At The Motley Fool, we may be buy-and-hold, long-term investors, but before we can hold a stock, we have to pick the stock, so our analysts are always on the hunt for excellent investment ideas. And every week, some businesses stand out from the crowd more than others, which is why every
episode ends with a segment in which host Chris Hill asks his guests -- this time, Motley Fool senior analysts Ron Gross, Matt Argersinger, and Jason Moser -- which companies they have their eyes on this week, and why. Motley Fool Money
For this episode, they're focused on children's apparel leader
Carter's (NYSE: CRI) , animal health specialist Zoetis (NYSE: ZTS) , and the top video streamer in China, iQiYi (NASDAQ: IQ) .
A full transcript follows the video.
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This video was recorded on Nov. 2, 2018.
Chris Hill: We're going to get to the stocks on our radar. Our man behind the glass, Steve Broido, is going to hit you with a question. But also with Steve Broido on the other side of the glass, visiting this week all the way from New Zealand, Denver Steele, one of our listeners and members down at Motley Fool Australia.
Ron Gross, you're up first. Steve's going to hit you with a question. What are you looking at this week?
Ron Gross: I've got a recent Total Income recommendation, Carter's, CRI. Dominant children's apparel retailer in the U.S., with 18% market share. They've had really strong financial performance across multiple market cycles. But let's be clear. They did have some weakness relatively recently. Toys R Us and the Bon-Ton bankruptcies played around with them a little bit. Some weather hurt them as well. So you have an opportunity to get in at a good price. The stock is trading at only 16 times earnings. Steadily growing dividend, currently at a 1.8% yield. They buy stock back. They continually raise that dividend. I think you'll do well.
Hill: Steve, you've got children. Question for Ron about Carter's?
Steve Broido: How important is the process of sales? Like, "There's a big sale going on at Carter's." It seems like with clothing retailers, everything is about everything being on sale all the time.
Gross: Yeah, the promotional is very difficult for them. They use it to clear out inventory often. If you're in the wrong place with inventory, that ends up being trouble for your margins. You want to be able to sell as much full-priced apparel as you possibly can. But often, it's not the case, and they need to clear it out.
Hill: Jason Moser, what are you looking at this week?
Jason Moser: Over the past three weeks, I got two postcards from our veterinarian as reminders that it's time for me to bring in two of our three dogs for their annual checkups, shots, tests, yada yada yada. Now, Chris, this reminded me that I spend a lot of money on those animals every year. Now, I'm not complaining about it. I love them very much!
Hill: [laughs] Really? Because it sounds a little bit like you're complaining.
Moser: Let's go ahead and profit from the money that I'm spending, right? My radar stock is Zoetis, ZTS. If you remember, they were spun out of the Pfizer Company a few years back. Zoetis develops veterinary vaccines and medicines for food animals as well as companion animals. The space itself is a massive market opportunity, globally estimated in the neighborhood of $30 billion or more. Zoetis' scale and reputation in the field for excellence gives them a very loyal customer base. Also, they do plow a lot of money in annually in research and development to help develop new vaccines and medications for animals. All in all, I love what they're doing. They just reported a great quarter. I own shares personally. I probably will add to that position at some point.
Hill: Steve, question about Zoetis?
Broido: We have two cats. How many cats is too many cats?
Hill: Matt Argersinger, what are you looking at this week?
Matt Argersinger: A company I've discussed before, iQiyi, IQ. This is the leading streaming company in China. This stock has round tripped from an $18 IPO price in the spring all the way to $46, and now back to about $20 today. I think it looks pretty good to me. The company reported results this week. Paying members hit almost 90 million last quarter. That's up 89% year over year. Let me repeat that. Up 89% year over year. That's great, because membership revenue, which is the key part of the business now, up 78%, growing much faster than the growth in content costs. As long as those trends continue, this is going to be a much larger and much more profitable company in the future.
Hill: Steve, question about iQiyi?
Broido: Does the current political environment worry you with this company? We hear a lot about China from our president.
Argersinger: Yes, we do. I think the headline risks about the trade war and the tariffs, iQiyi, like lot of these companies, is really 95% domestic China. It has nothing to do or offer in terms of trade or transactions between the U.S. and China. The headlines created all this tension and caused these companies' valuations to drop. They look pretty good to me.
Hill: Three stocks. Do you have one you want to add to your radar?
Broido: I think I'm going to Jason Moser on this one.
Moser: All right!
Hill: You're not put off by his anti-cat comment at all?
Moser: Listen, I was just going to say, lest I reel in emails from our listeners calling me a cat hater, I am nothing, nothing of a cat hater --
Gross: What was the phrase you used? "Food animals"?
Moser: Would you prefer I say "livestock," Ron? I like cats just fine. We just don't have any in our house, that's all.
Chris Hill has no position in any of the stocks mentioned. Jason Moser owns shares of Zoetis. Matthew Argersinger owns shares of iQiyi. Ron Gross has no position in any of the stocks mentioned. Steve Broido has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Carter's. The Motley Fool recommends iQiyi. The Motley Fool has a disclosure policy .