns Alphabet (C shares), Amazon, Apple, Chipotle Mexican Grill, and Walt Disney. Rick Engdahl owns Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Best Buy, Chipotle Mexican Grill, Costco Wholesale, Microsoft, Netflix, Salesforce.com, Target, Walt Disney, and Zoom Video Communications. The Motley Fool owns and recommends Accenture, Alphabet (A shares), Amazon, Apple, Best Buy, Chipotle Mexican Grill, CoStar Group, Costco Wholesale, Domino's Pizza, Elastic, Microsoft, Netflix, Salesforce.com, Twitter, Walt Disney, and Zoom Video Communications. The Motley Fool recommends Alphabet (C shares), Bilibili, and CVS Health and recommends the following options: long January 2024 $145 calls on Walt Disney, long March 2023 $120 calls on Apple, short January 2024 $155 calls on Walt Disney, and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.


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