It’s that time of year again — time for Motley Fool co-founder David Gardner to host The Market Cap Game Show, the most popular market cap game show in the world! What’s behind company No. 1? No. 2? A few billion dollars and change! Guess within 20% of the valuation and you get a point.
Motley Fool analyst Matt Argersinger rejoins the show to take a swing at another 10 companies. Can he keep up his streak? We’ll find out! Think you can beat his score? Feel free to play along, and catch some investing insights from this pair of Fools — from a few general strategies to companies they’re especially excited about and more.
A full transcript follows the video.
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This video was recorded on June 14, 2018.
David Gardner: Four times a year, we’ve gotten in the habit on this podcast of playing The Market Cap Game Show. That’s right, it’s a game show, on this podcast! I think, Matt Argersinger, it’s fair to say that we may be the only ones that have turned market cap into a game?
Matt Argersinger: As far as I know, I think we’re the only one on the planet.
Gardner: And this is your fourth time, because this is our fourth time doing it. Matt, you are my guest star every time, until you get bored or play so badly that we have to pinch hit for you sometime.
Argersinger: It’s going to happen eventually.
Gardner: I hope not, though! This has been a lot of fun to do together, and I’m really excited to queue you up again with ten companies we’re going to be talking about on this week’s podcast, none of which Matt knows ahead of time. He has familiarity with them, he might even have started to take to memorizing some market caps. I don’t know. That would be a wily thing to do. If he has, that’s great, because I want Matt to be as smart an investor as we can make him here at The Motley Fool.
But, enough about me, enough about Matt. This is actually about you, whoever you are, because you are playing this game with us. You’re kind of competing against Matt. This is a game show. I’m playing the role of Alex Trebek, the MC and host. Matt is a competitor and he’s facing off against you. For each of the ten companies we’ll be talking about this week, as we have in our previous three episodes, all of which are fun to go back and listen to, but, for each of these ten companies, we’re going to be asking Matt — and you — what is the market capitalization? What is the value? What is the price tag the market puts on this company? And Matt, if you’re within 20% — you remember that? — either way. So, let’s say the market cap of a company is actually $10 billion. You would be right if you got from $8-12 billion with that particular company. That’s true of you at home, as well.
Matt’s going to play. I’m going to pause so you can think about it and play, too. A big question that we always have at the end of this podcast every quarter is, did you beat Matt? Did you lose to Matt? So, #IBeatMatt, which is rarely used, in my experience. Matt tends to get about six out of ten here. #ILostToMatt, also a good one. The occasionally used #ITiedMatt. All of those on Twitter in the week ahead. It’s fun to see how everybody’s doing out there.
Matt, how are you doing?
Argersinger: I’m doing great!
Gardner: Great. We’ve had a big event in Washington D.C. in the last couple of weeks. For the first time since 1991 — quick math suggests that’s something like 27 years — a Washington D.C. major sports team has won the World Championship.
Argersinger: That’s right! Exciting! The Washington Caps!
Gardner: That’s right, the Washington Capitals hockey team. Matt, are you a hockey fan?
Argersinger: I’m not a huge hockey fan, but I admit, the Capitals pulled me in for the playoffs, I watched some of their games, including, of course, the last few games against the Las Vegas Golden Knights. Good times.
Gardner: We’re taping this on the afternoon of Tuesday, June 12th, when the Caps parade is happening here in Washington DC. Matt, at any point, were you caught up in traffic of any strange nature today?
Argersinger: No. I take the subway — the metro, as we call it in D.C. — to work, so I go against traffic. But, I did see a lot of red Capitals jerseys on the train going into the city this morning.
Gardner: Awesome. In celebration of that, we’re going to change our format slightly for this episode. We’re going to have two intermissions. We’re going to play this game in three periods, just like NHL hockey is played. We’ll do three companies, take an intermission, three more, and then four, paying heed to our world champion with a little bit of DC pride.
And, before we get started, one other scoring change, this one also very minor, but important. Last time — in fact, the first three episodes — we were struggling for the right sports analogy to use to describe how this game is scored. What have we typically settled on, Matt?
Argersinger: We tend to focus on golf and being a par golf striker, which didn’t seem to work very well.
Gardner: Yeah, it didn’t seem to work that well. The problem was, in golf, the higher your score goes, the worse you’re doing.
Argersinger: [laughs] Right.
Gardner: And in this game, the higher Matt’s score goes, the better he and you at home are doing. So, it didn’t entirely make sense. I kind of like the idea that getting four out of ten was par, I liked that idea, that that’s the standard, can you do better than that. But it really didn’t work. So, we wondered aloud if there was a better way out there.
And I’m really happy to say, we got a great write-in suggestion from Randy on Twitter. In fact, I shared this one or two mailbags ago. Randy is @FixedOn66 on Twitter. He said, “Hey, guys, what about just baseball and the batting average?”
Argersinger: Love it! I mean, we’re both baseball fans, so, of course, it makes sense. And, I have to say, I feel good about batting 600. I mean, if I batted 600 in the major leagues, well, I’d be the greatest player that ever played the game. [laughs]
Gardner: [laughs] You would be, by almost 2X. Yeah. We’re definitely baseball fans on this podcast, and it does make a lot of sense. Randy, thank you for that suggestion. From now on, starting with this episode and all going forward, this will be a batting average thing. It’s just the percentage of the ten that you got right. Matt has typically been averaging about 600, six out of ten, in the past. We’ll see if he can keep it up, or even up his game this particular episode. We’ll see.
But, who cares about Matt or me, right? We care about you and how you’re doing, so score right along with us. Without further ado, I think we should get started.
Argersinger: Let’s do it.
Gardner: I’m about to go with company No. 1. Matt, in fact, I’m going to put out there what the company is so you can be thinking about it a little bit, but I’m also going to ask you to be juggling things in your head. Right as I mention the company name, I’m going to want you briefly to explain market cap so that our many new listeners since last time, when we taped in early March — here we are, three months later — many people may not know what market cap is. I want to make sure everybody understands the game. So, first of all, company No. 1. Matt, have you been to Minnesota before?
Argersinger: I have, very briefly.
Gardner: Do you have any recollections of your time in Minnesota? Were you just passing through the airport, were you a kid?
Argersinger: I had a girlfriend in college who was going to … McAllister? Is that the school out there?
Gardner: Yeah, that’s definitely a small private school in Minnesota.
Argersinger: I visited her during winter break, which was brutal, but it was great to be out there for roughly a week and experience the city.
Gardner: Now, I obviously don’t want to pry here or touch sensitive ground, but, it sounds like that relationship ended up not working out.
Argersinger: It didn’t work out. But it was a great year.
Gardner: Are you comfortable mentioning who dropped whom? Was it mutual?
Argersinger: [laughs] I think it was one of those things where we both finished college and went our naturally separate ways. There was no animosity or anything like that.
Gardner: It wasn’t that you were unwilling to return to the fair state of Minnesota, was it?
Argersinger: No, no.
Gardner: Minnesota had nothing to do with the end of this relationship?
Argersinger: Absolutely not. In fact, I would love to go back to Minnesota.
Gardner: Alright. We’re going to go back to Minnesota very briefly, because Minnesota Mining and Manufacturing (NYSE: MMM), which is a very prominent company, we’ll do a little bit of its history in a second. 3M is company No. 1 this week. But, before we go there, Matt, what’s market cap?
Argersinger: Sure, David. You said at the beginning of the podcast, it’s a way of sizing up and valuing the company. Market cap is, very simply, the price of the stock times the shares outstanding. So, if you have a $100 share price stock, and it has 10 million shares outstanding, then it’s a $1 billion company. Just some simple math, and that’s a way of sizing up a company, comparing companies. If a company is a $100 billion company versus a $1 billion company, you’re saying, obviously, the $100 billion company is probably a lot bigger, probably has a lot more revenue, a lot more employees, etc.
Gardner: Yeah. The reason I think market cap is always worth thinking about is that it does give you, as Matt mentioned, that relative sizing of one company versus another. I think it’s fair to say that the larger a market cap gets, probably, the less likely you are to see that multiply greatly in the future.
Gardner: In fact, I was reading an article on our site this week by my friend Brian Feroldi, talking about how he was going to sell his Apple (NASDAQ: AAPL). Any time we write about a stock at fool.com, we ourselves have to wait a few days before we can take any action trading it. So, he said, “I have to publish this article first, but after a few days requisite, I will be selling all of my Apple.” And the first reason he highlighted — by the way, I’m holding on to my Apple, Brian — was the megacap multiplier obstacle. This is rather unwieldy phrase that I did develop some years ago. It’s a way of saying that, when you have a megacap company, a company that’s really big, there’s sort of an obstacle to it multiplying, and that would be its own size.
Argersinger: That’s correct. You mentioned Apple, which I think is within a few percentage points of a $1 trillion market cap, so I’m not surprised that Brian is using that as a reason, maybe, to lighten his position in Apple.
Gardner: That was one of his reasons. It was a good article, ten reasons he’s going to sell Apple. I think it’s worth reading it, even if, like me, you’re going to hold on to your Apple.
Thank you for that definition. Sorry, I feel like I disturbed the flow of the game show this week by putting out the first company name and then breaking away from it to discuss what we’re actually doing, but that’s what happens when you don’t have Alex Trebek, when you don’t have high-priced talent, when you have a couple of noobs, or, specifically one who sits down in front of a microphone and attempts to be a game show host with no justification for doing so.
Argersinger: But I certainly appreciate it, because it gave me more time to think. I’m pretty sure I’m still going to get the answer wrong. [laughs]
Gardner: Well, we’ll see about that, Matt! 3M, a great company. It’s funny, when I go to their website and I tap in, it says, “list consumer products from our company.” And you click the button, and it lists 25 products that we would recognize, sometimes you didn’t realize that comes from 3M. And then you get to the bottom of that 25, and it says, “That was 1 of 25. Click next for numbers 26-2,246.”
Argersinger: Oh my goodness!
Gardner: And you could page through for maybe hours, just looking through all that 3M sells. Before we ask you and Matt what the market cap is, I want to briefly share a little of the history of this company, because I love company histories. I always feel it’s so under-explored, and not many people know. This is sort of fun. I didn’t know this. This is coming, as always, from Wikipedia.
3M was actually founded by five businessmen in the year 1902 in Two Harbors, Minnesota. It was originally a mining venture. That’s the Minnesota Mining and Manufacturing, which is now, these days, abbreviated to 3M. The mining part isn’t a big part of this business anymore, but that’s how it started, originally, a mining venture. The goal was to mine corundum. But this failed, because the mine’s mineral holdings were anorthosite. I don’t even know what that is. Anorthosite had no commercial value. So, they have the mine, they’re in Minnesota, they start digging, and they think they’re going to find corundum, and they find anorthosite. So, no commercial value. One of the co-founders, John Dwan, basically sells off. A couple of other guys take over the company. Three years later, 1905, they move it to Duluth. They begin researching and producing sandpaper. I won’t go through it, you can read more on Wikipedia. The rest is history. But, I love hearing how companies start.
All of that, a long preamble. Matt Argersinger and my RBI podcast listeners at home, within 20% either way, what is the market cap of 3M Corp, which is MMM on the New York Stock Exchange?
Argersinger: I believe it’s one of the big Dow blue chips, so I know it’s a big company. I just don’t know how big. I’m going to guess the number $75 billion.
Gardner: I mean, you were right! You were right about almost everything you said. It is a Dow component, it is a big company. We’ve established, it’s been around since 1902, so they had a chance to get a little bit bigger in the meantime, it sounds like, than you thought that they were, Matt. Now, that was not a bad guess. We’re all guessing, right? I’m sorry that Matt’s starting off 0-1. That’s how it started last time. You got hot after that. But, 3M, the market cap today is $122 billion.
Argersinger: Oh, much bigger.
Gardner: So, those playing at home, if you guessed anywhere from $98-146 billion, you are in that 20% band. Matt, do you think you’ll ever go back to Minnesota?
Argersinger: I’d like to.
Gardner: I sure hope you will.
Argersinger: I know there are a lot of companies in our Supernova universe that are based out in Minnesota, including 3M.
Gardner: There’s a lot of biotech and some computer companies. We once visited the Cray Corporation (NASDAQ: CRAY), which was one of the early supercomputer companies. Seymour Cray was one of the pioneers of supercomputing. If you look up Cray Computers, they were the supercomputers back in the 80s, when computers were a lot bigger than they are today, and probably slower, but they were super back then. Anyway, that was a Minneapolis company I once visited. Our dad used to take us, occasionally, on trips. We’d just drop by corporate headquarters and talk to an investor relations person. That was one of the times I did that. It wasn’t like I did it dozens of times. We did maybe five or six times. But I’ll always remember Cray Computer.
Alright. Matt, nice try. 0-1. Let’s go now to company No. 2. I’ll call this one, from 3M to E3. Matt, you and I had the pleasure of spending some time together on a couple of years of trips out to the big video game conference, the big trade show that still happens in Los Angeles, California, E3.
Argersinger: That’s right.
Gardner: Have you been paying any attention this week?
Argersinger: I certainly have. I’ve been watching a lot of the videos coming out of E3. It’s an event every year where some of the biggest upcoming video games of the holiday season are previewed, and certainly, it’s exciting.
Gardner: Absolutely. Did any particular game catch your eye so far in the last few days of revelations?
Argersinger: I pay a lot of attention to Bethesda Softworks. It’s actually a private company, but they make some of the biggest games out there. Fallout, Elder Scrolls. They’ve had some nice trailers for a new Fallout game that’s going to be coming out, which I’m pretty excited about.
Gardner: Yep. There’s also going to be a new Skyrim, Elder Scrolls VI. And I saw their new IP, their first new intellectual property in the last 25 years — because, they’ve mainly been making sequels — and that’s something called Starfield, which looks like outer space, Star Trek-y, kind of a thing. Those are all great games.
Argersinger: Yeah, very intriguing. I’ll just mention the Spider-Man game, too. If any listeners out there might be familiar with, say, Batman: Arkham Asylum, it’s that big world, superhero swinging around buildings type of game. That’s one I’m paying attention to, too.
Gardner: Absolutely. You and I both enjoy video games and video game stocks.
Argersinger: That’s right.
Gardner: Do you own any Activision Blizzard (NASDAQ: ATVI)?
Argersinger: I do.
Argersinger: So, I’d better get this. [laughs]
Gardner: [laughs] So, Activision Blizzard is a stock that I own, as well. It’s a great stock, by the way, for kids’ accounts, too. A lot of kids — well, some grownups, too, it turns out — like video games. A wonderful way to connect kids into the stock market saying, “Hey, did you realize that Call of Duty or Hearthstone or whatever you’re playing, that you could actually own some stock in the company that does that? So, if the stock does well, the games, you could almost view as free. Like, your next Call of Duty, if you’ve made more than $49 in your stock, son or daughter, in a way, we’ve already paid for that. You can pay yourself when you own stock in companies that you buy from.”
So, Activision Blizzard is, in fact, company No. 2. These are always alphabetical, by the way. 3M to Activision Blizzard. First bought this stock, recommended this one in Stock Advisor, it was August of 2002. The price per share back then was $3.16 looking backwards, split-adjusted. Today, the stock is at $75. So, it’s been a pretty awesome investment.
But, here’s one of my proudest moments in Stock Advisor history. Six months later, in February 2003, the stock had declined about 40% in value. It was a tough late 2002 for Activision Blizzard. The stock had dropped from $3.16 to $1.62. Re-recommend it. So, that up to $75 looks really sweet. I know a lot of Stock Advisor members are listening right now. A lot of us own and have owned Activision Blizzard. It’s been a wonderful out-performer, almost by any measure: one, three, five, 15-year period.
Matt Argersinger and all of my fellow Fools at home, what is the market cap of ATVI on the NASDAQ, Activision Blizzard?
Argersinger: If I don’t get this — because, this was actually one of the first stocks I bought when I joined The Fool, it was early 2008, joined the Stock Advisor team, this was one of my first stocks.
Gardner: That’s awesome.
Argersinger: I’m going to say $65 billion on the market cap.
Gardner: Yep! In fact, $58 billion, so a little high, but I mean, we’re not picking nits here at all. That was very tight. The band of success for everyone playing at home was anywhere from $46-70 billion. If you were anywhere within that band, you nailed it, give yourself a plus one. You’re on base, to stick with our baseball analogy, even though we’re playing a hockey intermissions framework this time. You’re on base. Matt, you’re batting 500 right now, one of two to start.
Let’s go to company No. 3. This one’s pretty easy. Matt, have you ever been Tasered?
Argersinger: [laughs] Fortunately, I have not been Tasered.
Gardner: Do you remember feeling pain somewhat akin to what you might imagine Tasering felt like at any point in your life that you’d like to share here on this podcast?
Argersinger: Sure. I was actually electrocuted once. I imagine that’s probably close.
Gardner: That sounds worse.
Argersinger: It was — well, I don’t know if it was worse, but I remember it happening. I blacked out for about ten seconds.
Gardner: Oh my golly.
Argersinger: I was lucky in the sense that I wasn’t attached to anything, I was able to fall away. The feeling afterward, for hours, it was almost, when you have vertigo, that feeling. I felt that for several hours.
Gardner: Was your hair singed or anything? Did you smell a burnt smell for two hours?
Argersinger: No. It was kind of my hands, I had some redness, but no burning of any kind.
Gardner: May I ask how you did electrocute yourself?
Argersinger: [laughs] Sure. We were doing one of our house renovations. It was silly on my part. The electrician had been there during the day, had done some electrical work. He left the box a little bit open. When you’re doing electrical work, you take the frame off the box. That’s when all the electrical nodes are exposed. And that’s when you want to stay clear from the electrical box. But, I was sweeping up, and I happened to see some debris on top of the electrical box, and I went to wipe it off, stupidly, with my hand, and …
Gardner: Zapped, wow.
Argersinger: Zzzzmm, the sound, and a little bit of a light, and that’s all I can remember. [laughs]
Gardner: So, you definitely have been basically Tasered, it sounds like. [laughs] Maybe worse. I definitely, as a little kid, had a habit of, for some silly reason, pushing my hand or finger into a plug, outlet on the wall and getting zinged. Maybe we’ve all had that experience once or twice. It’s not like I liked it. I certainly wasn’t addicted to doing so. But, I think I did it probably five or six times. It’s probably stunted my growth and damaged me in all kinds of ways years and years later. That’s maybe the closest I’ve ever come to being tasered.
Taser is a company that’s been public for more than a decade. It goes by a different name today. We’re sticking with the letter A here as we hit Axon Enterprise (NASDAQ: AAXN). Axon Enterprise is the company that owns Taser. The Taser founders are still running the company, the Smith family. But these days, they’re better-known for their police body cameras. This is a stock I’ve talked about a number of times on this podcast. It’s a recent rerecommendation in Motley Fool Rule Breakers. It’s basically been rocking it.
One of the funny things to me about Axon Enterprise is, a lot of people have heard the word Taser or know what a Taser is. I always felt like more of the world knew that than really knew about this company or the stock. I always felt like it had an outsized impact and brand name, but it was a smaller company than you might have thought. Of course, the company has gotten bigger since the stock has gone very well, and they did add the police body cameras, Axon Business and evidence.com, which is the clouded video vault that police departments, when they take all this footage with the police body cameras, they store it. All that video footage is stored up in the cloud at evidence.com, and police departments subscribe to Axon Enterprise for access to that, a good business model.
It’s a really interesting company, and I’m glad we’re having a chance to ask you, whoever you are at home, and you, Matt Argersinger, what is the market cap, within 20% either way, of Axon Enterprise, ticker symbol AAXN?
Argersinger: Still small … I know they’ve had a heck of a run. I’m going to say Axon Enterprise is a $3 billion company.
Gardner: You came very close to missing. You were right on the edge there, Matt. That’s a great guess, but the math of it is, when a company like Axon, which has a market cap of $3.8 billion, when you only have 20% either way, you need to be from $3-4.6 billion. So, at $3.0 billion, you nailed it right at the minimum.
Is this a stock that you’ve ever taken a look at?
Argersinger: We have taken a look at it in our Odyssey 1 mission in Supernova. Aaron has pitched it a few times, and I’m sad to say that we, for whatever reason, didn’t have consensus on it, so we didn’t end up adding it to the portfolio. I certainly wish we had, because I feel like he pitched it a while ago.
Gardner: Now, you used the phrase “we didn’t,” but you could say, “we have not yet.”
Argersinger: That’s true. I think that’s the right way to say it.
Gardner: The team’s mind is open to it.
Gardner: Alright, good. I mean, I think it’s a great company, I definitely favor it. The Smith family have been owners that I would say are above average, but they’ve been a little controversial at different points over the years. It’s a more tightly held company. But, I have to say, take it all in all, they’ve done a great job, and their technology is really helpful for the world. I especially think police body cameras make a ton of sense in this day and age, so we continue to wish them the best.
Let’s get back to it. Company No. 4. Matt, one of the things that you may or may not know is that I keep stats on you in this game. I have retained, I have a memory of what you’ve done in the past. So, I think it makes sense for our fans and our fellow players at home to maybe occasionally bring back a stock that Matt horrendously mis-guessed.
Argersinger: [laughs] Oh, no.
Gardner: Like, he was off by 2X. It doesn’t happen very often. It happened a couple of times ago with FedEx, and then last time, last episode, I asked you, and you had FedEx right, because you learned from your mistake. This is from our very first episode together. We did this company, and you missed it by more than 2X. Matt, have you been to etsy.com (NASDAQ: ETSY) recently?
Argersinger: Oh, no!
Gardner: Just clicking in, maybe supporting some handicrafts from anywhere around the world? Somebody who’s doing something really beautiful and sharing it with people like you and me?
Argersinger: I’ve been exposed to it because my wife is … I wouldn’t say a regular, but a semi-frequent Etsy shopper. So, I see the goods.
Gardner: Awesome. The very first Market Cap Game Show ever was August 9th of 2017. In the meantime, here we are, almost a year later. Has Etsy entered your life since August of 2017? Was there maybe something under the Christmas tree for you? Is this part of how you guys roll?
Argersinger: You know, I think my wife probably gets things on Etsy, but I don’t know where they come from. They kind of just show up. So, I probably have had some exposure to Etsy goods, I’m just not aware of it.
Gardner: Awesome. I think a lot of us are familiar with Etsy. If you’re not, I would suggest that you go to etsy.com and check out their wares and buy something, because darn it, you’ll be helping support this business, which is a stock recommendation of ours. We love it when people support the businesses of stocks that we may own and recommend.
Etsy has been an excellent performer for Rule Breakers. It started off as kind of a sleepy stock. I think it went sideways, maybe dropped some. It wasn’t looking very exciting. First picked November 23rd, 2016. A year and a half later, really happy to say it’s more than doubled. This has been a very strong stock to own. Since we last played with this one together, Matt I think it’s gone up some, which might help you with your guess. I’m trying to help you out a little bit. I know our listeners at home are clearly going to get this, but Matt, you had such a problem with this last time that I’m trying to help you out just a little bit.
Everybody playing at home and Matt Argersinger, what, within 20% either way, is the market cap of Etsy, ETSY on the NASDAQ?
Argersinger: If my memory serves me, I think I went way over that first time. So, I have to go lower, but I know it’s gone up. I’m going to say, Etsy, $2 billion market cap.
Oh my gosh!
Gardner: You know, I’m going to have to keep bringing this back every few months. Not too often, because you’ll clearly get it at that point. Matt, it’s interesting, you did a good job analyzing what had happened in the past. When we played this game together with Etsy on August 9th of 2017, you said it was at $5 billion. In fact, Etsy’s market cap at the time was $1.6 billion. That’s why I said you missed it by about a 3X. Of course, with smaller numbers, these multiples aren’t quite as meaningful. But, you thought it was three times the size it was. I was thinking at the time, maybe you should buy the stock, Matt, because when you think something is that big and it’s much smaller, you can imagine it getting to that size, because you were thinking of it that way in the first place!
The good news is, Etsy’s market cap, since it was $1.6 billion in August of last year, today is that $4.0 billion. So, those playing at home, if you said anywhere from $3.2-4.8 billion, give yourself a check mark. You just got on base. Your batting average went up. For this one, Matt’s went down. Matt, you’re being shut out by Etsy in this game.
Argersinger: I can’t believe it. You’re absolutely right, I should have bought Etsy! I should have at least brought it to our Odyssey 1 team!
Gardner: Indeed, but here’s the beautiful thing about investing, and you know it as well as anybody — you still can!
Gardner: These are companies that I think are going to be around, I hope for decades. Etsy is in a really nice position, kind of a hard company to compete with in some ways, because it has that community of makers worldwide that are selling, and people who really appreciate the website. There’s a really nice confluence of buyers and sellers there. And in some ways, it’s Amazon (NASDAQ: AMZN)-proof. I’m sure Amazon has tried Amazon Handicrafts or something like that, but Etsy has that brand identity, so it makes it a little hard. Plus, it’s a smaller place to play, and Amazon needs big bets these days. So, I like Etsy, continue to like it from now going forward.
Argersinger: There’s something about the low-volume, customized product that, it’s just not big enough for Amazon to touch.
Gardner: Alright, company No. 5. Looking back over our first four, they’ve all been pretty good stock picks of ours, companies that a lot of Fools own and have done well with. This is one of my very worst picks, I’m sorry to say. Maybe a little bit of a hint, because it’s probably not that good a number or big a number these days. Matt, do you ever want a Fitbit (NYSE: FIT)?
Argersinger: I have one Fitbit. We did a competition here at The Motley Fool a couple of years ago where we were tracking steps, so I had a Fitbit with me.
Gardner: Wait. Did we purchase that for you and give it to you? Or did you just buy your own?
Argersinger: It was a group here at The Fool that purchased it for me. I was lucky there.
Gardner: Wow! We buy free stuff, Fitbits for people here?
Argersinger: Yeah! You know, it’s not very often, but … [laughs]
Gardner: Yeah, sadly, that’s what happens when you’re a small company. I will say, though, that part of the hope for Fitbit was that corporate enterprise solutions, big companies, might, in fact, buy a whole bunch and give them out to their employees, with the expectation or hope that that would make them fitter, which would help for things like health insurance and all kinds of things. We want good employees around a long time, be healthy. And that’s happened some, but not nearly enough to please Wall Street, or really to have Fitbit be a growth company. Really, the Apple Watch, I think, has put a big dent in Fitbit.
Argersinger: That’s right.
Gardner: Matt, before I ask you about the market cap of Fitbit, do you have a regular exercise regimen? You’re in very good shape. How do you stay in shape?
Argersinger: I change it up. I had a bit of a back, neck problem a couple of years ago. I had to get surgery. The advice going out of that was, I hadn’t done enough weight lifting, I hadn’t done a lot of resistance work. The past year, really, I’ve focused more on weight lifting and less on some of the more running and cardio things I was doing in the past.
Gardner: I see that you don’t have a Fitbit. I don’t think I see a Fitbit on your wrist.
Argersinger: I don’t have a Fitbit on me.
Gardner: You don’t really need that for your resistance training, do you? It’s not quite as helpful.
Argersinger: That’s true.
Gardner: OK, Rule Breaker Investor podcast listeners and players and Matt Argersinger, the market cap, 20% either way, of Fitbit? FIT is the ticker.
Argersinger: This is going to be tough, because I think it’s pretty small. The band’s going to be tight. I’m going to say $800 million market cap.
Gardner: Tough one. I mean, this was hard. I certainly wouldn’t have gotten myself. It’s a larger company then we would think. Today, it is $1.9 billion. The stock has actually perked up pretty nicely in the last few months, whether or not it should have. Call it a dead cat bounce if you will. But, it’s $1.9 billion. Everyone playing at home, if you’re within $1.5-2.3 billion, you got on base with this one. Matt, you’re batting 400 now, which is par, to mix metaphors and throw in some hockey, too. So, not bad, but you’re probably going to want to up your game here as we hit, not the second half, because we’re in the second period right now. I’m getting confused myself.
Let’s go to company No. 6. Let’s stay fit. Let’s stay within the exercise world, but let’s think, rather than about wearables, let’s think about the clothing that we’re wearing. Especially if you’re a guy, it may be hard to relate to this brand’s clothing, as much as you might have thought, until you discover that Lululemon Athletica (NASDAQ: LULU) these days is actually breaking into the men’s market. I know some Fools around HQ, guys, that have some Lulu wear. Now, of course, the yoga pants have always been very popular, especially among women. This is a company that really built its brand on yoga, and really the female market.
It’s a company that was a raging winner for some years there, then hit some questionable management decisions and some — sticking with ice — some thin ice and under-performed. But, in the last year or so, Lululemon has really perked up, I think. In fact, why think when I can Google it? … Yep! Lululemon, ticker LULU, is at all-time highs, stock trading around $124 today. I don’t think that’s a spoiler, Matt, because I doubt you know the shares outstanding of Lululemon. The stock was below $60 in the last 52 weeks, so this stock has more than doubled in the past year, and it is indeed at all-time highs.
So, my fellow Rule Breakers and Matt Argersinger, what is the market cap of Lululemon Athletica?
Argersinger: I’m going to say $12 billion.
Oh no! No!
Gardner: Ouch! Maybe I’ve made the game too hard. What really hurt about that one is, you were so close. I’m definitely pulling for you. I mean, I need to root against you a little bit to make the game tough. But, Lululemon is at $16 billion today.
Argersinger: No kidding?
Gardner: So, the band of accuracy was $13-19 billion. You said $12 billion, so, unfortunately, we need to give you a red X. Rick, could you play that buzzer just one more time?
Let that settle in, Matt. Maybe it motivates you.
Argersinger: Double emphasis!
Gardner: Alright, Matt, I’m looking over the numbers right now. You’re batting 333. Now, that’s still a pretty awesome baseball batting average. We would say it’s below par, from our earlier parlance, and I know you’re going to up your game from here. But, if you don’t, there will be an all-time record of people saying #IBeatMatt!
Argersinger: And that’d be great.
Gardner: That would be great!
Argersinger: That’s what needs to happen.
Gardner: We’re cheering all of our listeners on, as we always do on this podcast. OK, company No. 7. I love this company. I love this stock. I’ve never used its service, perhaps, I hope, for understandable reasons. Matt, perhaps you as well. Because the match.coms of the world, the Tinders, these are experiences that, I see three married men in the studio. Rick Engdahl, our producer. I’m assuming we’re not out there on Tinder. I hear about swipe left, swipe right. I see people make jokes, or in popular media, social media, or TV shows. I think I kind of understand, but I’ve never actually used the Tinder application.
That said, I have recommended match.com’s stock, and I am absolutely delighted — in fact, I’m noting, first recommended April of 2016, just about two years ago. The stock back then was at $11. Today, it’s at $43. This has been an awesome investment.
What I particularly like about match.com, owning Tinder, owning about 30 or 40 dating and meet-people sites, is that they’re the clear, out-and-out leader. What I kind of love here is that I can’t really see the Pepsi to this company’s Coke. It’s the Pepsi test that I’ve talked about on this show before, when you have such a dominant leader that it’s hard to visualize who they’re competing against. Some people would say Facebook, because Facebook has been trying to go this direction, and it hurt this stock a couple of months ago. But the stock has snapped back since then. Anyway, I really like Match Group (NASDAQ: MTCH). Matt, have you ever used match.com?
Argersinger: I have not.
Gardner: I’m glad to hear that.
Argersinger: [laughs] I don’t even know which way you’re supposed to swipe. Is left good? Right good?
Gardner: I don’t know! I honestly, sadly, don’t know. It probably sounds like the guys who are running this podcast are just out of touch with what’s happening in the world, but in some ways, I think we should be!
Argersinger: [laughs] I hope so.
Gardner: Alright, so, all my dear players at home and Matt Argersinger, what is the market cap of Match Group, within 20%? Matt, I see you, your eyes are closed, you’re shaking your head back and forth. You have sort of a sour smile, like you’re going for it, but you’re not highly confident.
Argersinger: I have no confidence in this, but for some reason, I want to say $8 billion?
Oh, no! [laughs] Crushing, crushing!
Gardner: [laughs] Again, pretty close!
Gardner: This is kind of a small to mid-cap company these days, depending on what yardsticks we’re using. Match Group is $12 billion. Players at home, if you picked anywhere from $10-14 billion. Matt picked $8 billion — close but no cigar. Yep, Match Group has out-performed $8 billion. It’s now $12 billion.
This is a company that’s been multiplying. I think it’s in a great position to continue to profit and prosper, doing an important thing in this world that certainly brings a lot of people together. We often hear that meeting one’s spouse online is among the top five ways to meet these days. That was certainly not true back in our day, Matt. I know you’re significantly younger than I am, but I still don’t think that many people were getting married off of websites.
Argersinger: Certainly not.
Gardner: Alright, company No. 8. Matt, I kind of feel like this is a softball for you.
Argersinger: Oh, no. [laughs]
Gardner: And if it is, it’s well-timed, because I think you definitely need a little help —
Argersinger: I could use one.
Gardner: — this particular month. This is a company I’m pretty sure you have in your Odyssey portfolio, you might have in your personal portfolio. I’m not looking right now. The ticker symbol is MELI, as we continue down the A to Z, alphabetical approach that this game show takes. The company is MercadoLibre (NASDAQ: MELI).
This is the dominant e-commerce player overspanning Latin America and even some Spanish-speaking peoples outside of just Latin America itself. It’s a company that has a brilliant leader in Marcos Galperin. In fact, I think he was maybe Stanford Business School. He was going to business school here in the U.S., but returning to South America and starting MercadoLibre upon graduation. I think he was one of those entrepreneurs who was creating the website while he was still in b-school. This is some time ago, now, but MercadoLibre has become a real leader and a great stock in a lot of Rule Breaker portfolios.
Matt Argersinger and players at home, what is the market cap, within 20%, of MercadoLibre?
Argersinger: OK, I feel good about this. I’m going to say $13 billion.
Gardner: You perfectly nailed it. Are you kidding me? That’s exactly what it is!
Gardner: Now, for those who aren’t quite as knowledgeable about this company or as awesome as Matt, if you guessed anywhere from $10-16 billion, you were within our 20% band, give yourself a big, green check mark. As much as you and I might like this company, Matt, do you own it in your own personal portfolio?
Argersinger: I do.
Gardner: Have you ever actually used the website in any way, shape or form? I never have.
Argersinger: I’ve been to the website. What’s interesting, listeners might not know this — it was owned by eBay (NASDAQ: EBAY) at one point, and then, eBay owned a partial stake in it. But for a long time, if you did eBay Latin America, it would send you right to MercadoLibre. So, I looked at that for many years, comparing it to eBay, and seeing if there were changes and differences. But, no, personally, I’ve been to the website, but of course I have not ordered anything from it.
Gardner: Matt, this is one of the companies, probably, it’s fair to say you know better than some others on this list. Give us a thought or two about MercadoLibre.
Argersinger: Sure. MercadoLibre, because of where it operates, in countries like Brazil, Argentina, and Venezuela is probably the poster child, we’re talking from fairly volatile economies —
Gardner: Yeah, some horrifically bad economies.
Argersinger: Right, and some very volatile currencies. What’s remarkable about MercadoLibre is that the business itself, even though the revenue has been volatile — because they report the revenue in dollars and they’re collecting revenue in Mexican pesos, Argentine pesos, Brazilian Reals — if you look at some of the non-currency metrics like items sold or payment transactions, things like that, all of the volume metrics, it’s growing by 40-50% per year. The business itself is doing well, it just happens to be operating in a part of the world that is fairly volatile.
Gardner: When we first recommended it in Rule Breakers, which was February of 2009, since rerecommended in 2012, 2014, and 2017, but, that’s been true of that area of the world all the way through that nine-year period. I’m really happy to say it’s up 21X in value. For those who had the vision and confidence to buy along with us in Rule Breakers in February 2009, and, just as importantly, who managed to hold all the way through a lot of volatility, some bad earnings reports, some big drops in MELI over the years, but MELI, MercadoLibre, has been a real, true, blue Rule Breaker, often a starter stock for that service. Matt, I’m glad to know you have it in your portfolio. Pretty awesome. And you were pretty awesome. You nailed the market cap. Right on!
Alright, two more. Let’s see if you can up it. Am I right? Are you three for eight?
Argersinger: I think I’m three for eight.
Gardner: 375, alright.
Argersinger: I have a chance to get to 500, which is great. A small chance.
Gardner: You do! Now, I always come up with this list ahead of time, I never share with you, I don’t know what the story arc of the show is going to be. But, at this point, I almost feel bad for including the next one.
Argersinger: [laughs] Oh no!
Gardner: The next one, I went back into our annals and I found another one that you blew pretty badly some time ago. The question will be, again, will Matt have learned from that mistake? Now, he has learned from his mistakes before. He corrected FedEx. Subsequent to an initial episode recently, he had a tough time today with Etsy, but that was kind of a hard one, a smaller number. We’ll see how you do with NASDAQ. NASDAQ is company No. 9.
Now, a lot of people, of course, know about NASDAQ. Some of the companies we talked about, like Etsy, are on the NASDAQ. But fewer people may realize that NASDAQ is itself a public company. You can own shares in the company that has all the NASDAQ stocks! These days, NASDAQ is a company that not only has a female CEO, Adena Friedman, who is a very talented, and a new hand, mostly, at that company, and very promising, it’s been a good start for her. But, this is a company that takes its NASDAQ market technology and really licenses it to many other smaller stock markets around the world. It’s like a service business, a significant part of their business — in addition, of course, to getting paid for listings of IPOs, etc., lots of ways, the data, all that NASDAQ data. They make money lots of different ways.
Matt, players at home, what is the market cap of NASDAQ, ticker symbol NDAQ?
Argersinger: I think this is a situation where I went way over again, so I’m going to aim low, but maybe not too low. I’m going to say, for NASDAQ, $20 billion.
Ugh! The thumb is down.
Gardner: You know, part of this game is it’s a numbers game, so I have to be a stickler, just like Mrs. Swanson was in your fifth-grade algebra.
Argersinger: Oh, yeah.
Gardner: You were taking algebra in 5th grade, Matt? That’s awesome!
Argersinger: No. No, definitely not. [laughs]
Gardner: [laughs] I mean, we have to stick by the numbers. NASDAQ’s market cap is $16 billion. If you were from $13-19 billion … you just, you said $20 billion. Give yourself a gold star this time if you got that. Matt missed it. Matt, you’re three for nine right now. You’re definitely going to still finish above the Mendoza Line, for baseball fans out there, no matter what happens on the next one. But I kind of feel bad that I decided to make the ninth one one that you’d had trouble with before. I’m going to predict that, in any future Market Cap Game Shows, you nail Etsy and NASDAQ every single time from here on out.
Argersinger: I’m writing them down. That’s going to be my homework every day for the next three months, just in case.
Gardner: [laughs] There we go! You don’t strike me as somebody who’s tattoo-clad as a person, Matt, but maybe I’ll see a little Etsy tattoo or something on you.
Argersinger: Every morning, I’ll wake up and just check the market caps.
Gardner: [laughs] Maybe buy the stock! Then you’ll really start caring, like MercadoLibre! Why not? And NASDAQ, too, has been a good performer. Anyway.
Alright, that brings us to the tenth and final company of this Market Cap Game Show, episode dated June 13th, 2018. Matt, this one was the biggest mover in the Supernova universe today. So, if you were paying attention, which we don’t always, day to day, to the market here at The Motley Fool — a company once known as Restoration Hardware, whose ticker symbol is now its company name, RH (NYSE: RH), because the founder decided to just take it from Restoration Hardware down to RH. RH is technically the company name.
This is a company up about 33% or so today. I’m going to stall and let you think about it a little bit, because before I ask you what the market cap of RH is, the former Restoration Hardware, these days, upscale furniture. Typically, what they’re doing is, they’re finding an old train station in a big American city — I’ll just make this up, this is not true, but, Chicago — and they’ll buy that, and then they’ll just outfit it with all of their wares, and create a gorgeous retail space that looks really expensive. And, as a shareholder, you’re kind of hoping a lot of foot traffic’s going through those places, because it’s expensive to do.
It’s a stock that’s been very volatile. It lost more than half of its value in the first couple of years that we owned it. But then, the CEO took a big risk. He decided to borrow a huge amount of money and buy back about half of the shares of the company, in one of the most radical financial engineering moves I can think in recent memory. And ever since he did that, when the company’s earnings improved and the business came back, earnings per share numbers, when there’s only half as many shares, started to go off the charts. These days, with this 33% move today or so, RH is now a positive performer for us, and just about dead-even with the market. Really an interesting company to follow. Many listeners may have some experience with Restoration Hardware in the past.
Matt and everybody playing at home, what is the market cap of RH?
Argersinger: I’m going to say $3 billion, David.
Yes! Alright! [laughs]
Gardner: You know, we have said in the past, when we used to use a golf metaphor, that par was four. Matt, batting 400 is how you finished out this particular —
Argersinger: I’m a Hall of Famer if I’m batting 400! [laughs]
Gardner: There was a lot of pressure on that last one, and that’s not an easy call to make at all. Restoration Hardware, RH, is one of those companies that’s been around for a few decades. A lot of people recognize the brand name. So, for it to be worth about $3.5 billion, today it’s $3.4 billion, so anybody who said from $2.7-4.1 billion, give yourself a green check mark and a gold star to finish, because you got it right.
This is an interesting company. I would say a lot of people know the brand name, or know of it, but may not realize that it’s a public company, and might be surprised that it’s smaller than you might have thought it was, given how long this company has been around.
Matt, we’re at the end of our time together. Any final thoughts here on this episode of The Market Cap Game Show?
Argersinger: Other than studying NASDAQ and Etsy and buying them, most likely, for my personal account, no, that’s about it. [laughs]
Gardner: Well, thanks, once again, to my good friend and fun playmate, Matt Argersinger, who always brings his best to the show, and has always done at least average, often better. This time, Matt, not the best month for you, but I think you’ve already made some commitments. And I think the reality of it is that the Matt Argersinger who walked into the studio is inferior to the Matt Argersinger who’s sitting in front of me right now, who will be walking out of the studio with a much-improved life going forward.
Argersinger: That’s right. And motivated by, I know, the #IBeatMatts that I’m going to be seeing over the next week.
Gardner: Indeed. Remember, dear listeners, #IBeatMatt, #ILostToMatt, #ITiedMatt. We’ll see you on Twitter. I should also just mention that if you haven’t already, I hope you’ll subscribe to Rule Breaker Investing on iTunes or Spotify or Google Play, wherever you find us. You can follow us on Twitter @RBIPodcast, of course. You can follow me on Twitter, if you like. I’m @DavidGFool. Matt, who are you on Twitter?
Gardner: Finally, we all hope, together with my talented producer, Rick Engdahl, who makes this fun episode with extra sound effects happen every three months or so, we all hope that you’ll give us a review. Drop us a review on iTunes, throw us some stars, let us know how we’re doing. We read every comment. In the meantime, may all your market caps rise, and may you get to know them better as you age. Fool on!
As always, people on this program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. Learn more about Rule Breaker Investing at rbi.fool.com.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Gardner owns shares of Activision Blizzard, Amazon, Apple, FB, FDX, Match Group, and MercadoLibre. Matthew Argersinger owns shares of Activision Blizzard, Amazon, MercadoLibre, and TWTR and has the following options: short September 2018 $55 puts on Axon Enterprise and long January 2019 $15 calls on TWTR. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Apple, Axon Enterprise, FB, Fitbit, MercadoLibre, and TWTR. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends 3M, eBay, Etsy, FDX, Lululemon Athletica, Match Group, and RH. The Motley Fool has a disclosure policy.