Motley Fool Hidden Gems Investing - Apple, Facebook, and Legendary IPOs

Episode Date: January 30, 2015

Apple and Google rise on earnings.  Facebook slips.  McDonald's gets a new big cheese. And one company announces a legendary IPO.  Our analysts discuss those stories and share some time-tested rules for investors.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week from Million Dollar Portfolio, Jason Moser. From Motley Fool Income Investor, James Early. and from Motley Fool Deep Value, Mr. Ron Gross. Good to see you as always, gentlemen. Good to see you, Chris. How are you doing? We've got the latest from tech, industrials, retail, and more. We've got a business going public that you will not believe. And as always, we'll give you an inside look at the stocks

on our radar. But guys, earnings season is in full swing, so let's start with the biggest public company out there. Shares of Apple up this week after setting a world record for quarterly profits. Fourth quarter sales, Jason, came in at $75 billion with a cool profit of $18 billion. I guess the iPhone 6, kind of a hit. Not too shabby. I mean, it seems like it was relatively well-received. I contributed to that, okay? I got an iPhone 6, and I actually really like it. I think it's a great product. But I think these results do sort of beg the question here, how is Apple really going to pursue this in the future? Because this is becoming more and more just the iPhone company,

right? I mean, we're seeing sales on the iPad dwindling, and we're seeing Macs, while they continue to pick up a little bit of share. It's really not going to be a big driver of revenue for the company, I don't see, for the foreseeable future. So, it's figuring out how to really monetize this phone and any iterations beyond this phone. And I think the one point that I look at with the phone that I think a real differentiator here with this iPhone 6 is Apple Pay. I think that that is something that, in time, will prove out to be a very valuable part of this sort of phone ecosystem that they've developed. And they've got a lot of activity going here with Apple Pay right now. I mean, Whole Foods Market,

for example, mobile payments are up 400% thanks to Apple Pay. The biggest challenge they have right now is rolling this out to more and more retailers. But I think they can do it. They've got the banks on board. They've got the card issuers on board. They've got the cash. They've got the cash. They get a little scrape from every transaction. So, I think that down the line, I think this is going to be something that will become a meaningful driver to the bottom line for Apple, because it really is high-margin dollars. It's becoming more and more of a phone company now.

Yeah, I think Jason's point is actually smarter than he'd think, actually. I mean, not that he thinks it's a bad point, but if you look at what is the iPhone 6, and like everybody else, I reflexively went out and bought one, right? Did you guys wait for your upgrade cycle, or you just went and paid full price? We waited for the upgrade cycle. I was on 4S before I got the 6. I don't keep track of that. It was a long change. Money bags over here doesn't keep track of that.

What is the iPhone 6, right? It's just a big iPhone 5. Then you get an even bigger one, the 6 Plus. That's not that innovative. Yeah, maybe it's a reason to buy, but they need to do more things like Apple Pay. Apple Pay is actually something different. They need more of those actually something different things to actually drive their future. Around the table quick.

iWatch, boom or bust? Chris? I'm going bust if that's my choice. Yeah, I'm going bust. Mediocre. Boom. Jason, one final point before we move on. Revenue in China for Apple grew by 70%. What is that going to do for their numbers over the next year if they're growing revenue by that

percentage on such a small store base? There is a consumer class in China that has the ability to buy these new devices really at will without having to worry about sort of upgrade cycles or whatever. And so, we saw, obviously, the bigger screens and more memory mixed in with an Apple product really played in to a large part of the consumer class in China. And that's why you saw unit sales more than doubled. You saw revenue up 70% in China. So, I think that's certainly proof that the Apple brand holds sway there. And as long as they can keep coming to the market with something that's different, something that's new, and something that is exciting, then they should continue to perform well there.

$4.7 billion in quarterly profit may sound like a lot, guys, but when you Google, apparently, it's just not enough. Ron, fourth quarter revenue and profits come in lower than expected, and yet the stock was up on Friday after this quarterly report. What's going on here? The report was a little bit more of the same. You had a decrease in cost per clicks. You had an increase in the number of clicks. The transition to mobile is a big conversation. What we saw here, I think, really for the first time was the CFO trying to calm people down with respect to Larry Page investing in his moonshots, quote, and all the side projects like self-driving cars and everything else. We heard, I should say, on the conference call things like we're going to balance growth and discipline. We're going to spend in a, quote, prudent manner.

So, we saw the CFO kind of saying, Google, obviously, we are what we are, and we have all our side projects, but we're not reckless here. We're going to be prudent. And that, I think, reversed the stock when we saw that the quarter was kind of just more of the same. Do you think that's a little bit of a mixed message, where you have Larry Page on the one hand saying, this is the vision, and we're going to use the money that we're making off of search to fund all of these quote-unquote moonshots, but then you've got the CFO almost off to the side saying, no, no, no, don't worry, we're going to be responsible stewards of the money. It's a mixed message to me. The market

liked it. Perhaps the CFO was also speaking about just regular operating expenses, 2,000 new employees for the quarter. Maybe we'll see some prudence with respect for operating expenses like that. But the side projects, I don't see Larry Page really pulling back on that. He's got a vision for the future. He's going to keep throwing irons in the fire to try to hit the next big thing, to really change the world, I don't see that slowing down. Shares of McDonald's up this week, not on earnings, but on the news that Don Thompson is out as CEO after two and a half years. He's being replaced by Steve Easterbrook, Senior Vice President and Chief Brand Officer. James, I don't think there was anyone who

looked at McDonald's over the last 12 months and thought that this was a business that was really doing all that well. I was still a little surprised that Thompson was shown the door after two and a half years, but I was even more surprised that they're not going outside the company to get a new leader. That is interesting. By the way, I should say, we sold McDonald's from my income investor service not long ago, before this happened, but that's my opinion on the stock, frankly. Yeah, it is surprising that they did not go outside, because in a way, that's what they need. But McDonald's, I think, is emblematic of a game theory question that

It plagues many of these sort of like former monolith companies that are now starting to decline, like a JCPenney's or maybe a Circuit City. What do you do? Do you try to chase the growth, chase innovation in the short term, which is the temptation, or do you just shrink gracefully and serve your core market, you know, just be a greasy spoon for grease lovers? I mean, that's what McDonald's is kind of known for, right? And they have a strong brand, strong business in that respect. Usually what we see is companies just spin, spin, spin, trying to chase that growth because that's where the motivation lies.

I'm not so sure that's McDonald's' best bet. They're really suffering five consecutive quarters in same-store sales drops and visits from the 19- to 22-year-old demographic are down 13% over two years. The younger people are just not going to McDonald's. I think that really shows you how difficult it is to change what your brand communicates. For so long, they've been successful because their brain communicated value. But we're in a day and age now where the priority is less on value and more on quality. And they're going to, I think, continue to face headwinds in trying to convince anyone of us here, at least at the table, that they're all about quality and not about value. And they're trying to add new menu items that are more customizable.

But the problem is that messes up their whole food flow. The kitchen slows down. They have to stop and make this other thing. And they're just not set up for that. They've got this fine-tuned system to put out the fries and burgers, basically. So trying to mix something else in, it just really slows it down. Eli Whitney would be proud. I don't know how they turn this around, James, because I suppose it's easy to sort of look at McDonald's and just with one blanket statement say, well, people are eating healthier.

People like greasy burgers. Just look at the sales of any burger chain. Just look at, by the way, Wendy's stock over the last 12 months. It's doing great. There are better greasy burgers. I think that's your point. It was a rough holiday for some retailers, but Amazon was not one of them. Fourth quarter profits came in higher than expected, and the stock was up more than 10% on Friday. And Jason, a very different quarter than we saw three months ago when they had posted

their worst loss in 14 years. Yeah, it was. For as great of a quarter as this was, it really is kind of a lot of the same stuff with Amazon. Top-line revenues grew at a phenomenal rate. They did end up bringing some of that down to the bottom line this quarter, as opposed to some others. But there were two things that really stood out for me here in this quarter that I think investors ought to be really encouraged by. No. 1, they talked about Prime memberships and really the growth that they have witnessed in Prime memberships over this past year. The language that they used in that release, they said, off of a base of tens of millions

of Prime members, we grew Prime memberships by 53% globally paid memberships. That would imply that they have somewhere in the neighborhood, if you're thinking tens of millions, maybe that's 20 million, and they're growing 53%. Now, maybe they have more than 30 million Prime members. There's some estimates out there that that number is even upwards of 40 million and beyond. But, interesting to note that this came in the face of a price increase, where a lot of questions were posed as to whether they would be able to retain members. I think the question at least has been answered, that the price increase really didn't scare people away. It kind of reminds me a little bit of Costco back in the day

when they did the same thing. But it also shows you, really, the power of that membership model, because Prime members do spend more. The other thing that I think is really interesting that I'm excited about here, they will start breaking out Amazon Web Services as their own separate results in every quarter from here on out. And so, what that tells us is, No. 1, Amazon Web Services is relevant to business as we thought it would. It's going to bring in somewhere in the neighborhood of about $5 billion to $6 billion, or brought in between $5 billion and $6 billion this past year. But it is something that they continue to sink a lot of money into, and it looks like that investment is paying off.

Jason, as we saw with Google, where they're trying to calm down investors' fear about spending, are we seeing anything about that in Amazon? They're notorious to say, listen, we're spending. You know, I think we see that quarter in and quarter out with Google and Amazon. And like we were talking about before, you have to tell investors that this is what you're going to get with these companies. If you don't like it, then just move on. Don't invest in them. But if you're going to invest in them and then start complaining, but just shut up, all right? Don't invest in them if you can't deal with that longer term outlook.

Someone's got some vitriol today. Right, but that's where Google, the mixed message comment you made earlier is interesting, because they're trying to do both. Amazon makes no kind of bones about it. I'll say, it did seem like Google was pandering a little bit, whereas Amazon, they just don't do that. You're right. Well, at least if you're going to pander, make sure it works. In the case of Google's stock price, it appeared to have worked. Coming up, a future IPO that is the stuff of legend. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, James Early, and Ron Gross. Guys, it is not just retailers offering deals during the holidays to generate traffic and sales. Microsoft cut prices in its Xbox and Windows businesses, and it kind of looks like it hurt the bottom line, Ron. Second quarter profit came in lower than a year ago. Stock down more than 12% this week. Yikes. Yeah, a little bit disappointing. What we're seeing is a good transition for what Nadella has been saying. And he's had a good first year. He was on a roll. The roll seems to have gone a little bit stale. Right up until this week. But what we're seeing, right, Windows, which had been doing nicely because of that kind of

one-time upgrade cycle when they said they would stop supporting XP, that's gone. So Windows is struggling now, down 13%. But the transition of the business to the cloud continues. They're probably at a run rate now, they're saying at about $5.5 billion a year in that business, but that's only 5% or 6% of revenue. So, while it's going nicely, it's still a small percentage, and they need to do better. The big deal here is guidance was weak, especially because the strong dollar is going to hurt results. On the face of it, Facebook put up another round of strong results. Fourth quarter revenue up nearly 50%. Profits higher than expected. And yet, Jason, shares dipping a little bit this week. Why do you think Wall Street was not impressed?

Well, I think the valuation of the stock today is reflective of some very enthusiastic expectations here for the coming years. And so, they're really going to have to bring the heat quarter in and quarter out. This, you know, it was a good quarter. I mean, they have a lot of great numbers there as far as active users and the user base goes. I think interesting to note was that the average price per ad was up 335%, where actual impressions fell 65%. So, it seems that they are getting better with their ad targeting. and this is an ad play as it stands. But when you see the questions regarding WhatsApp and Instagram and Messenger and how they're going to monetize those, the party line is there,

look, we're working on connecting the world, not making money. Money is going to be a byproduct of our connecting the world. And so, this is definitely a leadership team that is taking a very long-term approach to this business, and I think investors are going to have to get used to that. But yeah, the stock is, I think, reflective of some robust expectations. Mattel was scheduled to announce fourth quarter earnings on Friday, but surprise, James, they announced on Monday, which is never really a good sign. The results were not good, and it came with the added news that chairman and CEO Brian Stockton has resigned effective immediately. This seems like a business in a little bit of trouble. Kids don't seem to play with toys anymore. They just want the iPad. They just want some video games.

Mattel has been slower than Hasbro in licensing. Licensing has been the saving grace of the toy industry, slapping some movie character's likeness on some toy. And Mattel has been behind. And even their Fisher Price division, which doesn't really do that, was down like 11% most recently. They're losing Disney to Hasbro. Barbie is suffering. The analysts predicted EPS was $0.93, and the actual result came in at $0.52. So not looking good for Mattel.

That's a big miss. And when you consider that this is coming during the holiday quarter, too. Yeah, this is their time to shine. it even worse. Shares of Caterpillar down more than 6% this week after fourth quarter profits fell 25%. That was worse than expected, Ron. And CEO Doug Oberhelman, not really optimistic about 2015. No, this is really all about commodity prices. As I'm sure everyone knows, oil prices are way down, but other commodities too, whether it's copper, coal, iron ore. And you have

companies like mining, agricultural companies, they're just not spending right now because their businesses are weak. That feeds right through to Caterpillar and other industrial companies like Deere, most probably. It reflects the bottom line. There's nothing you can really do about that, except for cut costs and stay lean until things turn. Eventually, oil prices will filter through the economy, low oil prices, and it should actually be good for the economy as a whole. But for now, that's not going to be, as the company said, in time to affect 2015 results, that those are going to be weak as well, and nobody really wants to own a stock when they come out and say, this year's going to be pretty much a bust.

How concerned should shareholders be? Because when you think about the business of Caterpillar, and when they're selling those big machines, those are huge capital expenses that businesses plan years in advance. This is not exactly a business that necessarily turns on a dime. Exactly right. So, 2015 is pretty much done, even though we're only still in the beginning stages. You have to look at 2016, maybe 2017. So, estimates have to come down, and probably valuations as well. Some on Wall Street were focused on Shake Shack, the burger chain that is the latest hot IPO. But thanks to our colleague, Alice Lomax, we here at The Motley Fool are already looking ahead to

a legendary IPO coming later in 2015. The legend is Bigfoot. The company is BPI. Bigfoot Project Investments, a Nevada-based company that will be offering stock at $0.10 a share. And not surprisingly, this is a company that is in the business of proving the existence of the legendary creature, Bigfoot. What else? I went through their SEC filing, and this is a direct quote from their risk factors, because every business has to put their risk factors. Our auditors have expressed, quote, substantial doubt that we can continue as an ongoing business for the next 12 months. Yeah, a go-in concern clause from your auditor is never a good one.

So are you going to public fleece the public investors out there? And we should also know that this isn't a traditional IPO. There's no investment banker. Officers and directors are attempting to sell the stock on their own. This is a company that is burning through cash, and buyer beware. Alright, I've got an idea. It sounds like this could be something, utilize the internet here, put together a little company, igopublic.com. If you want to go public, we'll consult. We'll help you, we'll take a little cut. I think there's something there.

All right, let's just go around the table. You have to invest in a business where the business is proving the existence of a legendary creature. It can be Bigfoot, Loch Ness Monster, Abominable Snowman, or Space Aliens. What are you going with, Ron? You've got to buy shares. I think it's almost a lock that eventually we'll find Space Aliens. The other three, not so much. James?

I go with Abominable Snowman over Bigfoot. I feel like I should do Loch Ness just for the prospect of playing golf in Scotland, but I'm going to go with Space and Aliens. Let's bring in Steve Broido from the other side of the glass. Steve, what are you buying shares of? The one Loch Ness, their photos, it's got to exist. You don't think the photos are doctored in any way? Didn't they ultrasound the lake?

They ultrasounded the whole lake one time. They didn't find anything. It's murky there, though. That's why we need the technology. Oh, your feet's too big. Don't want you because your feet's too big. Mad at you. All right, guys, we'll see you a little bit later in the show.

up next, Morgan Housel weighs in with a few rules investors should live by. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Joining me in studio is my favorite financial columnist, Morgan Housel. Thanks for being here, my friend. Thanks for having me. I want to get to some of what you've been writing about recently, But as you know, we are really getting into the thick of earnings season. You had to have seen Apple's record quarter. I want to talk a little bit about earnings season, but let's start with Apple. What, if anything, did that report tell you about Apple or the market in general?

Well, I think what's pretty fascinating about it is, you know, there is this law of large numbers, whereas something grows bigger, it should be more difficult to grow. Now that the United States economy is a $17 trillion economy, we're not going to be able to grow as fast as we used to. That's just how most things work. And it seems like Apple has completely defied that law. As it grows bigger and bigger and bigger, the growth just keeps going, just keeps on going. So the fact that a company its size can be growing like it is, is just staggering.

And it wasn't that long ago that Apple was doing $20 billion per quarter in sales. And now it's doing almost that in profits every quarter. It's just staggering what it's done. They sold 75 million iPhones. It's just, I really don't think, maybe with the exception of like Standard Oil in like the 1890s and early 1900s, I can't think of another company that has just exploded so exponentially and is just raking in the amount of money that Apple... It really is like a once-a-century kind of story.

It's just fascinating. We hear this more often with Google than we do with Apple. But at some point, I mean, if you're going to use the standard oil comparison, at some point, does Apple become so big that the U.S. government starts knocking on the door and saying, you might want to think about spinning off a division or two. You might want to think about getting a little bit smaller. That wouldn't worry me. I think what worries me with Apple, and it doesn't necessarily worry me.

I'm sure they'll have many great years ahead. But a company like that has to keep innovating constantly. It has to keep coming up with new hit, new hit. And they've done a very good job at that. They've proven that they can do that. But you compare that to a company like Coca-Cola or Colgate that makes the same product today that they did 100 years ago. Those kind of companies, you can put much more faith in and say, I'm nearly certain that Coca-Cola will be here in 30 years.

Is it feasible that Apple could be a know-nothing company in 30 years? Yeah, that's not a forecast, but they need to keep innovating year after year after year. And at some point, you hit a roadblock and some other competitor starts innovating better than you. So it's a very exciting business to be in. I think Apple has done it better than any company in history, but it's a challenging business to keep that momentum going. This week, we also saw some very large, historically successful U.S. companies, Microsoft and Caterpillar, just to name two, who not only had disappointing quarters that they reported, but they were adversely affected by the strength of the U.S. dollar. And they're not the

only ones. And I'm wondering, when you look at this, at what point does the strength of the U.S. dollar start to become a legitimate concern for investors who are buying shares of U.S. companies who are doing a lot, if not the majority of their business overseas? I think it really goes both ways. Because yes, about half of sales from the S&P 500 are done in foreign currencies. And when you convert those currencies back to the U.S. dollar, that is strengthening. That doesn't help these companies, companies like Procter & Gamble and Caterpillar that you mentioned. But the other side of that is that a strengthening dollar for the most part is good for U.S. consumers. It gives us cheaper oil, which is a huge boon for U.S. consumers right now. And some of that stimulus

to U.S. consumers is going to funnel back to companies like Microsoft and Caterpillar. So it balances out a little bit. The other thing is that a lot of these companies have their foreign currency exposure hedged. So there is some ding to earnings like we've seen with some companies that reported this week, Procter & Gamble and Microsoft. But it's not one for one. I really think in the long term, a reasonably strong dollar is a positive for the U.S. economy and U.S. stocks in general. But sure, you're going to have these issues in the short run where companies are taking a hit on their foreign exposure. But I think if you're an investor, it's really not something I would spend too much time talking about.

If you have a diversified portfolio, you own a lot of American companies and some international companies. It's not something you should be thinking much about. So you're listening to Motley Fool Money, talking with financial columnist Morgan Housel. Morgan, you do a lot of writing on fool.com. You do some writing for The Wall Street Journal. I want to touch on something you wrote recently for our Motley Fool One service, 18 Rules Every Investor Should Live By. And one of the things you start out is by talking about how financial advice is like medical advice. That's right.

How so? Well, I think that with medical advice, it's gotten so incredibly good and complicated, complex. The treatments that we have available now for complex diseases have become so sophisticated in the past 20 or 30 years. And that's great. That's a huge development and it's increased life expectancy. But if you take something like lung cancer, where there are tons of new treatments, very sophisticated treatments. But those fancy treatments will likely never be as effective at stamping out lung cancer as the advice of just don't smoke, just really simple common sense advice, just don't smoke. Or the improvements that we've made treating heart disease have been fascinating, and we've made so much progress treating heart disease, but it's unlikely that any of those treatments will ever be as effective as just diet and exercise.

So I think it's this irony, this paradox, I think, that advice that is really complicated sounds better and people are more attached to that than advice that is really simple and common sense but very effective. And I think that's true for investing, too, that there is a lot of advice in the financial world out there that sounds very sophisticated and complicated, and a lot of it is good and necessary. But I think there are some really basic rules to live by in investing that are just simple and common sense, but make all the difference in the world. And that if you follow these common sense rules, you don't need the sophisticated advice to begin with, too. So that's how it's like medical advice. It's a stretched analogy, but I ran with it anyways. Let's get to a few of the rules, have you unpack them a bit. One of the things you write is, judge investors by the quality of their arguments,

not the performance of their most recent trade. It sounds good. It also sounds hard to do, particularly when you think about how so much of Wall Street is marketed to people based on the most recent trade. Based on past returns. And it's natural, I think, for people to say, look at this mutual fund that did so well over the past five years. I want to own that mutual fund. And they just extrapolate, well, if the last five years were good. The next five years are going to be even better. And most of the time, that's not the case. There's a reversion to the mean of, you know, there's a saying that past returns aren't indicative of future returns, but statistically they are. The better the past returns for mutual

funds, the worse the future returns will likely be. And what's unfortunate about that is that a lot of investors in things like mutual funds will pile in to those funds that have done well at the top, just as they're about to turn and start underperforming the market. We've seen that time in time again with really hot mutual funds. During the dot-com bubble, when people piled into technology funds, there's a story in the past 10 years, a fund run by a great investor named Ken Huebner. He had a great, I think, 2000 to 2007, just knocked it out of the park. Then investors piled into his fund in 2007. Then over the next three, four, five years, the fund did terribly. We see that time and time again. It's just really important that

when you're judging the quality of investors. You're doing it based on, because you like the investor's style, they're trustworthy. What they're saying makes sense, not just looking at their track record and going off that. One of the rules you write is, read more books and fewer articles. I find that curious from a guy who writes articles. Right. It's a little, it's kind of going against my own profession. You're shooting yourself in the foot there. But I think there's a lot of the financial media that is an article form, daily articles, news stories and whatnot. There's a lot of great stuff out there.

I think for the most part, though, it is generally geared around daily news, what's happening today or maybe what's happening over the last week. It's very here and now and current. And I think that really truncates people's investment timeframe. It makes them think about investing in the short run when, of course, they really should be thinking about the long run. Whereas, I think books, by and large, of course there are exceptions to this, but by and large, take a much more broader, long-term, philosophical view about things and go more in-depth. So I've definitely been more influenced in thinking, and I think most investors have too, more by great books they've read than great articles they've read.

Two more rules and then we'll wrap things up. One is, you're only diversified when some of your investments perform worse than others. right? I don't want any of my investments performing worse than others. What happens is people, they don't like the portion of their portfolio that's doing bad, so they get rid of it and they put it into something that's doing well. And that's the exact opposite of what you should be doing if you want to be very diversified. You know you have a diversified portfolio if a portion of it is doing worse than the rest of it. If your entire portfolio is going up, that feels great. That's what everyone wants.

But that's pretty much the opposite of having a well-rounded portfolio. And it's hard for people to accept that because I don't like losing money on any of my portfolio either. But during the long run, though, that will pay off much more than trying to adjust your portfolio every month or every quarter and putting it into what's doing well. That's a recipe for disaster. As an investor, what makes you pull the trigger on selling an investment? Is it management? Is it something happening with the business? Is it just the thesis I had when I bought this, didn't really pan out, and now it's got to go? It's happened so infrequently, Chris, that I really don't have much to say on it. I really

don't sell many stocks. Some of that is because I'm still a ways away from retirement. I don't need to reallocate my portfolio to cash or bonds or anything. But I'm really a long-term investor. And a lot of the stocks that I own right now, I've owned for 10, 12, 15 years. All right. The final rule you write in 18 Rules Every Investor Should Live By. Every five to seven years, people forget that the market crashes every five to seven years. There's always a sense when the market has a big pullback, even a giant one like in 2008. You mean five to seven years ago? Right, exactly.

There's a sense that this means that the market is broken, that something's wrong, that this is a sign of something bigger than I need to get out because this isn't right. This isn't normal. And it is. This is what the stock market does. the reason that you're able to earn great long-term returns is because there's short-term volatility. That's the cost of admission that you have to pay. But a lot of people forget that. And I think most investors' timeframe just barely stretches back to the last crisis. So it's been

five or seven years since the 2008 crash. And I think already investors have more or less kind of forgotten about that, forgotten what it feels like. And when it happens again, they'll panic again and they won't really learn from their past mistakes. So, taking a very long-term historical view about markets, about how frequently stocks crash, is something I think is really important. One of the things our CEO, Tom Gardner, has said frequently is that the single best thing any investor can do to become a better investor is to simply double their holding period. So, if you're typically someone who hold stocks for six months before you turn them over, double that to a year, one year

to two years, et cetera, et cetera. What's one piece of advice for anyone who's looking to do that? Because as you and I have talked about before, temperament can be a really tough bear to wrestle. Oh, sure. I think there are a lot of people that want to have the majority of all of their money in stocks, because that's how they think they're going to maximize their long-term returns. And for some people, that's if you're young or you have a high net worth and you can get away with that, great. But I think with most people, if remaining calm during a bear market so that you can stay invested means that even during the bull market run, you only have 60% of your money in stocks or 50% or

70%, that will give you much greater long-term returns than having 100% of your stocks during the bull market and then being forced to sell during the bear market because you are so overexposed. That's what's dangerous. All right. Before I let you go, you get out of here this weekend. We have the Super Bowl, Seattle Seahawks against the New England Patriots. You've spent a number of years in Seattle. Do you have a prediction on the game? No. And I also, I went to USC when Pete Carroll was our football coach. So I have two affiliations with Seattle. So I feel like by default, I have to go Seattle. I really don't have a feeling either way, but I feel like that's what I'm supposed to say. Do you have a key to the game? No, I don't.

That would be cool, though. See, I know I'm going to get the key to the game from football experts. I want the key to the game from an investing expert like yourself. Flip a coin. Lastly, do you have a go-to snack when you're watching televised sports? I know you're not an enormous football fan, but I know that last year at this time, we were talking about the Winter Olympics. You're a big Winter Olympics fan.

When you're watching televised sports, I come over to your place. what can I expect in the way of snacks? You know, I'm just going to say this because we just got a bunch of snacks at the Motley Fool kitchen this morning, a bunch of new snacks, and they have Pirate's Booty. You're a fan.

If I've ever been clinically addicted to something, it might be Pirate's Booty. If you want to read more from Morgan Housel and join the Motley Fool One service, just go to discoverone.fool.com. That's discoverone, O-N-E, discoverone.fool.com. Check out all that the Motley Fool One service has to offer, including the writings of Morgan Housel. Thanks for being here.

Thanks, Chris. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, So don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, James Early, and Ron Gross. Guys, it is that time once again, time for the stocks on our radar. We'll bring in our man Steve

Broido from the other side of the glass to hit you with a question. Ron Gross, you're up first. What's on your radar this week? Steve, this is a stock we own, but it's a radar stock, and also I have some caveats, so buyer beware. Is that enough disclaimers? Modine Manufacturing, M-O-D. They're a maker of heat transfer products for trucks and cars, radiators, condensers, oil coolers. I really like the stock. I think it's about 30% undervalued. But, much like we talked about with Caterpillar earlier, they could be in some trouble when they report Wednesday. I'm waiting to see on February 4th. They might be in the same boat as Caterpillar, where people are just

not buying agricultural equipment, not buying mining equipment, and that's going to hurt their business. And if so, maybe some adjustments to valuation would be necessary. So, really look into Wednesday. Steve, a lot of caveats there. Question about Modine? If gas prices stay really, really low, I guess Modine does much better. Well, maybe, but the agriculture and mining companies will not be spending as much because they won't have the profits. These energy companies that are affected won't have the profits they used to, so they won't be able to spend so much on equipment, which

would actually be bad for Modine. Sounds like a lose-lose run. Then I mentioned it was undervalued. Before we move on to James, you made the Caterpillar comparison. Are they selling equipment as big and as expensive as what Caterpillar sells? No, but Caterpillar is a customer, so it filters through. James Early, what's on your radar this week? Peter Lynch, Chris, said to buy what you know and love.

There's also a James Early school of thought to buy what you hate and can't avoid using. So I'm going to go with Verizon this month. You know, we all have, many of us have horror stories about Verizon, but it's a solid company. There's currently a price war in the mobile phone business, and Verizon is best equipped to win that war. It has the lowest churn rate. It has the highest profitability. They actually make money, whereas Sprint, for instance, and T-Mobile are not. They're really suffering.

So Verizon also pays a 4.6% yield. It's hard to find one of those that's not some weird stock these days. So I'm going with Verizon. And the ticker symbol? VZ. Steve Broido, a question about Verizon? Who is the biggest? Is it Comcast? Is that the competitor I should be looking at? Well, AT&T is the other kind of big wireless.

I mean, they're the only other, like, real wireless company. But Verizon's at Fios. They're everywhere. Oh, they have that, too. Yeah, but they bought back from Vodafone the other half of Verizon Wireless. So now that's, like, their main thing is Verizon Wireless. They do have other things. Yeah, actually, the cell phone stuff is their big enchilada. Jason Moser, what's on your radar this week? Speaking of enchiladas, Chipotle Mexican Grill earnings come out February 4th next week. That's one I am keeping my eye on. They really brought the numbers last year. Just

a phenomenal performance. It was the year of the burrito. This year, they have set relatively modest expectations, so it'll be interesting to see how they meet with that. Just a few weeks back, we saw the crisis with the pork supply shortage there. They had a supplier that wasn't meeting up to their standards. So, rather than go ahead and accept less than the best, they went ahead and shut off about a third of their stores there from getting those beloved carnitas. So, I admire management for sticking with their food with integrity mission there. Yeah, it brings in some questions about how this will affect their supply chain going forward, especially as the company grows. But, this is one of those investments that

you can hold for the next 20 years. And if the market decides to overreact to a short-sighted earnings call there, I think it could present some opportunity. And the ticker? Ticker is CMG. Steve? I'm a shareholder. Will you ever get bored of that menu? No, I will not. I'm a shareholder too. And I go there probably about once a week at this point. I just can't wait for them to actually get the pizzeria locale where I can go there too. Are you ever bored with the menu, Steve? A little bit, but I still go there a lot. Chipotle, Verizon, Modine Manufacturing. You got one you like there? I might have to go with Moe Dean just to give Ron some love.

Love you, Steve. Nice. All right, Ron Gross, James Early, Jason Moser. Guys, thanks for being here. Thank you, Chris. That's going to do it for this week's show. The show's mixed by Rick Engdahl, our engineer Steve Broido. Our producer's Matt Greer.

I'm Chris Hill. Thanks for listening. We'll see you next week.