In this segment of the Motley Fool Money podcast, host Chris Hill asks senior Motley Fool analysts Matt Argersinger, David Kretzmann, and Aaron Bush to tell us about the companies they have their eyes on this week and why.
Their picks this week go around the globe: Kush Bottles (NASDAQOTH: KSHB), a supplier to the cannabis dispensary market; French video game maker Ubisoft (NASDAQOTH: UBSFF), and Chinese e-commerce giant JD.com (NASDAQ: JD).
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A full transcript follows the video.
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This video was recorded on July 27, 2018.
Chris Hill: Let’s get to the stocks on our radar, and Steve will hit you with a question. David Kretzmann, you’re up first. What are you looking at this week?
David Kretzmann: Steve, are you ready for this? I’m going with Kush Bottles, ticker KSHB. They’re aiming to be the go-to supplier for the cannabis industry — everything from containers, packaging, branding services, vaporizers, and much, much more. There are 12 facilities here in the U.S.
They’re already serving more than 5,000 clients in every major U.S. market where cannabis is legal. They still have two co-founders with the company, including one who’s remained as CEO, Nick Kovacevich. Those two co-founders still own about 30% of the company, so you have some skin in the game there.
Hill: Steve, question about Kush Bottles?
Steve Broido: How important are accessories in the cannabis industry? Is this that big of an industry when you’re buying cannabis, accessories?
Kretzmann: They’re mainly a business-to-business supplier. They’re supplying products to dispensaries. Things like containers and packaging, that’s their main business. The vaporizers, which are more used by the end consumers, those are important, as far as I know. I’m not a user myself, so I can’t speak from direct experience.
Hill: Aaron Bush, what are you looking at?
Aaron Bush: I’m looking at Ubisoft, ticker UBSFY. This is a French video game company behind big franchises like Assassin’s Creed, Far Cry, Tom Clancy games. Just like pretty much every video game publisher out there, there’s a huge runway for new games, new gamers, mobile, digital, licensing, e-sports. There are a lot of tailwinds there.
But, I’m also feeling deja vu, because they recently made a deal that is eerily similar to what Activision made a few years ago. Vivendi, which owned over a quarter of their shares, they recently came to an agreement where Vivendi is going to sell its entire stake. The founders are going to buy more. There’s going to be a big share repurchase. And, Tencent is coming in and buying up part of Ubisoft to help them expand into China and grow their mobile presence.
There’s a lot to like here. The stock isn’t cheap, but they’re smaller than other top publishers, and I think it could be an interesting investment.
Hill: Steve, question about Ubisoft?
Broido: In five years, what will be the biggest platform that Ubisoft is on?
Bush: I would still guess probably PS4. Or Xbox, but probably PlayStation.
Hill: Matt Argersinger, what are you looking at?
Matt Argersinger: Going with JD.com, ticker JD. It’s one I’ve spoken about before. It’s China second largest e-commerce company, but largest overall retailer. You look at revenue growth, over 40%. It has China’s largest shipping and logistics network. It has partnerships with companies like Tencent, Walmart, Alphabet. And, you can buy shares for less than 1X revenue. I still don’t know what I’m missing about this business. I’m missing something, obviously, but it looks like an incredible bargain to me.
Hill: [laughs] Steve, question about JD.com?
Broido: Does the news that we’re hearing politically about China concern you, in regards to this company?
Argersinger: Not so much for JD. 90% of JD’s business, if not more, is in B2C retail in China. Nothing in terms of import, export, U.S. relationship, should get in the way of that.
Hill: Ubisoft, Kush Bottles, JD.com. Do you have a stock you want to add to your watchlist, Steve?
Broido: I think I might go video games.
Bush: That’s my first win! I’ll take it! [laughs]
Hill: Can I just say, I love the names of this week’s radar stocks? If you told me, “I have this new company, it’s called Ubisoft. It’s a video game company.” It might as well be baby products or something like that. Kush Bottles? I mean, because it was you pitching it, I figured it had something to do with the cannabis industry. But, I don’t know, Kush Bottles could be a new acquisition for Coca-Cola.
Kretzmann: Just call me Kush Kretz.
Bush: What?! [laughs] No! Never!
Hill: I don’t think I will, and I don’t think anybody else will.
Kretzmann: Alright, scratch that.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Aaron Bush owns shares of Activision Blizzard, Alphabet (C shares), JD.com, and Tencent Holdings. Chris Hill has no position in any of the stocks mentioned. David Kretzmann owns shares of Activision Blizzard, Alphabet (C shares), JD.com, and KUSH BOTTLES INC. Matthew Argersinger owns shares of Activision Blizzard, Alphabet (C shares), and JD.com and has the following options: long January 2020 $50 calls on JD.com and short January 2020 $50 puts on JD.com. Steve Broido owns shares of Activision Blizzard, Alphabet (A shares), Alphabet (C shares), and Tencent Holdings. The Motley Fool owns shares of and recommends Activision Blizzard, Alphabet (A shares), Alphabet (C shares), JD.com, and Tencent Holdings. The Motley Fool recommends Vivendi SA. The Motley Fool has a disclosure policy.
