Motley Fool Hidden Gems Investing - Apple, LinkedIn, and Twitter

Episode Date: May 1, 2015

Apple reports big earnings. LinkedIn and Twitter stumble. And Lumber Liquidators falls to a 3-year low. Our analysts discuss those stories and share some stocks on their radar. Plus, Motley Fool columnist Morgan Housel talks earnings, easy money, and misguided financial advice.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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It's the Motley Fool Money radio show. I'm Chris Hill and joining me in studio this week from Million Dollar Portfolio, Jason Moser and Simon Erickson. and from Motley Fool, Deep Value, Mr. Ron Gross. Good to see you as always, gentlemen. Hello, Chris. Earningspalooza rolls on. We've got the latest results from Wall Street. Columnist Morgan Housel is our guest this week. And as always, we'll give you an inside look at the stocks on our radar. But before we dig into these companies, guys, let's just go around the table real quick. How do you approach any given company's earnings? What is it that you're

looking for? Jason Moser, I'll start with you. So, two things I'm looking for. Number one is management doing what they say they're going to do, and are they meeting the expectations that they set out for themselves? I'm not nearly as concerned with the expectations that Wall Street tends to have, because they are far more short-term in nature, and I don't think they're nearly as connected to the business as management is. So, those are the two things I really focus on. I have a quick question about that. How important is listening to the conference call to figure that out? Can you get it from the press release?

No, I don't. Well, you can get a vibe, I guess, is the best way to put it, from the press release. But I do think the calls are a wonderful source. Now, with that said, I think the question and answer portion of the calls, I find those to be useless 95% of the time. Except when it gets a little chippy. Then it's fun. Then it's entertaining. Simon, what do you look for? Chris, I'm looking for the underappreciated story.

You know, if you go five to six paragraphs into the results and find the hidden gem in there that really tells how this business is performing. If you're a fan of the conference calls, maybe midway through the prepared remarks. But that's the thing that I'm always looking for for these businesses. Ron? For me, it's if the financial results, and even more important, the future guidance, are those two things directionally in line with my thinking about the stock? And if they're not, then I need to go back and rethink my valuation. And it could be higher, it could be lower, but it really requires some rethinking.

So even if a company lowers their guidance, that may be in line with your thinking. It perhaps could be. And if it's one quarter, I might not even get bent out of shape either way. If something changes about the business to cause a shift in their guidance, or it's a full year change, that gets a little bit more serious. All right. Well, let's start with the biggest public company out there. Apple's second quarter profits rose 33%, and Ron, the revenue in China up 71%. Yeah, China definitely strong. iPhone, a big deal there.

iPhone in general unit sales up 40%. They sold 61 million of those little guys. actually those big guys, I guess, and average selling prices were up 10% as well, which are really nice to see. Foreign currency hurt them. What's new? Foreign currency is hurting everyone. That's going to continue probably for a while. But their gross margins were strong nonetheless. The one area of weakness was iPads, down 23%, sort of being cannibalized by the larger iPhones that are available now. But overall, the company's doing a really wonderful job. Continue to execute. The Apple Watch is the newest thing. Kind of too early

to tell. Not knocking the cover off the ball, it would appear, and they've had some issues with some defects that they have to fix. But overall, doing great. Increased their dividend 11%, increased their share repurchase program by $50 billion, returning lots of money to shareholders. Everything looks great. Yeah, what about that share buyback? In the past, we've dinged some companies for deciding to buy back their stock when it's at or near an all-time high. Do we ding Apple for this, or do they just have so much cash that it doesn't even matter? I would rather see a big one-time dividend or an even higher dividend than them buying

stock back at these levels. But it's not a horrible decision. It's a preference that I'd like the money. One thing I did want to mention, that they are in a situation here where they're being investigated by the European Commission for their tax situation in Ireland. could result in a pretty hefty fine. I've seen some estimates as much as $2.5 billion that they could be forced to pay back taxes for the last 10 years in Ireland. What does that translate to? Maybe $0.40 per share for the stock price. So, nothing to freak out about, but I did want to mention that. Yeah, I think Apple has $2.5 billion in Tim Cook's couch.

I saw an interesting article real quick here on The Consumerist today that apparently looks like Tattoo Inc. is causing some problems with the sensors in the Apple Watch. So, for So, for all you kids out there thinking about getting a wrist tattoo, you might want to think twice. Twitter's first quarter revenue was up 74% from a year ago. That was still lower than expected. And shares of Twitter down more than 25% this week. This is one of those stocks, Jason, this is not for the faint of heart. It is not. And I've said time and time again, it's one where if you can't take a five-year outlook at least, then you shouldn't even bother investing in it, to be honest

with you. I think the biggest challenge that Twitter faces today is that there is a tremendous amount of uncertainty in how well they're going to be able to monetize their ad platform. That uncertainty is warranted. When you look at something like Facebook that has 1.5 billion sets of eyeballs, it makes Twitter's 302 million seem pretty small. The move to mobile has been very challenging. It's a smaller screen. You've got to get more bang for your buck. I think that Twitter's working on trying to figure out how to do that. We saw the acquisition of Telepart to bring more direct marketing expertise under the roof. The partnership with Google DoubleClick platform will bring more transparency to ad performance.

And I think that the new search deal between Twitter and Google, which starts in May, should help bring more traffic to the site as well. You know, there's no question, CEO Costolo is on the hot seat. And, I mean, he really needs to change sort of the narrative here over the coming quarters, or else he could find himself in a situation. And it remains to be seen, really, whether Twitter's better off on its own or part of something bigger, like Google, for example. Do you think that the 25% drop represents a buying opportunity?

You know, I do. I think it's always one that, when $50-plus, it was unreasonably priced, I thought they just didn't have the record to really back that up. But whenever I see that stock sort of creeping back below $40, I mean, there is plenty of value in this platform. It's not something that's just going to disappear. But I think that if you don't own shares and you're looking to open a position in Twitter, now is probably not a bad time because the pessimism is sure high. By do, his first quarter profit came in higher than expected, but the revenue was a little light, Simon. So was their guidance for the second quarter. Shares of the Chinese search

engine giant down about 10% this week. What did you make of the quarter? Well, I agree with you, Chris. This was a little bit slower than normal for the reported results. We saw revenue, like I said, up 34%. It was up 48% the quarter before that. And the number of advertising customers was about flat quarter over quarter. So, I think the street, it wasn't so wrong for them to punish the stock on this. But there's a bigger trend I think we should be following as investors, and that's the shift from desktop to mobile. And Baidu is the undisputed leader in mobile, especially in China. Mobile now accounts for more than 50% of the company's revenue. And they're really focusing on, rather than just searching for something in

their searches, actually making transactions that occur out of that. They're calling this O2O, online to offline. You buy something online, but the service is actually delivered offline. It's like movie tickets, food delivery, stuff like this. And there's a lot of huge opportunities for a country that has 1.4 billion people for Biden to connect with. Well, and you alluded to this. I mean, the stock performance to this point, I mean, this was kind of a lofty stock. So, taking a 10% haircut, probably not all that unreasonable. LinkedIn getting hammered on Friday after first quarter results. Shares of the business networking site down 20% after the company cut their guidance for the second quarter,

and for that matter, Jason, for the rest of the fiscal year. Is it really that bad, or is this an overreaction? I don't think it's really that bad. I think the business continues to do what they've told us we're going to do. I mentioned, that's what I'm looking for is for management to do what they say they're going to do, and that's what we get here with LinkedIn. This is an expectations reaction to a stock that literally was priced for perfection. When you have that situation, they miss guidance or they revise downward. The sell-off is imminent. It's just going to happen. In this case, I understand why shorter-term investors don't really want to have anything to do with it, but I think that

are a lot of positives to take away from the quarter. Members are up to 364 million. Engagement is up. They're closing in on 35,000 corporate solutions customers. They're bringing this huge acquisition of lynda.com into play here, and that's going to cost them a little money in the short run. But I remain convinced, particularly after hearing from our man behind the glass, Steve Broido, in his opinion of lynda.com, I think this is going to be a really nice integration to a business that is really focused on building something over the long run. The management is keeping that long-term perspective there, and I like that. Yeah, I really like the company, too. From a valuation perspective, I think everyone

needs to realize what you're getting here. It's still about a $25 billion company, even after the sell-off. And last year, if you're liberal about their income, they made about $250 million. So, you're still paying about 100 times their 2014 earnings if you become become an owner of this stock. They need to grow quite a bit for many, many, many years to come to grow into a valuation of that size. I'm not saying they can't do it, but you have to be aware if you're going to become a shareholder. Yeah. Lynda.com, the online content site, they bought it for about $1.5 billion. Steve Broido, you've taken some of their online courses at Lynda.com, haven't you?

Yeah, it's great. It's a terrific place to learn about Photoshop or editing and all sorts of different things. And they're branching out to broader things. Someone just talk to me about a personal finance thing they're offering. Simon, what did you make of the quarter? Chris, the underappreciated story, I think, for LinkedIn that I caught out of the conference call was that there's now 3.5 million jobs posted directly on the site. LinkedIn's previous largest acquisition before Lynda was a company called Bright, which was kind of connecting members to the job opportunities. They can now do that directly on the site, and it's

bringing a ton of traffic. The number of job applications submitted over LinkedIn directly is up 50% over the last year. The number of job listings on LinkedIn is up tenfold. Well, and Jason, we've talked about this before, unlike Twitter, LinkedIn actually a profitable business. A profitable business, and they have a number of different revenue streams, which I think is really important. That's something I think will be crucially important for Twitter, is to figure out how to diversify their revenue stream. But yeah, with LinkedIn, they have a number of different ways that they make money. And I think to Ron's point, he makes a very good point here, in that investors

looking at a sell-off like this, don't make the automatic leap that, oh, wow, the stock's 20% down, this is an automatic buying opportunity. Because, make no mistake, this is still an expensive stock even with the sell-off. So, give it some time. Don't just feel like it's an automatic reason to back up the truck. Coming up, one company learns that when Uncle Sam comes knocking at your door, it's not to give you candy and flowers. Stay right here. This is Motley Fool Money. welcome back to motley fool money chris hill here in studio with jason moser simon erickson and ron gross this week shares of lumber liquidators hit their lowest point in three years they reported

a loss for the first quarter and the u.s department of justice has advised lumber liquidators it is seeking criminal charges against the company uh ron they say it's going to cost about what's your point they say it's going to cost about 10 million dollars in legal we have two separate problems going on here the first is they've been attacked by short sellers for high levels of formaldehyde they deny that and the second is the sourcing of illegal wood that's the 10 million dollar problem 103 million class 103 million 103 class action lawsuits against them currently is the brand permanently impaired what will the investigation show very hard to tell i would suggest that one other problem they have is their longtime cfo has picked this time to say that he's leaving

i actually don't think it was his choice now we don't know that that is my speculation i think this there's just been too many things that have been going on at this company and two negative things and it was time for somebody to go um is it possible he just was like i have to leave sure it is that's not my guess though i think a big challenge these guys are going to face for some time to come, is if you just do a Google search for lumber liquidators, just go five, six headlines down and you're going to click off and you're not going to want to get your flooring from them. I mean, they're going to have, I think, a litany of bad press from this for some time to come, and I think that'll be a challenge.

Yeah, two things. Our Hidden Gems service, Seth Jason over at Hidden Gems, has done a lot of work here. He actually believes that the claims are not credible, the formaldehyde claims, and that they're going to be proven to be compliant. So, if that happens, the will actually shoot to the moon. The other thing I want to say is that Lowe's, the short seller this week said Lowe's was also guilty of high formaldehyde levels. And of course, Lowe's is denying that as well. Fourth quarter profits for the container store came in lower than a year ago, stock down around 15% this week. And Jason, it is now trading below its original IPO price. Well, Chris, the good news is that at least the formaldehyde levels

in the container stores. Containers is perfectly acceptable at this point in time. As far as you know. As far as I know. But you would look at the stock price and probably think differently. And I don't know that this is a company that really probably should be public. I don't think they really had a heck of a lot of choice in doing so. But they face, obviously, a challenging time right now with a consumer that is not exactly as free-spending as they'd probably like to see, a housing market that is recovering relatively slowly. And they sell big-ticket items. I mean, their contained home offerings average a ticket size of $2,000. The new TCS

closet offering is an average ticket size of $10,000. So, they're introducing a financing wing to the business to help their consumers pay for that. It doesn't generate a tremendous amount of repeat sales. And there are other options out there. So, I don't know that there is really a catalyst that takes this thing back in the other direction anytime soon. It's a wonderful company from the perspective that management has developed a wonderful culture. they do one thing and do it very well. I mean, certainly their containers are a popular offering for the customers that use them. It's just, you know, it's a difficult one to see really a big enough market opportunity to get interested, for me at least, as an investment.

Well, and this isn't anything that really shows up on any company's balance sheet. But when you look at the environment that any given business is operating in, the container store is struggling at a time when the economy in the United States is largely a good one. Just like we were talking earlier about Twitter. I think part of what's hurting Twitter is not just whatever shows up on the balance sheet, but the fact that it comes against the backdrop of a business world that is spending more and more money online to advertise. So it's not just, wow, you're not really getting it done. It's you're getting it done when times should be really good. Yep. And that's one of those things that they have to look at and say, well, how do

we battle that? I'm not sure really that opening additional stores in the face of flatlining sales is the answer there. But, you know, that remains to be seen. Last year, Yelp recorded its first annual profit as a public company. But this week, Wall Street gave the stock a bad review after Yelp posted a loss for the first quarter. Also, another situation, Simon, where the guidance was weak as well. Yelp, whimper, cry. Tough quarter for these guys, I think. The lifeblood of this business, Chris, is the mobile visitors, which has always been kind of the story behind Yelp. We're starting to see that slow down.

Two quarters ago, they saw a 46% increase in mobile visitors. One quarter ago, that was down to 37%. And then this quarter is down to 29%. So less people are coming to Yelp over mobile. But there's a bigger red flag, I think, tucked within this story, and that is the reliance that Yelp has on Google. They still derive the majority of traffic from Google searches, but Google's got their own local advertising and Google Plus ads.

So this is becoming kind of a hot point of contention here. Google has now changed their mobile search algorithms for this last month. That could be an opportunity for Yelp. It could also be a killer for Yelp. I think there's further pain to come. Well, and we've talked before about the price of oil coming down, and are we going to see, and are we likely to see more sort of mergers and acquisitions in the energy industry over this year? But, I mean, just look at the companies we've talked about this week with Twitter, with Yelp. I'm wondering if we should start looking at social media companies the way some of them are getting hit and ask ourselves, are we going to start seeing some mergers and acquisitions?

Because if Yelp has a couple more quarters like this, someone's going to swoop in and buy. I wonder if it would be Yahoo if they would have an interest. The value would have to come down a bit, I think, for Yahoo to be interested in spending that kind of money. But it's been talked about in the past. Yeah, I think there's no question we'll see more consolidation. And it's one where I wouldn't be surprised at all to see Google make an offer for Twitter at some point, because Google Plus hasn't really worked out so well for them, and they need some sort of a social presence to remain relevant, Twitter would be an easy way to accomplish that. But to Ron's point, that would be another big acquisition. Granted, Google could fund it.

Well, let's bring in our man Steve Broido in from the other side of the glass. Steve, I know you're a restaurateur. Do you write reviews on Yelp? Or do you use Yelp when you're looking for something other than the Olive Garden? I generally don't. I'll look at Yelp a little bit here and there. It's hard to make sense of it. I remember there being a bit of a scandal about Yelp being, you know, if people were being charged to or allegedly being charged to write positive things or remove negative things or something like that. So I don't know. I don't know if I can trust Yelp. It's pretty astonishing that that's where their traffic is coming from, Simon, that it's Google. It's because Yelp, that's not that

hard to just type into your search bar. And I mean, they're getting sued right now in Europe right now. Google's got a 90% share and they've been accused of promoting their own sites on top of others for that organic search. Just it's a legal battle. I don't like to see stuff like that. All right. Ron Gross, Simon Erickson, Jason Moser. Guys, we'll see you a little bit later in the show.

Morgan Housel is next. Stay right here. You're listening to Motley Fool Money. Baby, you're a rich man. Baby, you're a rich man. Baby, you're a rich man, too. You keep all your money in a big round bag inside a zoo. There is nothing quite as wonderful as money. There is nothing quite as beautiful as cash.

Welcome back to Motley Fool Money. I'm Chris Hill. Joining me in studio, it's my favorite financial columnist, Morgan Housel. Thanks for being here. Thanks for you being my favorite financial reader. I want to get to some of the stuff you've been writing about, but let's start with earning season. We're in the thick of earnings season. And it reminds me of the classic Clint Eastwood movie. There's some good, there's some bad, and there's definitely some ugly out there. What, if anything, has stood out to you so far this earnings season? Well, I think what's interesting is that during the long run, earnings are what drives

stocks. That's what's going to push stocks higher. But we've had pretty bad earnings, not just this quarter, but maybe for the last year. And the market as a whole, at least, doesn't really seem to mind that much. Which to me, it brings to the second more important point is that as an investor, I think quarterly earnings in any individual case are largely useless. It's great that companies are transparent about what they're doing and report, here's what we've done. But if you think about quarterly earnings as this is a 90-day snapshot on a company that is maybe 50 or 100 years old, and you're an investor who's going to be investing for the next, let's hope, 10 or 20 or 30 years. When you put it in that context, it really shows, I think, how not relevant quarterly earnings are. But a lot of investors take them very seriously.

And how should I trade around earnings? Should I buy? Should I sell? Earnings disappointed? Is this bad? Is this a sign of things to come? to me, I think it falls pretty heavily in the noise category. And there's sometimes for some companies, of course, you get really important news coming out of quarterly earnings that is

relevant and groundbreaking. But I think for the most part, quarterly earnings are something that individual investors should probably not pay that much attention to. You alluded to the age of some of the companies out there in the public market. As an investor, I know you don't do a lot of trading. You're pretty meticulous when it comes to buying or selling stocks. Does the age of a company, does the history of a business factor into your decision? Or is it more about the market opportunity for whatever industry a company is in? So you asked, does the age of companies play any role? I think for me, it does. I really

want to establish businesses where you can look back and not just a two or three year history, but a two or three decade history to see how this company has progressed, to see how management runs the company, to see how loyal its customers are. That's important to me. There are a lot of investors that do things differently, that really don't look at the past much at all, or really just focus on what's coming next. But to me, I think for businesses, what they've done in the past is not necessarily a good indication of the future, but I think it's one of the best indications that we have. When it comes to headline writers, it seems that what has worked in the past continues to work in the present, and presumably again in the future,

because you had written something recently about the phrase, the easy money's been made. And it's one of those things that I hadn't really focused on until I read your article. And what is it about that proclamation that so many analysts seem willing to make that comment? I think when the market is rising, as it has done for the last six years, it's really tempting to look back and say, okay, the past gains, those were obviously going to occur. That was easy money. And a monkey could have gotten notes. Anyone could have done that. Everyone knew the market was going to go up.

But going forward, starting today, you have to be tactical and smart and a genius. And I just think it's a crazy quote that people use, but a lot of really smart investors and reputable investing publications use this phrase. And I really just think it goes to show how powerful hindsight bias can be. That someone today can look back at the last six years and say, that was easy money. That of course the market was going to go up like it did for the past six years. Because you can go back to all sorts of headlines or book titles from the past six years and see just how utterly scared people were for the entire six-year period. Every year since 2009, every week, every month, there has been a big ugly news headline that could have scared you into selling stocks, whether it was the European debt crisis or the United States' credit rating got downgraded.

We had a government shutdown in 2013. Earnings have been supposedly about to, you know, on the cusp of falling. Stock valuations since 2009 have apparently shown that the market is way overvalued. There's always a good reason to sell stocks. And they've all been wrong so far, but people forget that. They forget how scared they were in the past. And just because the market has done so well over the last six years, they look back and think that it was all obvious. And I think it's really dangerous mindset. And with the calendar turning to May, we'll just get ready for a whole fresh round of... Sell in May and go away? Yes. The best response to that was from our friend Josh Brown, who around this time last year, he tweeted, sell your house in May and buy it back

in June. And of course, that sounds so ridiculous. No one would ever do that. It sounds absurd if you said that, but people do the same thing with stocks. And it makes as little sense for stocks as it does your house. You mentioned the run that the market has had. We are in what? We're in the sixth year of a bull market, which means the next bear market maybe is closer. I don't know. Based on what you've written recently, it seems like you're rooting for it a little bit. Well, I think I'm always rooting for a bear market because I'm a long-term investor and I'm going to be around. I'm going to be investing for the next 30, 40, 50 years, maybe longer than that. So if you are in that situation, you should want stock prices to go

down because the lower stock prices go down now, both the higher the odds that stocks are going to go up in the future and the higher those returns will actually be. It's very difficult to think about, to think that way. Even for me, it's counterintuitive that what makes sense on paper, which is that you want stocks to go down, goes heavily against your intuitive feelings of, Of course, we want the market to go up because that feels good. You get to see your wealth rising and whatnot. But if the ultimate goal for people is retirement, which is some number of years in the future, you should absolutely want stocks to go down today.

So I showed in this report, so over the last 140 years, in every five-year period, on average, there's an 80% chance that stocks will rise in any given five-year period, 80% chance. What I looked at is, okay, after stocks have fallen, what happens to those odds? And it turns out that if stocks have just declined, the odds of earning money over the next five years go up substantially to where, you know, if stocks have fallen 20%, there's about a 90% chance that they'll make money over the next five years. And if stocks have fallen 40%, there's no historical precedent over the last 140 years that they won't increase over the next five years. So that's all some technical stuff. But the big point is when stocks fall, that's when the odds increase that you're going to do well in the future. And vice versa, after stocks have had a big boom, that's when the odds of success that you're going to do well over the next five years go down.

So if you're a long-term investor, yeah, you could look at us right now and say we've had a six-year rally. What does that mean going forward? Well, it really could mean anything. I'm not calling a top here by any means. It's well within the possibility. that stocks could keep going up for another five years. But it's definitely that the odds of success going forward today are lower than they were several years ago. You've got to fight against human nature. Obviously, we've seen this time and again

when the market drops, and it is human nature to say, you know what, I'm going to pull my money out, or I'm certainly not going to put more money back in. So, investors have to fight against that. They also have to fight against advice they get or read from different people. One recently from someone that I think you respect, James Altshuler, who recently did a video. I'm assuming it was aimed at younger people, millennials, young adults, saying, whatever you do, just pull your money out of your 401k plan. You seem to take issue with this. Well, I really like James Altshuler as a writer. I think he's a brilliant guy. He's an incredibly good writer. And he did a video with Business Insider arguing that young workers should not

invest in 401ks. And I thought it was not bad advice, but dangerously bad advice. And the arguments that he used to say why people should not invest in 401ks, I thought were pretty wrong. So he said, for example, that if you invest in a 401k, you don't know where your money's going, that it's sort of like a black box. And to show that that's not really true. If you are investing in a 401k, your company and the financial companies that your employer invest with, they have an obligation to show you exactly where your money is going, both what funds you're investing in and the individual securities that those funds own. You as a worker have a right to see all that information. Your employer is also legally

required to offer you a diverse set of investment choices. And you, the worker, have a legal right to get to choose where that money goes into, and also that you get to change that allocation at least every quarter. And look, there are a lot of companies that offer subpar investment choices in their 401k. By no means is it perfect, but the upside that you get from a 401k, both from the employer match that most plans offer and the tax deferment that you can get, especially if you're young, as this video was targeted at, those will more than offset the injustices of the fund industry that get put in higher fees or subpar investment choices. The benefits that you get from a 401k are really phenomenal. And I think it's especially important for young workers today

because A, they have a long life expectancy. They're probably going to live well into their nineties and they can't necessarily rely on social security or private pensions to get them there. So they're really going to be self-reliant to fund their retirement. And the biggest pillar in that self-funding is going to be their 401k. So I think to give advice that people should not use their 401k is dangerous. Well, and as you said, particularly when there's a match involved, which is just free money on the table. Free money.

So, you know, for some employees that can be, you know, that can be a 50% return right from the get-go, boom. And then to argue about a fund management fee that is half of 1%, when you just earned a 50% risk-free return from the match, I think it's kind of silly. It's just an example that the benefits far outweigh whatever the problems are. Before I let you go, you're among the more voracious readers I know. As we get ready to head into summer, and hope springs eternal for people like me that I'll actually get to sit on a beach and read a book, give me a recommendation or two. Hank Paulson, who used to be the CEO of Goldman Sachs, and then he was Secretary of the Treasury

during the financial crisis. He just wrote a book on China that's really good. It's called China. I just looked at the book. The book is called China. So when Hank Paulson was CEO of Goldman Sachs, he visited China a hundred times, which I found pretty incredible. But he was fascinated with the country from a business standpoint, doing business in China. And he has really an insider's perspective into how business in China operates, both where they've come from, where they are now, and where they're heading next. It's a very, very good book. A non-business book that I really enjoyed. It's from an earth scientist named Vaclav Smil. And I got this recommendation from Bill Gates's blog, actually, who recommended it as well. The book

is called Should We Eat Meat? And I would ask you to withhold judgment because he does not judge whether you should or shouldn't. It's just a scientific look at how humans eat meat, both how it's raised, what that does to the environment, what it does for nutrition, both good and bad. It's just a really fascinating look, how different cultures consume meat differently. And there's really no judging in the book either way. It's a scientific look at it, and it's just fascinating. You can read him on fool.com. Occasionally, he pops up in the Wall Street Journal. And you can get him here on Motley Fool Money. Morgan Housel, thanks for being here. Thanks for having me.

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. I'm Chris Hill. Joining me in studio once again, Jason Moser, Simon Erickson, and Ron Gross. Guys, a couple of things to get to before we get to the stocks on our radar. This weekend is the Berkshire Hathaway annual meeting, and we've got a free e-book, Advice from the Oracle,

50 Warren Buffett Quotes That Will Make You a Better Investor. It's free, and all you have to do to get it is just drop an email to warrenatfool.com. That's warrenatfool.com. Drop us an email, and we will send you the book. We also got an email this week from a longtime listener, Peter McLaren, from Cabo San Lucas, Mexico. I'm 36 years old and started investing about five years ago. At the time, I subscribed to several services, one of which was the Motley Fool service. I initially did well with gold and silver and left equities alone. Then with the fall of gold and silver, I lost all my profits. I tried many different tactics from day trading to trailing stop losses, all while I had forgotten about the Motley Fool. Recently, I found my old portfolio

that I started with recommendations from the Motley Fool. There were 10 stocks in it. One was down 80%. But despite that, the overall portfolio was up 74%. I had my eureka moment. In the last six months, I've listened to every Motley Fool podcast and read the stock news online nearly every day. I've subscribed to Motley Fool Stock Advisor, and I'm reconstructing my portfolio. Sometimes you need to make your own mistakes before you know the right thing to do. And now I see that my experiences have led me full circle and to fall in line with the Motley Fool's principles. The only way for an individual investor to make money is to follow your rules of long-term investing. Thanks, and keep up the good work."

Nice. A really great note. And once again, I don't think anyone would have any problem with someone having that kind of bad experience with investing, and then just sort of swearing off investing in general. So the fact that he kept at it and found a way to succeed is wonderful. I'm so moved by that, I think I'll head over to Cabo and congratulate him personally. Exactly. But his point there in learning from as mistakes, I think, is tremendous. You and I talked about that the other day when we were talking about kids and investing. I mean, sometimes those mistakes are what really can

sort of net you out as being a better investor. So, you know, wonderful email. Thanks a lot. One thing we like to do at The Motley Fool is look at trends and how we can profit from them. Here's a trend that came up this week. Gartner Research predicts that by the year 2025, one-third of jobs will be replaced by software, robots, and smart machines. Not radio shows Hopefully not But Steve Broido Do you have a job

Or a responsibility Maybe around the house That you'd be happy To hand over to a robot I would say vacuuming But I'm not a fan Of that little Roomba thing It doesn't seem to get in

You know clean enough I like the big vacuum still So vacuuming would be On the list So if they came up With a bigger Roomba A better Roomba With more suction

And better cleaning power I cannot get my son To take out the garbage So I'm turning to a robot You want a robot To replace your son Well, no, just for the garbage part. All right, let's get to the stocks that are on our radar this week.

And Steve Broido will hit you with a question. Ron Gross, you're up first. What are you looking at? Steve, at the risk of sounding like a broken record, I must go back to Horsehead Holdings, Zinc, Z-I-N-C. And that's because it's my number one recommendation right now, and I need to share this with our listeners. The price of Zinc, the commodity, has rallied about 12% over the last 30 days, as mines have closed and the supply of Zinc has dwindled. That bodes really, really well for Horsehead. That, combined with some really great moves they're making within the company,

makes this look really cheap to me. The stock's around $14.50. I think it's worth $21.50 at a minimum. That's 50% upside. They report on May 8th. If there's anything bad there and we get any kind of sell-off, it's probably a really good time to initiate a position. Steve, question about Horsehead Holdings?

Well, we just heard an email about how gold and silver investing didn't work out so well. Precious metals, Ron, what do you think? So, the problem with something like gold is that there really isn't an industrial use for it. As Warren Buffett likes to say, we dig it out of the ground and we put it into a vault, and that's all it does. There's no cash flow associated with it. Zinc, on the other hand, is very useful, mostly in the galvanizing of steel. It's highly used in construction and industrial uses. So, it's not really a precious metal in that sense. It's an industrial metal.

Simon Erickson, what are you looking at? Chris, the stock on my radar is FireEye. Ticker is F-E-Y-E. We keep hearing news stories about these companies getting hacked. Home Depot, Target, even Sony Pictures. And I think network security is growing incredibly in importance in the world. In fact, there's estimates that there's nearly $500 billion a year of lost profits from cybercrime each year. FireEye is a provider of network security. We've seen that they're really just growing at an incredible pace right now. Revenue is up 12-fold during the last three years, and I think that best-in-class supplier in this field gets the lion's share of the profits. Steve, question about FireEye?

Was there a 60-minute story about FireEye? I believe there was, and it was very compelling, very interesting stuff. So, my question for you is, security, I mean, the point of this story was that exactly what you're saying. Should we be looking more closely at, are these guys at the leading edge of this, or is it just waiting for a few other people to come in who are just a little bit smarter than they are. Well, I think that, well, first of all, I heard that that story was on fire, Steve, as I think you pointed it out. I think that, you know, again, using sales as a proxy for quality, I think you don't need multiple security providers. You're going to go for the best in class out there. And that's what we're trying to figure out. It's on our watch list for

MDP right now. These are the guys that are going to be the win in the long run. Jason, what do you got? Sure thing. One I've been digging through, I was actually surprised to see that it's not a recommendation in any of our services is TASR, T-A-S-R. You probably know them best for making actual TASERs, the electronic weapons that police forces and private security and whatnot use. But I think that this is a company that is starting to benefit from this, really the trend where we're seeing more and more law enforcement around the world, really, because this is a global company, are going to be required to carry video capability in some capacity or another. TASER is by far and away the market leader in this space. Sales last quarter as a percentage

of total revenue of video equipment made up about 7.5% versus about 1.5% in the previous year. Sales have doubled since 2010. You have a co-founder in Patrick Smith as the CEO of the company. And they offer these all-encompassing plans that give these forces the hardware, software, and the data storage capability, which I think could afford them some pricing power in the future. So, there you go. Steve? Looks like the stock's where it was at about 2004. Should that worry me, yes or no? No, actually, I think that's very encouraging because of the future prospects. All right.

Jason Moser, Ron Gross, Simon Erickson. Guys, thanks for being here. Thanks, Chris. That's going to do it for this week's edition of Motley Fool Money. We will see you next week.