Small cap, midcap, large cap, megacap…? How do these companies compare? It’s not enough to know the share prices; you have to know the market caps! And that’s why we play this game — now with a new “throwdown rule.” Play along with our guests, Motley Fool Chief Investment Officer Andy Cross and Motley Fool Senior Analyst Matt Argersinger.
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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David Gardner: The price per share of a stock tells you almost nothing. It’s the price to buy one share of the stock. But how many shares does the company have outstanding? Well, in math, we multiply two multiplicands together, but the price per share is only one multiplicand. If you don’t know the other one, well, you can’t do any meaningful math or figure out much of the world around you. Fools with a capital F know that you need to know the shares outstanding and then multiply that by the price per share, and now you know the actual full value of the company, its full price tag, its market capitalization: market cap.
Well, to teach this lesson inexorably and unforgettably, we invented a game. That’s what we do. The date was August 9, 2017. The Market Cap Game Show was born, and we’ve been playing it every quarter since and will be rejoined this particular episode by the man who was there at the start — spoiler alert.
Oh, by the way, you’re playing too. I designed it that way so you, dear listener, can play along against my guest stars, against your spouse or partner, against your kids. Well, it’s that time of the quarter again: 10 new stocks, three guest stars, Andy Cross, Matt Argersinger, and you, only on this week’s Rule Breaker Investing.
Welcome back to Rule Breaker Investing. I know: holidays, busy week, busy Wednesday. I hear you. Foolish best wishes to you, dear listener, on making the most of these holidays. Most of all, feeling, if you can get there, in the moment, not too nostalgic for the past or too frenetic and anxious in advance of the weekend, family coming too. Hey, or maybe you’re headed out to be with family and friends somewhere in the moment to savor this week, this day, this moment, each moment as much as you can. That is my wish for you. I know, busy Wednesday.
This Wednesday also happens to be the penultimate Wednesday of the quarter, and therefore, it is the Market Cap Game Show. Now, Market Cap Game Shows may never score a Bestie most years, and yet they are four of my favorite shows to do every year, this week being no exception.
I’m delighted to be bringing back to the game show two outstanding fellow Fools who played before, but it’s been a while. Andy Cross is the chief investment officer at The Motley Fool, working with dozens of fellow investors here to deliver investing guidance to our members. He has 26 years of Foolishness under his belt. Looking forward to one day, just maybe, Andy tells me, winning the Market Cap Game Show. Andy, welcome back.
Andy Cross: Thank you, David. Maybe one day.
David Gardner: Today could be your day.
Andy Cross: Could be.
David Gardner: Matt Argersinger has been an analyst at the Motley Fool for almost 15 years. He currently heads up investing on the Fool’s Mogul, Real Estate Winners, and Epic Bundle services. Matt, welcome back to the Market Cap Game Show.
Matt Argersinger: David, it is great to be back, and I think this could be Andy’s day, because I’m here.
David Gardner: Well, it’s kind of you to say, Matt. Now, longtime listeners will instantly recognize that you are where you should be in the saddle here, back in the saddle again for the Market Cap Game Show. The first several of these that we did starting in 2017, Matt, it was just you and me. Do you remember?
Matt Argersinger: I can’t believe it’s been more than five years already.
David Gardner: Do you remember how the rules worked back then?
Matt Argersinger: I do. I remember you gave me a company, and I think I had to guess the market cap within a 20% range up or down of the market cap.
David Gardner: That’s right. It was pretty much a straight-up question. Players at home could do the same thing, too, right along with you. Indeed, we did that for a year or so until Adam Nelson, longtime listener, said, “The game would be even better if you had two people competing and one of them named a range, and the other said ‘inside’ or ‘outside,'” and the game has changed forever since then. Matt, welcome back to the new format.
Matt Argersinger: All right. I’m excited about that.
David Gardner: Not only is that and has that been our format, but, gentlemen, we are introducing a brand-new rule with this Market Cap Game Show. We like to innovate — not too often. We don’t want to go under the hood too often with his vehicle — but once a year or so, can the game be improved? We talked about it ahead of time. Do you guys like the new rule?
Andy Cross: I do. I don’t know if it’s going to give me an edge or not over Matthew, but I do like the added excitement around this rule.
Matt Argersinger: I’m excited. I’m nervous but excited about it.
David Gardner: Good. This is going to innovate off of what happened at the end of last quarter’s show. There was a tie, 5 to 5. My two noble contestants played, for the first time, the Stephens sudden death rule. I’m not going to fully explain how that came about now or why we call it the Stephens sudden death rule, but it was a wonderful way to break a tie.
And that format, I decided, isn’t as fun as a tiebreaker, which is all that penalty kicks are really worth in soccer. I think most of the time, you actually want to be playing soccer, but for this game, that tiebreaker was actually a fun format to inject into the game itself. We’re going to call this the throwdown rule. Let me explain it very briefly.
This hour, we’re going to be playing with 10 stocks, and you, dear listener are playing right along with us at home. When you agree or disagree with my contestants you will get a plus 1 along with them when you’re right. But when I turn to Matt and turn to Andy throughout this hour, once each over the course of this game — use it or lose it, guys; you don’t have to do that — Instead of just stating your market cap range, you’re actually going to announce a throwdown. With that one stock at that one moment, instead of you being on the spot to come up with the range yourself, both players are going to quietly, after I don’t know what, 10 seconds of thought, are going to write down what you believe is the market cap range. You’ll do that simultaneously for that stock.
Then, first of all, in order to get a point, you’re going to need to be right. The market cap is going to need to be inside your range. But whoever has a tighter, narrower range, whoever is willing to commit to more of the bullseye instead of just the whole target, that player will get the point.
That’s how we play sudden death. If you guys tie 5 to 5 this week, we’ll do that once again, we’ll do that as an 11th final tiebreaker, but within the show itself. At one point for each of you. You can announce throwdown, and that’s how it works.
Now, players at home, I want to make sure you know how we’re scoring that. Once we get to it, we’ll talk about that at the moment. But gentlemen, I say without further ado, let’s start your engines, let’s do this.
Andy Cross: Rev rev.
David Gardner: All right. Let me just briefly remind especially new listeners, new players: I’ll be mentioning a stock. Neither Andy nor Matt knows what stock is coming. They’ve been in soundproof chambers. Guys, you haven’t been out of your houses for how long?
Matt Argersinger: Years.
Andy Cross: During COVID, certainly.
David Gardner: They have no idea what I’m about to ask them, nor do you at home, but I’ll turn to one of my friends here, and that guy will state the market cap range. The other contestant and you playing at home will simply say, “I agree, inside that range, or I disagree, I think it’s outside that stated range.” If you get that part right, give yourself a plus 1.
That’s the Market Cap Game Show. We’re focused on the real market caps, real stocks. Nobody knows what’s coming.
Andy, let’s get started. Andy, which operating system do you favor?
Andy Cross: Apple.
David Gardner: For how long has that been the case?
Andy Cross: It’s been the case for probably a decade.
David Gardner: Was there a trigger moment where you decided, you know what, all my [Microsoft (MSFT 1.18%)] Windows stuff…?
Andy Cross: I couldn’t get over all of the spinning disks and all of the applications I needed to add to my Windows machine for security and Symantex this and that. I just got frustrated with it. I’d read about the simplicity of Apple, having appreciated Apple, having an iPod years ago and all that, but never having the laptop, the MacBook. Finally made the jump when the Fool could support it. Ever since, my whole family is now over to the Apple ecosystem.
David Gardner: I can relate. In fact, for me, Andy, I think my kids are just a little older than yours. It was 2008. It was my daughter saying, “Dad, I want an iPhone.” I was like, an iPhone? But I’m all Windows. I’ve got my Palm Pilot. iPhone? All of a sudden, I got her an iPhone, and then I realized I need to understand the operating system, iOS, which connects to Mac OS, et cetera, so I can totally relate.
Andy, talk about operating systems. What’s your favorite operating system for your bank? It’s a completely absurd question unless you think about nCino, ticker symbol NCNO, which is basically a company that creates operating systems not for your Mac or your iPhone but for banks themselves.
The company’s cloud-based banking software helps financial institutions gain efficiencies from digitizing and streamlining processes and commercial banking, small-business banking, and retail banking. That’s pretty much right off their website. BOS, Andy Cross, the bank’s operating system, nCino based in Wilmington, North Carolina, ticker symbol, NCNO, a company that came public not so long ago.
Andy, I know you’re starting to think about it. Do you have previous association with bank operating systems or specifically nCino?
Andy Cross: No. Just when it did come public, I think there were some conversations among those over on various services. I had never really studied it, haven’t looked at it, and I certainly couldn’t tell you where the stock price is today. I’m thinking very hard about my range for the market cap.
David Gardner: That’s it. You want to think very, very quickly, because I’m about to ask you, Andy Cross, what is your stated market cap range for nCino, ticker symbol NCNO?
Andy Cross: I believe the mark cap range, Matt, is somewhere between $8 billion and $17 billion.
David Gardner: Eight billion dollars to $17 billion. Matt Argersinger and players at home, inside Andy’s range or outside Andy’s range?
Matt Argersinger: It’s a nice wide range. Andy was really furrowing his brow earlier, so I thought I can get them on this maybe outside, but he’s given them a wide enough range. I’m going to say it’s inside.
Andy Cross: I do furrow my brow almost all the time, I noticed on the Zoom calls.
Matt Argersinger: You’re throwing me off, though. I think it’s inside that range.
David Gardner: I bet the management team wishes, guys, his market cap was inside that range, but it’s been a tough few years for nCino. The company did come public summer of 2020. It was somewhere around $75 a share. Today, it’s much closer to $25 a share. So, Andy, there was a place in time not too long ago where I think nCino fit within that market cap range. But the market cap for nCino today is $2.89 billion, $2.9 billion.
Players at home, if you said outside the range, give yourself a plus 1. Matt, unfortunately, you said inside the range, so guess what? Andy gets the plus 1, even though he arguably overestimated the market cap by more than 2x.
Andy Cross: Not arguably, I did. There’s no argument about that, so I lucked out on that.
Matt Argersinger: I should have thought recent IPO, though.
Andy Cross: Exactly. I did not as you were giving your logic.
David Gardner: Well, part of the fun of the Market Cap Game Show is that there’s always another stock, there’s an opportunity for turnabout, which is fair play last I read.
Let’s move on to stock Number 2. Matt Argersinger. Matt, I know you have a son, and one of my favorite lesser-used male names as well, because what is his name?
Matt Argersinger: His name is Dutch.
David Gardner: You just showed me an awesome picture. Where were you and Dutch last weekend?
Matt Argersinger: We were at the Tampa Bay Buccaneers game when they were playing the Cincinnati Bengals. We took a quick trip down in Tampa, spent some days at the beach, but I wanted to take my son to an NFL game, his first.
David Gardner: Absolutely spectacular. I know Dutch is a young guy, five years old. Does he like toast?
Matt Argersinger: He loves toast, actually.
David Gardner: Really?
Matt Argersinger: He does. He’s very particular about how much it’s toasted, too. It has to be toasted a certain way.
David Gardner: Does he have any spreads in mind, things that he hopes would be his toast?
Matt Argersinger: He does. It’s got to have at least some strawberry, raspberry jam. Some red jam has got to be on it.
David Gardner: Do you guys have a pet, or has Dutch yet asked for a pet?
Matt Argersinger: We have a pet. Her name is Daisy. She’s about seven years old.
David Gardner: You might wonder, why are we talking about toast and pet food, but there’s a company, there’s probably more than one of them, but there’s a long-standing public company that really works hard in both markets these days, J.M. Smucker Company, ticker symbol SJM, has been around since 1897. It was founded as a maker of apple butter. That’s right. Ohio Farmer.
You might wonder, Smucker, J.M. Smucker. What’s the J.M.? The answer is, Fools everywhere, Jerome Monroe Smucker. Smucker said he’d gotten his apples from apple planted in Ohio by Johnny Appleseed in the 19th century. That’s how the J.M. Smucker Company began. These days, they own things like Knott’s Berry Farm, Folgers, Dunkin, 9Lives, Kibbles ‘N Bits, Meow Mix, lots of stuff for your toast, and lots of stuff for your pets.
Matt Argersinger, I’ve given you some opportunity now to reflect on that with some of the subbrands of the J.M. Smucker Company. Going strong now in its second century of business. What is your market cap range for the J.M. Smucker Company?
Matt Argersinger: I’m going to go fairly large here. I think I’m going to go $70 billion to $90 billion is my range.
David Gardner: Seventy billion dollars to $90 billion. Andy Cross, players at home, inside Matt’s range or outside Matt’s range?
Andy Cross: Well, if you listen to Motley Fool Money, you know Smucker is often a topic of conversation with Jason Moser and some others. I hope I can get this right. I’m going to say outside the range.
David Gardner: If you were having to guess which side of the outside, which way would you tell?
Andy Cross: I think Matt’s a little bit high. I think he’s on the high side.
Matt Argersinger: Oh, man.
David Gardner: Now, Matt spends a lot of his time these days in the world of real estate. Arguably, he’s not spending a lot of time researching Smucker’s even though toast matters and pet food matters, too. Matt, I may have biased you by talking about the long history of this company, the many brands, and the dogs. I wasn’t trying to do that.
Matt Argersinger: The market cap was growing bigger in my head as you listed off each brand.
David Gardner: I wasn’t trying to do that. So Matt, specified $70 billion to $90 billion. Market cap for J.M. Smucker is $16.46 billion, 16 and a half billion.
Matt Argersinger: That’s so small.
David Gardner: Company that started with apple butter, that ain’t bad, but it’s an order of magnitude, just about smaller. Matt, that in your mind, Smucker.
Matt Argersinger: I thought there was no way was below 50.
Andy Cross: I was thinking lower than what you said, but even I was somewhere in the 20 range, so I was still on the high side.
David Gardner: I want to apologize to Matt, because I think I pumped these guys up.
Matt Argersinger: No.
David Gardner: I need to be a little bit more restrained.
Matt Argersinger: No, no, no. Don’t.
David Gardner: Well, if you said outside that range, that’s been the way to play this game so far, because both of my talented contestants have gone high and strong, not trying to further influence you for the game.
As we move on to stock No. 3, Andy 2, Matt 0. Matt, let’s get in the game here.
Andy, can you think of any retail brands that have both the high end of their market in their stores and the low end?
Andy Cross: Well, I like Williams-Sonoma and their highest-end, low-end, but most of them specialize either in the very high or the very low. In the middle is very hard to do.
David Gardner: This company is a cosmetics company, and it definitely offers the high end in its stores, but it also has drugstore cosmetics, skincare, and fragrances. It is a long-standing pick thinking on my brother’s side of Stock Advisor. It also has its own brands of beauty products and fragrances. I’m thinking of Ulta Beauty. Once Ulta Salons, now Ulta Beauty, ticker symbol ULTA.
Now, I’ve spent personally zero time in Ulta. I probably should’ve sent more. It’s that time of year where you’re looking for something for the woman in your life, that’s not a bad place to saunter into. Maybe I’m still headed there sometime later this week. But for now, I’m still never stepped in an Ultra ssalon, but I’ve seen the growth of the company over time.
Andy, is this a company that you have any real association with?
Andy Cross: Well, this is one that I do know, more familiar with. Although I have not shopped a lot in Ulta, I did last year for Christmas, but I’ve not shopped a lot, but I do know the history and the story of Ulta and the success. Mary Dillon, who is no longer the CEO there, but came over and really helped to fuel the growth of the last few years.
David Gardner: Did it work well last Christmas?
Andy Cross: I think it did. It was a combination of for my oldest daughter, who was just starting out, and for my wife a little bit, but it wasn’t a huge shop. I’m not one of their loyal shoppers that they’d love to have as part of their loyalty card membership program.
Matt Argersinger: Did you join the loyalty card membership program?
Andy Cross: I didn’t jump onto it. I’m one of the very few, because I think it’s 90% of their sales come from their loyalty membership business.
David Gardner: Somebody who knows this because, I’m not going to say inside and out, Andy, but Andy Cross, what is the market cap range you’re going to specify for Ulta Beauty?
Andy Cross: I think the market cap range is in the teens, and so I’m going to say $13 billion to $19 billion is the market cap for Ulta Beauty.
David Gardner: Thirteen to $19 billion. The ticker symbol ULTA, appropriately enough.
Matt Argersinger, players at home, inside or outside Andy’s range?
Matt Argersinger: I think Andy knows this company really well. I know he’s made some winning recommendations of this stock. I have to go in. He knows the company inside the range.
David Gardner: I’m not going to say that Andy head-gamed you, because you can do that also. If you really know it that and person thinks you really know that it’s not the right thing to do to give a proper answer, and Andy might be playing that game.
Andy Cross: I did a head game a little bit, or tried to, Matt, to talk about, but still, I thought I was in the range.
David Gardner: And you weren’t far off the market cap of Ulta Beauty today is $22.61 billion, so it was outside the $13 billion to $19 billion range. Andy, I’m giving you another point. Earlier, you expressed a dream that one day you might win the Market Cap Game Show. That day could be this day.
Andy Cross: Well, it’s still early in the game. I’m hopeful, but the —
Matt Argersinger: This is the penalty shootout, and I’m France.
Andy Cross: Exactly Well, you look like Mbappe.
Matt Argersinger: Coming up now, Mbappe is coming up right now.
David Gardner: Matt, have you ever been, hung out in an Ulta?
Matt Argersinger: I have never been inside an Ulta, and I have a son. My wife is not crazy about cosmetics, I don’t know if it’s happening anytime soon.
David Gardner: Well, I’m feeling a little bit bad for Matt and he’s down three nothing. It’s been years since you came back on the show. I feel like we haven’t been very hospitable. How about if we play a word-association game, right now?
Matt Argersinger: Sure.
David Gardner: Right. Because anytime you’re a little down your lock and you want somebody to play a word association game.
Matt Argersinger: Of course.
David Gardner: All right. Great. America.
Matt Argersinger: Apple pie.
David Gardner: Corporation.
Matt Argersinger: Profit.
David Gardner: Hospital.
Matt Argersinger: Healthcare.
David Gardner: You’ve just got the name of the next stock in reverse order: Hospital Corporation of America. Well, that’s how it started back in the 1960s. Today, HCA Healthcare is much much bigger about 60 years later. In fact, the wealthiest man in Tennessee today is Tom Frist Junior. He was the son of Tom Frist Senior. They started it together. I feel bad for younger Tom’s brother, Bill, because Bill, I guess wasn’t there starting with his dad. His brother started his dad. But Bill is the senator, has been a senator from Tennessee, so he’s done OK to the Frist. A very wealthy family in and around Nashville, and that’s, of course, where HCA Healthcare is based.
America, apple pie, corporation, profits, I get it. Hospital, all you could bring with is healthcare, Matt? It’s more word association. I can’t judge.
Matt Argersinger: It’s all I got.
David Gardner: Well, that’s not all you got, because you got something else, Matt. You’ve got a market cap range in which HCA Healthcare’s market cap falls. We hope, Matt Argersinger, ticker symbol is HCA for HCA Healthcare. This is a stock I picked for Stock Advisor. I liked this company a lot. What is your specified market cap range?
Matt Argersinger: I’m probably going big again, but I’m thinking this is a $60 billion to $80 billion market cap.
David Gardner: You going to stick with those round numbers, 60 and 80?
Matt Argersinger: Sixty to 80.
David Gardner: Sixty billion dollars to $80 billion, Andy, is Matt’s specified market cap range. Players at home, Andy Cross, inside or outside that range?
Andy Cross: I think Matt’s, again, a little high, I’m going to go lower. I think I’m going outside the range.
David Gardner: Matt, score 1, you’re back.
Matt Argersinger: All right!
David Gardner: They can’t say you got shut out, Matt, because that’s not going to always ever happen on this show, but now, it was an excellent guess. In fact, the market cap for HCA is $67.66 billion.
Matt Argersinger: Great guess.
David Gardner: Billion dollars. In fact, while we’re recording on Tuesday afternoon, the market caps, they always change. Let’s go with $67.67 billion just to make it really memorable. Really nice guess, Matt, $60 billion to $80 billion. Andy Cross 3, Matt Argersinger 1.
Andy, thoughts, hospitals?
Andy Cross: Well, I respect the profession of doctors. My grandfather was a doctor, and I remember when I was looking at careers, as you are, I just remember my mother just said you don’t want to be a doctor because you don’t want to spend your whole life in hospitals.
Now, I have not spent my life in a hospital. I’ve been very fortunate from that, except for my kids being born, so I can understand how someone could think like that. However, all the TV shows about hospitals that are on, they make it look so exciting.
David Gardner: Well, I’m thinking to myself, and “Dr. Cross” sounds so cool.
Andy Cross: I could be a Dr. Cross, just not be a doctor hospitals that’s my ultimate dream, maybe becoming a doctor.
David Gardner: But just the name, I think here is the brands.
Matt Argersinger: That’s why I’m going for it.
David Gardner: That sounds…
Matt Argersinger: That, of course, the guy I can trust.
David Gardner: Yeah. What network do you think that show or streaming is going to be?
Matt Argersinger: It’s going to be here. It’s to be ABC prime time.
David Gardner: ABC prime time. Dr. Cross. That makes me feel good. Thank you, Matt, and thank you.
David Gardner: Yeah. My dad, who is a lawyer, sat us three little Gardeners down and said “The one thing I won’t let any of you be is a lawyer.” I don’t know what it is with family occupations where you’re coached not to do that, whatever Gramps or Dad did, but I think Dad always felt like he didn’t create as much as he wanted to do within his job. He is a corporate lawyer. Corporate, Matt, word association: profits.
Matt Argersinger: I know.
David Gardner: He was helping the profits of his law firm, working with the Japanese banking in the ’70s and ’80s, which is a golden age for Japan coming in and investing in the U.S. As we remember, some people were worried that Japan was going to buy the whole U.S. at that point. But he just said, guys, don’t be lawyers. We weren’t.
Andy Cross: That’s the beauty of our profession, is that even if our kids don’t actually become professional investors, you can be an investor for life.
Matt Argersinger: You should be an investor for life.
Andy Cross: That’s, I’m excited just to start to do more and more of that.
David Gardner: Really good point.
As you mentioned, by the way, that the stocks that I’ve been picking, I myself have randomized. Here’s what I’ve actually done. This is the process by which I come up with 10, little known and quite boring. But I sign into fool.com and The Motley Fool services for our premium members. I look at our Screener, and we have hundreds and hundreds of stocks in the Screener that are ranked. I take the top 500, I just call them the Fool 500 in my mind. I randomize two numbers, 437, 78.
I look at those two companies and I decide, which would be more fun for the Market Cap Game Show. So the chances of any given stock, let’s say Apple or Etsy, being on a show are probably lower than ever before, because I’m looking, I’m casting a much wider net.
Back in the day, Matt, when you and I first did the show, I would tend to favor all stocks that I picked or I knew because I just knew them, I loved them. But these days, have thrown it much more wide open, and so it’s really hard to know what I’ll be bringing to any episode of the Market Cap Game Show. We have some obscure ones, including at least one coming up. Anyway, there it is, the Fool 500, that’s where these are coming from.
Gentlemen, as we move on to stock No. 5, I’ll remind you, I’m not trying to prompt you, Andy, but you each still have your throwdown if you want to throw down.
Andy, how’s your car running these days?
Andy Cross: Terribly, David, terrible. I was just thinking this at the drive in. It’s more than 10 years old, and I need a brand reboot, and I need just a car reboot.
David Gardner: I’m so sorry to hear that.
Andy Cross: No, that’s OK. Thank you for asking. I appreciate the concern. But it can get me from A to B, which is fine. I just worry about like, you know, M and N and Q. That’s where I work.
David Gardner: Well, I’m sorry to hear that. Would you like to specify the brand that you sound increasingly disenchanted with?
Andy Cross: Oh, it’s a Toyota Prius, and it’s served me very well, coming from Maryland to the office when we are coming in. Gas mileage, excellent. I bought it really before the explosion of lot of the EVs.
David Gardner: Yeah.
Andy Cross: That has served me well and is a very reliable, safe car. It’s just that after those cars, when they get that old, they start to not run nearly as well.
David Gardner: Yeah. Much is made of this, and I think should be. Matt, Andy, and listeners at home, roughly how many parts are there in an internal combustion engine? I won’t quiz you guys because I’ve asked you enough numbers this hour, but the answer is about around 2,000, maybe more than that. Two thousand moving parts. Two thousand moving parts in an internal combustion engine.
By contrast, an electric vehicle: 18, 18 to 20, so really 20 versus 2,000. We can see why, as these vehicles age, they can be increasingly costly. I think that’s another reason to love electric and why I think brands like Toyota, among every other major brand, have more and more EVs coming out these days. Thanks for sharing. You and I hadn’t talked. It seems like you’re ready to talk about your car.
Andy Cross: As soon as you mentioned “Andy” and “your car,” I kicked up driving around the Beltway, what I was thinking just coming in today.
David Gardner: Well, Andy, one company that would probably not do as well if we increasingly go electric and lots and lots of parts seems not as necessary for the future of the automotive world would be LKQ Corporation. That’s another past stock pick of mine for Motley Fool Stock Advisor. An American provider of alternative and specialty parts to repair and accessorize automobiles and trucks, et cetera. In fact, LKQ, just checking Wikipedia right now, stands for Like, Kind, and Quality. Not sure I knew that until today years old. The ticker symbol is LKQ.
Let me turn back to Andy. Andy, this is a company — not trying to influence you too much unless it’s toward the good. But I’ll just mention: this company, 44,000 employees today. It’s grown over the years through acquisitions, 200-plus acquisitions, 44,000 employees. LKQ, by the way, not based too far from HCA Healthcare, both in and around Nashville, Tennessee. Booming business in that area of the country these days.
Andy Cross, I hope your car gets better. Andy Cross, what is your specified market cap range for LKQ Corporation? Ticker symbol LKQ.
Andy Cross: Matt, I’m going with my throwdown on this one.
David Gardner: Oh my gosh, that’s the first time the throwdown sound effect has ever been played [laughs] on this show because that is our first ever throwdown. Andy is using his throwdown right now for LKQ Corporation. As I speak, Andy and Matt are thinking about what their specified ranges are and quietly and secretly writing them down.
This is how you score yourself at home, dear listener. What you’re going to do is you, too, right now are going to think about what is your market cap range for LKQ. In order to give yourself a plus 1, you’re going to have to get that right. LKQ is going to need to be inside your market cap range.
But in case you think that’s all it takes to get a plus 1, I’ve outwitted you, because you can’t just say 0 to $1 trillion and get a plus 1. You’re going to need to have a range that is narrower than one of my contestants. You need to beat either Andy or Matt in order to give yourself a plus 1.
I’m not going to say pencils and pens down, Fools, because it looks like my talented contestants have already done that. This is an audio podcast, so listeners will never see this, but how confident, with the show of thumbs, right now, are you guys with the ranges that you’ve come up with? Matt’s thumbs-down. Andy?
Andy Cross: I was thinking about when to use the throwdown through the show. This one I’m struggling with, and I figured a good time for the strategy was when I’m struggling and thinking maybe Matt may not know this one as well. I am…
David Gardner: You yourself are feeling not so confident.
Matt Argersinger: By contrast, I’m waiting for the one I feel supremely confident about. I see how that might work.
David Gardner: Different ways to throw down here. But one throwdown is what you each have.
Andy, you just used yours. Let’s find out what you’ve written down. I’ll just turn to you first, knowing that our listeners now have their specified range in mind and fixed. Turning to you then, Andy. Andy, what is your specified market cap range for LKQ Corporation?
Andy Cross: I am between $8 billion and $14 billion.
David Gardner: Eight billion dollars to $14 billion. Matthew Argersinger, LKQ.
Matt Argersinger: I’m almost there. I am $12 billion to $16 billion.
David Gardner: All right. Well, here’s the market cap for LKQ Corporation: $4.26 billion. It is $250 million above where Andy had said. It’s outside Andy’s range, but it is in Matt’s range. Matt, plus 1.
Matt, whether you win or not this time — and it was a tough start, but you’re making a comeback — history will know that you are the first guy ever to score a point in the throwdown. Well done. You’re now king of throwdown.
Andy, Great guess. Both of you guys, you were giving me a thumbs-down in terms of your confidence level, and you almost nailed it.
Andy Cross: First contestant and now first throwdown winner, it’s like royalty.
Matt Argersinger: I was sitting right around 10, but I wanted to go a little higher than that.
Andy Cross: I was on the lower side even than that. Then I started raising it, just thinking about it. That was fun and I’m so disappointed. I was so close, but I still was outside the range and not even in the tightest range if I had gone even a little bit higher than where I was.
David Gardner: Well, you both did really well, and I have to admit, I’m always going to cheer on whoever’s behind, so it’s a close, tight finish. Good job, Matt. It’s now Andy 3, Matt 2. We’re going to move on to stock No. 6.
Before we do, of course, players at home, make sure that, first of all, you had to have LKQ Corporation’s market cap within your range, and you’re going to have to have had a narrower range than Matt’s, $12 billion to $16 billion. I’m I making it a little bit harder for our listeners at home? You bet here, because they’re worth in.
All right, let’s move on to stock No. 6. Matt, we had such fun playing word association earlier. Should we do it again?
Matt Argersinger: Of course.
David Gardner: All right. Matt, the first word or phrase that comes to mind when I say security.
Matt Argersinger: Stock.
David Gardner: How about cloud?
Matt Argersinger: Software.
David Gardner: SaaS.
Matt Argersinger: Service.
David Gardner: You didn’t want to say “down”? Because it feels like all of the SaaS cloud security companies are down, and some very substantially. In fact, many stocks are down, and that’s something that we’ve all had to endure over the year 2022. It has been a very tough year for many companies. This one included.
So security, cloud, SaaS. There’re probably multiple directions we could have gone with this one, Matt. But I’m focused here on one of the higher-rated stocks in the Fool 500 today. Yet it is substantially down. I’m going to say two-thirds from where it was a year ago. Zscaler, ticker symbol ZS. Zscaler.
This is a stock I’ve not picked before, but I certainly had some of my own cloud picks, and I think those stocks are down as well. This company, still not profitable, which is probably part of the vulnerability in markets like these for a company like this, but a company that, I don’t know if you just bought and held from the IPO, you’re still pretty happy today, but you’re not very happy if you bought a year ago today.
Well enough biasing the judge, the caller here. Matt, I don’t want to help you out any more than I already have. So, Matt Argersinger, have you spent any time looking or ever thinking about Zscaler?
Matt Argersinger: I never looked at Zscaler. This is going to be…
David Gardner: How are you spending your time these days, Matt? What are you looking at?
Matt Argersinger: Real estate and some dodgy dividend stocks tend to be my bag today. I haven’t taken a look at Zscaler.
David Gardner: When you say “dodgy,” I’m assuming you’re being tongue in cheek.
Matt Argersinger: I meant “stodgy.” I have a cold, so it might come out as “dodgy.”
David Gardner: I was going to chime in and say I think he said “stodgy,” just not “dodgy.”
Matt Argersinger: I might have missed the S.
David Gardner: I think most of us would prefer stodgy dividend payers to dodgy dividend payers. I know you spend no time with the dodgy, Matt Argersinger. I love it. Like many of us, you are coming at this with beginner’s mind. Zscaler, ticker symbol ZS.
Matt Argersinger, what market cap range do you want to specify here?
Matt Argersinger: I’m going to say $5 billion to $10 billion.
David Gardner: Five billion dollars to $10 billion. Andy, is this a company you’ve spent some time with?
Andy Cross: Again, unfortunately for the game, this is one that I do own and I have looked at before. I feel like I should have little bit of a leg up, but it doesn’t help my record.
David Gardner: Now, I made it a little painful with the throwdown rule for our listeners at home. I feel like I made it a little harder, but you might have made it a little bit easier for them when you say stuff like “I think I know what I’m doing on this one.” Let’s listen in, because we’re all listening to Andy and keying into what his impression of Matt’s market cap range was. So again, Zscaler.
Matt, you said $5 billion to $10 billion. Andy, players at home, inside that range or outside that range?
Andy Cross: I’m going outside that range, David.
David Gardner: Sure enough, research should pay. I feel like you’ve looked at this. You own it. Matt hasn’t really liked that. He doesn’t own it. I feel like you should have gotten the plus 1 here.
Andy Cross: Well, it didn’t help me with Ulta.
David Gardner: It’s true, the wily ways of this game sometimes can surprise, which is part of its charm.
Andy, any thoughts about Zscaler these days?
Andy Cross: Well, it’s in the cybersecurity business, which obviously has so much momentum behind it. David, you mentioned the challenge with so many high-tech, especially companies like Zscaler, CrowdStrike, those great cyber companies, founder led. Jay Chaudhry at Zscaler’s a fabulous thought leader in cybersecurity. But it is under a lot of duress from investors because of the market, the multiple of the stock, and just the volatility around investing in technology these days.
David Gardner: The company has about $1 billion in sales. With its $16 billion market cap, it’s still 16 times sales or so. We’re talking about a company that is still fairly richly priced, and yet it’s a very light business to run. If you can tilt this thing, not just cash flow positive but profitable over time, it could more than earn out its market cap from here.
Andy Cross: Yeah, I think so. We still like it. Generally, when we are thinking about, again, the market opportunity. It’s one of those just very volatile technology stocks that has really been punished in the markets these days.
David Gardner: Yeah. This company came public in 2018, not so long ago, friends, around $35 a share. It traded up 10 times to just over $350 by this time last year. A 10-bagger run for three years. And from $350 or so, it’s now around, well, about $112 as we talk. It’s down two-thirds in value. Not the only stock in the market that’s done that. Not the only stock we’ll be talking about this Market Cap Game Show.
Anyway, that was stock No. 6. Guys have got it. Andy 4, Matt 2.
Andy Cross: I think that’s right.
David Gardner: All right. So we got that number right. Let’s move on to stock No. 7. Andy, how did you meet your wife?
Andy Cross: Here at The Motley Fool, David. Jamie worked here with you and Tom on different marketing and press and communications parts of the business, and so we didn’t start really dating here at The Motley Fool really until she mostly left, maybe at the end of her tail career here and then.
David Gardner: I still miss her. She was just a wonderful… somebody who really understands public relations and is just fun to have around the office. I assume is fun to have around the house.
Andy Cross: Very. Yeah. When she’s not working — she works now a lot. Obviously very stressed, but she has wonderful fun memories of The Motley Fool and still speaks highly of it.
David Gardner: Well, wonderful. I guess it’s fair then say you did not meet online?
Andy Cross: We did not.
David Gardner: But ironically, you met working for an online company.
Andy Cross: Very true.
David Gardner: A lot of people meet online these days, and I think you guys maybe know where we’re headed with this next company. When we think about leaders in the space of online matches, how can you not think of Match Group, ticker symbol MTCH? This is a stock I own as well, which means I’m in a little bit of pain this time of year versus a year ago.
But for the long term, this is a company that has really benefited by being at the forefront of the “hey, I met my spouse or partner online” revolution. Which these days — we’ve often talked about this in the past on this show — is the third-most-common way that people meet their spouse or partner online.
No. 1 continues to be through family or friends. “Hey, have you met my roommate?” No. 2 is arranged marriages worldwide. That continues to happen in countries like India at real scale and volume. Happens to the United States of America, too. It’s still very much more common than we might think sometimes here in the Western world. But No. 3, from a standing start at zero, probably about 40 years ago. Now No. 3 most common way. And work probably fits into one of those.
Andy Cross, I think you know where I’m headed here. I’m about to ask you what you think the market cap range is for Match Group, ticker symbol MTCH. Now, listeners at home can’t see you do this, but it looks like you’re, I would say almost grimacing, or you’re thinking hard, or you’re thinking you should have looked this one up already. Or what are you thinking, Andy?
Andy Cross: Not thinking I should have looked it up.
David Gardner: We’re you reminiscing?
Andy Cross: I was pondering. This is my “if I ever had a doctorate,” as Matt said, I’m just like constantly the thinker.
Matt Argersinger: Thinking Dr. Cross.
David Gardner: It can be misconstrued sometimes, because I see…
Andy Cross: I’ve never really spent a lot of time with Match, as successful as they have been in the past.
David Gardner: Have you visited the site at all in recent years?
Andy Cross: Never.
David Gardner: I wonder why.
Andy Cross: Yes, exactly, and just with the explosion, so I’m just thinking about the balance between the growth of that market, but then also just software companies in general contracting and trying to figure out where that fits in my market cap. David and Matthew, I’m going with $22 billion to $28 billion in market cap.
David Gardner: Twenty-two dollars to $28 billion. Ticker symbol MTCH, $22 billion to $28 billion, players at home.
Matt Argersinger, inside or outside that range?
Matt Argersinger: Amazing. I was thinking to myself if I was going to guess $20 billion to $30 billion, so I’m going to say inside Andy’s range.
David Gardner: It’s actually surprisingly lower than that. Maybe again here, friends, since the stock has gone from $160 late last year to $40 today. It been gut wrenching: a 75% drop. And again, I feel like we keep talking about this across so many different companies. It’s not true of the market overall. J.M. Smucker, friends, is not down 75% over the last year, so the world recently has been to the Smuckers and has been against a lot of the Rule Breakers and other kinds of companies we often favor it at The Motley Fool, and I’ve talked about it a lot this year. I’m down about half from where it was last year, is still in it’s companies like these that make up a lot of our portfolios.
The good news here, Fools, is it’s not about one year. It’s especially not about what’s in your rearview mirror here. It’s all about where the world is headed. I continue to favor many of the companies that we’re talking about this week, and I own Match Group, so I sure hope it’s going to make a comeback from its market cap of $11.28 billion.
Well, outside Andy’s range, lower.
Andy Cross: I didn’t think it’d be that small. I guess because of the stock pullback, really, but just because they are so large in that space.
Matt Argersinger: Like the brand awareness. But I just don’t think they’d felt when David and you said it dropped at $40. I’m shocked at that. I just haven’t looked at the stock for a long time, but I didn’t think it was that low.
Andy Cross: Little more stealing that just the stability and the people.
David Gardner: I guess during COVID, that maybe that wasn’t…
Matt Argersinger: What else they have is thinking during COVID, this is probably one of those games against massive popularity.
David Gardner: Well it did, in fact, friends. It went $100 to $180 over the course of the COVID year, and it topped $80 in, around October last year, and now it’s at $40, so it’s the last three-quarters of its value.
But here’s the thing. We’ve often said this. This, one of the beauties of the Market Cap Game Show from the earliest days, Matt, you and I talked about this Etsy. When you think a stock has a much bigger market cap than it actually has, that maybe you should mean it’s headed to your watch list. Because if in your mind — and I could have easily bought in here, I get to be the game show host. I don’t have to make any calls. I love that role for me. But if you’re thinking $25 billion in stocks closer to $10 it wasn’t at $25 too long ago.
Might be a good buy, at least something to put on the watch list. So again, what’s already happened is no longer interesting to most of us and, in some cases recently, it’s sad over any meaningful period of time. You are pretty happy as an investor in the stock market and these kinds companies. But what’s going to happen next?
Well, a lot of these companies, really good ones, are about half what we thought they would be or should be, and so let’s watch what happens in 2023.
Well, we’re still stuck here. The near-final week of 2022 where, Andy, you have a 5-to-2 lead. So, Matt, if you want to stop Andy from his dream of winning, you’re going to need to get the next three. No pressure.
Andy Cross: No pressure. I can handle that.
David Gardner: Well, let me turn to you then and let’s have a short conversation about the S&P 500 — down, Matt, 15% or so over the past year. Obviously, we’ve been talking about stocks that are down closer to 60%. This is going to be another one of those.
But I’m wondering, a lot of people are obviously feeling this with stocks in their portfolios right now down 60%. What do you do in those situations, Matt, if you have a stock, God forbid, would you ever have that? I do. But anyway, Matt Argersinger, if you’ve ever had such a stock, what is your mindset? What’s your approach?
Matt Argersinger: It’s boring, but my approach doesn’t really change, and in a lot of ways, I’m sometimes excited, because if it’s a business I love and I’ve bought and held for a long time, I’m usually interested in buying more of it. But I certainly do have many stocks that are down 50%, 60%.
Because I was thinking about my portfolio, David, and my portfolio, because of the growth over the last decade and because of me working on Stock Advisor, Rule Breakers, and Supernova, as you remember, my portfolio, even though I’ve been buying a lot of those stodgy — or dodgy — dividend stocks, most of my portfolio is still a lot of those Rule Breakers stock yards, companies that you love, I know, and then that are down a lot this year. But there have been such big winners, of course, over the past decade. I’m, in a lot of cases, I’m pretty excited about some of the values, I’m saying.
David Gardner: Well, this particular company is another one of those. This is nearly a household name for many, but it’s a stock well down from its recent highs. Of the 10 stocks featured on this edition of the Market Cap Game Show, this is the only one that was there last Market Cap Game Show. So I don’t know if you guys were listening at the end of September, but if you were and you thought hard at that moment about Block — which is what Square renamed itself to with the ticker symbol SQ. I’m seeing Andy smiling, and he’s probably recently looked at this. Maybe he was listening three months ago.
Andy Cross: I, unfortunately along the line, and I have not looked at Block recently.
David Gardner: It’s hard to say Block. It’s still hard for me to say Meta for Facebook. I think I’ve gotten over the whole Google thing. I think I’d say Alphabet more often than not now. But guys, Block. Can you imagine like the branding forever decision, the decision like we have you down to the final three choices? You’ve got the management team there. We’ve done our branding research. We think we have your new corporate name. Block. What do you all think?
Matt Argersinger: Right.
Andy Cross: You hear those stories of companies going through rebrandings, and I do wish to be a fly on the wall of the board conversations for some of those that have gone through, just…
David Gardner: If you’re Jack Dorsey, you’re probably sitting in that room. You’re thinking, well, first of all, I named this Square, so I guess I get that square blocks. But ultimately, he may have loved it. I don’t know, clearly. They voted for it and it’s today, what was once known as Square. And by the way, the service, serving small and medium-sized businesses, where you can pay directly, is still called Square, and the app is still called Square. But gentlemen, as you know, along with the Metas and Alphabets, Block has recently gone through this transition.
Matt Argersinger: Well, I think I’m going to use this opportunity Andy, to do a throwdown.
Oh my, I got a good feeling about this one, so let’s do it.
David Gardner: I was wondering, now, Matt didn’t have to do that. The throwdown is an option that my players, my talented contestants, can use or not, and so I see them diligently scribbling. And you, dear listener at home, you are also right now coming up with your specified market cap range for Block, ticker symbol SQ, very analogous to Alphabet, ticker symbol GOOG still. So yeah, the companies, it’s funny they change their names but they don’t change their tickers. I wonder why. What does that mean?
Andy Cross: Well, Meta did.
David Gardner: Meta did. You’re right, that’s right. Now would be Facebook became Meta. Thank you, Andy. That itself is, I’m having fun with this, but when you think about it, is actually a big money decision to change your corporate name but also to change your ticker symbol or not. I don’t know what the thought process is, but people are going through it, and it matters, whatever they’re doing.
Gentlemen, pencils downish. Andy still scribbling. Matt, you’re the one who threw down. Let me turn to you first. What range have you scribbled down for Block, ticker symbol SQ?
Matt Argersinger: Going with $40 billion to $48 billion.
David Gardner: Forty billion dollars to $48 billion. Andy Cross, what is your market cap range for Block?
Andy Cross: That is brilliant, Matt. I’m outside your market range but around it. I’m $35 billion to $50 billion. I’m a little wider here, which could hurt me.
David Gardner: Well, Fools everywhere, the market cap for block is $38.1 billion. And what that means is that Matt, your tight range of $40 billion to $48 billion, just a little high, which invalidates you scoring a point here.
Listeners at home, you’re going to need to have had $38.1 billion inside your range, and then you’re going to need to beat Andy’s range. He had it as $35 billion to $50 billion, a $15 billion range.
Andy, you gave yourself some latitude. You kept it a little bit lower. Because this stock is down, friends, more than 60% from where it was a year ago. And so Andy Cross, you nailed it.
Andy Cross: I was on the higher side, and my first right up here was $50 billion to $70 billion, and then I was what, I think it’s lower than that because I was thinking about PayPal and comparing a little bit. And just, I don’t mind, I’m not quite sure exactly where PayPal is, but then I said, I think it’s more in the $30 billion to $50 billion range.
Matt Argersinger: I had $45 billion to $55 billion as my initial guess. Crossed that out. I came down a little bit too, but not down enough. I’m like the guy on Price Is Right who never gets on the stage because he goes over every time.
David Gardner: I love that guy.
Andy Cross: You just cheer for that guy.
David Gardner: Well, one thing I want to say about this show. It’s less popular than The Price Is Right. But I think we’re a little more cerebral. I think so. Are you with me?
Matt Argersinger: Totally.
Andy Cross: Dr. Cross is only coming on this game show. [laughs] She’s not going on…
Matt Argersinger: Price Is Right.
Andy Cross: Let’s get the Price Is Right. But —
David Gardner: Although headed to ABC prime time, I understand again, next fall.
Matt Argersinger: 8:00 p.m. Thursdays.
David Gardner: 8:00 p.m. Thursdays.
Matt Argersinger: Awesome.
Andy Cross: Negotiations.
David Gardner: Well, you can now afford to hire an agent, Andy, because you’re going to win this no matter what, you’re up 6-2. We’ve got two stocks left. But you know what, Matt, resilience. Never, ever, ever quit.
Matt Argersinger: Call it resilience or just going to try to get respectability.
David Gardner: Respectability. People tend to just remember the last thing that happens, Matt. We could argue, might be what it’s all about, so you can go soft on this one as you wish as we go to stock No. 9.
Andy, have you been playing around with ChatGPT or DALL·E or any of the chatbots of 2022?
Andy Cross: Very interesting. I’ve asked our Quant team about it, and because I’ve been reading more and more about it recently, and they have played around with it, our investing Quant team. I personally have not. It is fascinating technology to watch.
David Gardner: Well, I’m glad you’re having the Quant team look in, Andy. On last week’s show, our Besties of 2022, Dan Pink talked about the significance of ChatGPT, and he said, it was what I recall Dan saying as he said, there was a time in 1989 where I leaned across the transom and my buddy hit his keyboard. I’m like what did you just do and he said, I just sent an email, and Dan said really, how’s that work? It’s like, well, my friend in Oregon just instantly received my mail that I wrote. And Dan, thinking backward from where we are today, we all chuckled at that.
But moving forward from 1989, it wasn’t obvious necessarily that’s where the world was headed, but boy, did we had there. And Dan was likening the dawn of the chatbots this year to a similarly impactful revolution forward with AI, the early innings here.
People have talked about AI and machine learning forever, and we have a team and we have some people who are working on that here at the Fool, and many other companies, too, no doubt, including the company we’re about to talk about. But it’s still so early, and a lot of the things I saw were silly or questionable until I started seeing what ChatGPT can manage, and we talked a little bit about that last week. Sounds like you’ve had an experience or two. My son, Gabe, typed in a rap battles between me and Shakespeare. I’ll be sharing that on next week’s show.
Matt Argersinger: Really.
David Gardner: It took five seconds for ChatGPT to come up with it. It is hilariously great. I’m pretty much blown away by what’s happening here, so I think we’re mark this point in time, December 2022. It all started before this, but the last few months, the dawn of ChatGPT, guys, I think it’s really worth paying attention.
Matt Argersinger: Fascinating.
Andy Cross: I should have put in “how to win at using the throwdown in the Market Cap Game” to ChatGPT in when it came out, and I didn’t.
David Gardner: I tried stuff like that, and one thing I’ve picked up from ChatGPT — and by the way, that’s just one of many different chatbots. That’s the one I’m talking about right now, but it’ll say stuff like I’ve only fed stuff in through 2021.
Andy, unfortunately, the throwdown rule is brand new in December 2022 year’s podcasts, so it’s not going to have anything for you for me.
Andy Cross: Not yet
David Gardner: Not yet.
Matt Argersinger: But Dr. Cross in the future will have it.
David Gardner: Well, it is a big revolution out there, and there are some early emergent players, and this is a company that I barely know. But our company knows it and our members do, because it’s right there on our Motley Fool premium services Screener. The ticker symbol is STEM, and the company’s name is actually the same: Stem.
Stem Incorporated is a global leader in AI-driven clean energy solutions and services. This is a company — I was about to say its market cap, but I shouldn’t do that. This is an earlier-stage company that might start helping Andy, who apparently needs no help this week at all, as he starts to think about the market cap range for Stem, ticker symbol STEM, the global leader in AI-driven clean energy solutions and services.
Andy Cross: I think I will say $3 billion to $4.5 billion in market cap.
David Gardner: Three billion to $4.5 billion for Stem.
Matt Argersinger: Not heard of this one. And I’ve been saying “inside” all day for Andy’s ranges, which have been great. But I think I would go outside for this one.
David Gardner: It is indeed. Early days still for AI. This is a young public company. Its market cap is $1.57 —
Matt Argersinger: Small.
David Gardner: — billion, and we talked about this earlier. Now, I’m not plugging this company, I haven’t researched it myself. It could be the next Rule Breaker. I’m not sure. But if you think it’s like a $5 billion company and it’s only $1.5 billion, it might be worth putting on a watch list.
Andy, I think Matt and I had not any facility with this company. I know you’re our chief investment officer, and now some people might think, he must know everything about every stock, every company. But at the same time, you are familiar with a lot of different services that we offer. Is this a company that you’ve come across before?
Andy Cross: Well, this one has been pitched to us in some of the conversations we have as analysts, and I think I was anchoring to, over the past year or so when I had not researched it or studied it. So I think I anchored to where it was maybe when we were talking about and didn’t adjust for the stock price. So not to make an excuse for my poor decision or poor choice. And congratulations, Matt, on getting that outside of the range.
David Gardner: It wasn’t that far.
Andy Cross: Chin up over there.
Matt Argersinger: Did single-digit market billions, which was right where…
Andy Cross: Well, that is true. But anyway, so it’s one that I had heard of but have never really looked at it.
David Gardner: Well, this company came public two years ago. I’m just looking at it now. Quiet IPO. I’m not sure anybody noticed it. It was at $10. Somebody then noticed it as the volume picked up hugely. In its second month or so of trading, it went from $10, it touched $50 very briefly at the start of 2021. Today, it’s at $10.
Which is a reminder that so often — in fact, the majority of the time, guys, we’ve talked about this over the years as fellow Fools. The majority of IPOs are at or below that price they debuted at a year or so later. And this is a company where two years later, it’s sitting right at the price where it sleepily IPO’ed.
Certainly an interesting business.When I hear AI and clean energy, I find myself sitting up in my seat going, “I wonder what they’re doing over there.” I’m guessing there’s not much profit yet. That’s damn. This is still an early, emerging business — again, just a one-and-a-half-billion-dollar market cap. But it was good enough for a point for Matt Argersinger, so let’s give him 3 and call it 6-3.
Remember, people only really remember what happens right at the end of things, at the beginning and the end. The beginning, Andy scored a point, so some people will always remember that. Some people will always remember that Matt scored the first-ever point of throwdown. But I think a lot of us — and it’s recency bias, it’s a problem — a lot of us are only going to remember stock No. 10.
Matt, how many public companies can you think of that were founded in 1865?
Matt Argersinger: Oh, gosh. I can probably think of three just off the top my head.
David Gardner: Do you want to just throw out one name?
Matt Argersinger: I don’t know if they’re accurate. Union Pacific.
David Gardner: Union Pacific, that’s sounds plausible. I’m not going to go to my best friend, Wikipedia, and ask it right now whether you’re right or not because that sounds generally, but that’s not the company. This really isn’t a quiz, because I would never want any of this is really such an arbitrary question. But if I were to specify an additional clue, that it was founded by an immigrant, no less, a guy who came over from England and decided, “you know, I’m going to plant my feet and my family in American soil and I’m going to start something” that, by the way, in 2022 is still going 160 years later.
Do you think that William Carter, who was born in 1830, do you think he ever could have dreamed that we’d be talking about his company, which recently in 2005, bought OshKosh B’gosh, OshKosh B’gosh clothes? That the Carter’s company. Carter’s Inc. Kids, Dutch. Kids’ clothes. Right, Dutch, maybe a little Matt, little Andy, a little Dave.
For decades, this company has been in business. William Carter, a British immigrant. In fact, he arrived in America on January 28, 1857. Wikipedia, that’s where I am right now, is not actually mentioning how this company started or what it did, but let’s just assume it was always kids’ clothes. Sounds great. It’s that time of year where you might want to give a favorite child, grandchild, something under the tree, might want to shop at Carter’s, maybe help them out. They need a little bit of help these days. Again, it’s been a tough, tough market year, so you can see what we’re talking about, gentlemen.
And I’m about to turn to Matt and ask him what his market cap is for Carter’s.
Before I do, I want to mention the Carter family itself sold out in the 1990s. Guys, that means they held on to the stock for more than a century, probably fifth, sixth generation of family and finally says, we’re done here. But yeah, they bought out if this helps at all, OshKosh B’gosh, for $312 million in 2005. Carter’s is a publicly traded company. That ticker symbol, Matt, is CRI.
Matt, what is your specified market range for stock No. 10? Probably the only one people will really remember from this episode. Carter’s.
Matt Argersinger: I’m going to go $6 billion to $10 billion for Carter’s.
David Gardner: Six billion dollars to $10 billion for Carter’s.
Andy, before you give your answer, I don’t want to draw it out a little bit, a little bit of drama at the end. What’s going through your mind right now as you think about kids’ clothing, British immigrants, the end of this episode this week? The holiday season. Are you prepared? What’s going through your mind right now?
Andy Cross: Well, I was originally thinking in the high single digits, and then I got distracted by the fact that this will be my first victory on the show before, so I feel good about that. I think I was 0-2, maybe even 0-3 before, so I’m feeling pretty good about that.
David Gardner: Big moment.
Andy Cross: I am thinking a little bit about the holidays. You got me thinking about shopping and my own thing, so I have a lot of stuff going through my mind.
David Gardner: There is a lot, and I want to thank both of you guys ahead of time near the end of this week’s show for being here. Because not only did you share with us some of your time, which is precious this time of year, but Matt, you drove about an hour to come into the office today, a commute that we don’t ask you — Actually, we don’t ask any of our employees do commutes anymore, but when you take the time and make the time to come in face-to-face, it’s appreciated.
It was a lot of fun to do this show physically face-to-face with you. This is the first Market Cap Game Show we’ve done live in this format for a few years now, so thank you both for being willing to play and, of course, for everybody at home giving us their attention this week.
Andy, Matt said $6 billion to $10 billion. Inside or outside that range?
Andy Cross: You threw me with a wider range than I thought he was going to go with, so I am going to say just inside that range.
David Gardner: [laughs] I guess that’s the way this should have ended. That way, everybody can smile, and he gets his first win, but Matt is remembered forever as a guy that’s thought No. 10.
Matt Argersinger: That’s right.
David Gardner: Not just 9 and 10. You were on a roll of the end of..
Matt Argersinger: If this went to 15, I think…
Andy Cross: It’s like if there was a boxing match, you’d be all set in many ways.
David Gardner: Andy did say inside Matt’s range. The market cap for Carter’s is $2.68 billion, so this is a company… If you think about it, it’s almost a little sad. I don’t want to be dark here at the end of the year, but imagine a company being around for 157 years, and it’s compounded now, finally, to be worth $2.68 billion. I’m not going to do the math on that, but I don’t know. Doubling every seven years or so along with the S&P 500, Andy, over the course of that? Should this company be bigger?
Andy Cross: Well, I was just thinking your acquisition of OshKosh B’gosh, the acquisition. I mentioned the price there that was a little bit of anchoring for me trying to think about where they would have paid for that, how large of a business would have had to make that acquisition. But I guess in hindsight, because it has been just a tough market in general, and online commerce, all the shifting consumer habits.
David Gardner: They just don’t have stores, but they do do a lot of online businesses, and this might be a good time to take a hard look at Carter’s. This is a stock I brought to Stock Advisor. At the time, I liked it, and it was a winner. But I have to say, since it was at $55 10 years ago, it’s $70 today, and recently, it’s traded over $100. I feel like that it wasn’t a great stock pick by me.
Matt Argersinger: Well, but OshKosh B’gosh, at only $312 million.
David Gardner: $312 million in 2005.
Matt Argersinger: Just five. It’s still seems small to me. I feel like that brand is bigger than the 312 point.
David Gardner: That might be the theme and the takeaway from this quarter’s Market Cap Game Show.
Take a hard look at some of these companies, fellow Fools, because I feel like these prices are pretty good for some of these businesses. To review: I don’t do this very often, but nCino, J.M. Smucker, Ulta Beauty, HCA Healthcare, LKQ Corporation. Those were the first five. Zscaler, Match Group, Block, Stem, and Carter’s.
Friends, this was a Motley mix from the Fool 500. Lots of different types of companies, which is what makes the Market Cap Game Show.
Guys, you made the Market Cap Game Show with the fun and energy you brought. Andy Cross, Matt Argersinger, thank you both so much for being with me again on the Market Cap Game Show.
Andy Cross: Thanks, David. That was a load of fun, Matt.
Matt Argersinger: It was a big blast.
Andy Cross: Well done.
Matt Argersinger: Awesome.
David Gardner: We had our Besties last week, which I’ve often likened to the Oscars. That’s the Oscars of this podcast, and Andy, as I gave the 10 Besties to the 10 best podcasts of the year for this podcast, we didn’t have any victory speeches. We didn’t have anybody receive the award or say something. But Andy Cross, I feel like you started this show by expressing a dream. A dream that you might one day win this show. Now, having achieved this, is there something you want to say to the world?
Andy Cross: Well, I just want to thank David for having me on the show.
David Gardner: Wait, you’re going to be sincere? I thought you were joking.
Andy Cross: I’m really sincere, I’m going to be very…
David Gardner: I thought you were joking.
Andy Cross: Of course I’m joking. This is the last show of the year.
David Gardner: Just about, but Andy, I feel like I interrupted you. You were saying something very emotional.
Andy Cross: No, it was all tongue in cheek. But it’s a great reminder about just enterprise, I think. Just the lessons of investing and thinking about businesses, the transactions, some you may never have heard of, some unit, and hopefully, people at home or wherever you’re listening to are having a lot of fun with this as well too. And it’s just fun to give a lot of perspective to businesses, like wow, that’s that size? My gosh, that’s that size? And that does just add a lots of the fun of investing.
David Gardner: But it does. Some of my favorite, just some of the corporate history. This is something I’ve said before on this podcast. I feel like corporate history is undertaught in our country. We tend to teach history of war. What are the five causes of World War I? Or we memorize presidents. What about all of the companies that employ all of the people, some of which are hundreds of years old? And I don’t still know of any university-endowed chairs that teachers specialize in the stories, the history of private and public companies. But I find each one fascinating. So it was fun to hear about Johnny Appleseed leading to Smucker’s today or thinking about 160 years or so of compounding only the $2.6 billion from a British immigrant who had a dream, but all fun stuff.
Matt, in closing, I’m sure you want to express some consolation to those who lose. We all lose all the time. So you lost this time, and a lot of us probably need a little bit of… speak to…
Matt Argersinger: I’m the guy who gives up the no-hitter or something like that or just, I’m happy to say that I was the guy who lost and got Andy’s first win.
Andy Cross: Well, let’s not forget about the first throwdown champion, too.
Matt Argersinger: You got to respect that.
Andy Cross: They will take it.
David Gardner: Well, thank you again to Andy and to Matt and to you for suffering Fools gladly over this Market Cap Game Show to help close out the year of 2022. We’ll be doing your mailbag next week, so that’s what’s on tap. That’ll be actually closing out the year, as it has every year, now in our eighth year for Rule Breaker Investing.
Thanks for joining Andy, Matt, and me. I wish you the best, family and friends, in the week ahead. In the moment, Fool on.
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