Motley Fool Hidden Gems Investing - Best Buys, Overpriced Drugs, and Productivity Tips

Episode Date: August 26, 2016

Best Buy surprises. Herbalife slides. Tiffany shines. And a drugmaker faces big blowback. Plus, Charles Duhigg offers some productive insights from his new book, Smarter, Faster, Better: The Secrets of Being Productive in Life and Business.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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But you can give them to the birds and bees From Fool Global Headquarters, this is Motley Fool Money. 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 Matt Argersinger, and from Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen. Hey. How you doing?

We will dig into the latest earnings from Wall Street. Best-selling author Charles Duhigg is our guest. And as always, we'll give you an inside look at the stocks on our radar. But we begin this week with surprising news out of Best Buy. Second quarter profits came in much higher than expected. Shares at Best Buy, I'm stumbling because I can't believe you're up more than 20%. You're stunned. This reminds me of the Mark Twain quote, the reports of my death have been greatly exaggerated.

Exactly. Boy, did I call this one wrong, at least for now. We don't know where the story is going to go. The headline you need to be aware of is that online sales are up nearly 24%, obviously right up against amazon but putting up really impressive numbers more visits to the website and the average size of online the average size of orders were up as well so you got the double whammy there that's nice to see online sales as a percentage of revenue now at 10.6 percent up from 8.6 percent that's a very large percentage increase so the company is getting it done even with amazon kind of knocking at their door uh the big deal was supposed to be their customer

customer service differentiation in the stores, they're getting it done online. This is why it is so hard to short a company. We talk all the time about not shorting high-flying tech companies. You're setting yourself up for disaster. But you look at a company like Best Buy, a few years ago you're thinking, this company's dead. There's no way. It's a long train wreck to nowhere. Unfortunately, though, it's tripled, I think, in the last few years. It's amazing. 27% this year, up 60% over the last five years, which is underperforming the S&P, but you still make solid money.

And we've got to give a hat tip to Hubert Jolie, the CEO. He and his management team walked in the door four years ago, and this stock is more than double what the market has done over that time. Sure. I mean, I think the question, though, is, with the stock having performed so well this year, so well over the past couple of years, really, typically we don't argue too often shorting on valuation, because that just is, I mean, valuation is relatively subjective, right? When you find a business that's fundamentally impaired, like one or two that maybe we'll discuss later

today, it becomes a little bit more obvious. But maybe the valuation for Best Buy right now is perhaps a little optimistic, right? I mean, we are in the throes of a very inflated market. And yes, they perform very well, but I can't help but feel like there's a little bit too much optimism on the stock price. But four times EBITDA only, four times cash flow. What do you do with that? All things being equal, that's a cheap stock. Now, you have to compare it to something. You can't just look at it in a vacuum. But if you nibble at it at four times, there could be money to be made here. I'm not making that call, however.

Is this a business that you want to own for the next five years? It's not for me, no. But do you think this could be one of those ones where it goes private, maybe? Because some private equity company thinks they can wring some value out of this company over the next five, 10 years as it winds down as a business. Up against Amazon, though, that's tough to do. I don't know. Second quarter profits for Tiffany came in higher than expected, and that's a good thing, Jason,

because for the first time in six years, same-store sales fell. Womp, womp. Yeah, it has been a difficult year for Tiffany thus far. I would make the argument, though, that this is the time for investors to actually consider buying shares of companies like these, where earnings growth has been somewhat hampered due to sort of conditions that are beyond their control, right? Macroeconomic conditions, globally speaking, are very difficult for these true luxury brands. And Tiffany is a true luxury brand. As long as management continues to protect that brand, you don't see them resorting to fire sales, taking any two-for-one deals or

whatever that may be. Let's make sure we keep that brand prestigious. It's sort of an aspirational brain. As long as they do that, I think that this is a business that will continue to do well over the long haul. It's not one you want to just buy and hold forever, though, right? We've seen this happen before. But again, assuming that we see conditions start to improve slowly as the year progresses, and that's what they're looking at, I think going into next year, if you're a shareholder today at these levels, hanging on for the next year or so, I think you can be pretty happy at the end of the day. This is one of those businesses that is constantly at or near the top of the list in terms of revenue per square foot in terms of their stores. But when we have talked about

retailers in the past, whether they're general retailers or niche retailers, one of the things we look at is, are they selling through more than one channel? And I'm curious if Tiffany has an e-commerce strategy, if that makes sense for them. I don't see them anytime soon going the way of what we saw, what we've talked about before with companies like Coach or Michael Kors, and they're going downmarket and doing some discounting. I don't think they're going to do that. But I am wondering if an aggressive e-commerce strategy helps them or hurts them. I don't think it hurts. I mean, I've personally purchased a few things from Tiffany via e-commerce.

I think we're going to see sort of limitations into how far they take that actual physical footprint. And as long as they are able to sort of manage that physical infrastructure and really sort of go back to relying on multiple channels of distribution, making sure that they keep their cost structure in line. I mean, we saw some good gross margin improvement here, about 200 basis points over the year before. That was thanks to a little pricing power that they had, along with some sort of cost controls. They're making sure they're keeping the cost side of the business in check. And so I think that as time goes on, the e-commerce strategy helps,

but you won't see them pushing that like you see something like an Amazon or perhaps a Best Buy, where they're always in your face advertising because they're trying to get great deals out in front of you. But Tiffany's not about deals. It's really about that brand and that blue box and that experience and that feeling of getting a gift or giving a gift like that. And it's important for management to continue to maintain sort of that luster that the brand has carried into today. Splunk's second quarter revenue grew more than 40%. The machine data company also raised guidance.

And yet, Matty, Wall Street, not impressed. Well, when you trade for 10X sales, which is what Splunk did coming into the earnings result, you don't really just have to beat and slightly raise your guidance. You really have to blow it away. And that's what Splunk has been doing quarter after quarter. And this quarter, great results by any stretch, but they just didn't blow expectations away that I think a lot of investors were hoping for. That said, I thought the results were stellar. As you pointed out, revenue up over 40%. They added some impressive new customers, Priceline, Uber, Subway, the city of Los Angeles. And

that already joins companies like Amazon and Facebook, who are using Splunk pretty regularly. That said, this is a company that is going to have to spend a ton on their sales force. They're already spending a ton on R&D. To get to the kind of scale where they can really generate substantial profits, it's going to take a long time, and they're trading at a very lofty valuation. So, they've got to keep that top line growing pretty fast. And if they don't, then it's probably going to come down, and then you have a quarter like this. This is not exactly a household name kind of company, and yet it's worth about $7.5 billion. Given the challenges you just laid out, is part of the bull case for buying

this stock that, hey, they're doing some good work, they just don't have a great cost structure, and they could be better off being acquired by someone else? Well, I don't know about being acquired by someone else. They're doing something very unique, which is taking highly unstructured data, data that you might get from a user who's clicking around a social network site, or from a car that's changing speeds and directions all the time. They're taking that data and providing real analytics, and there's really no one who's doing it as effectively as they are. That's why I think three-quarters of the Fortune 100 are using Splunk as of now. But really, it's all about growing the services

they're offering, growing their sales. They're going to have to do that at a dramatic rate to get the kind of scale they need to make real profits. And so I don't see them as an acquisition candidate right now, but that could be something that they might consider down the road. The story of the week involves Mylan, the company behind the EpiPen. The cost of an EpiPen has reportedly gone from $100 to more than $600 in less than a decade. Mylan is primarily a generic drug company, but the EpiPen accounts for 40% of their operating profit. it. Adding to all of this, Jason, is the fact that the CEO, Heather Bresch's, compensation

is very much in the spotlight. Kind of like the cost of the EpiPen itself, her compensation has gone up from more than $2 million a year to more than $18 million in the same amount of time. Sure. This is an issue, this is a story that elicits a lot of emotion, a lot of feelings. I think it has a lot of different angles, Ultimately, I think when we think about it as investors, I think this really brings into question the value, the real value in competition, right? Because, I mean, the reason why Mylan owns this EpiPen market is because it's the only game in town. And so, they've been able to raise prices at an extraordinary rate here over the past few years. Typically, investors,

I mean, we look for pricing power like that. We like that. But we're sort of seeing downside here, too. It can be real headline risk, particularly when you have a CEO that gets out there and says, nobody's more concerned about this than I am. And I'm pretty sure that someone out there is more concerned than she is. Just a stab in the dark. Parents who have to shell out $600 every year for an EpiPen. And I think, for leadership to say that, I understand she's trying to make a powerful statement, but that's just not a very believable statement. So, she probably made a little bit of a misstep there. But again, I don't think this is necessarily a cut-and-dry argument,

because you have one side arguing the insurers are charging too high a rate. You have the other side saying that device makers and drug makers are charging too much. So, it's kind of like the peanut butter and chocolate thing, right? I mean, you put your peanut butter on my chocolate. No, you put your chocolate in my peanut butter. However it worked, it happened, right? And now we've got to figure out how we're going to make this all work together. And so, I think this is a good example of where you really have to have all parties come together and try to figure out the best course of action here. Because playing the blame game isn't going to be very productive. And this is obviously a product that's going

to be very important here in the coming years and coming decades. So, perhaps we tear down some of the regulatory barriers, we introduce a little bit more competition into the fray, and maybe that provides an avenue for some lower-cost products there. But again, it spans political, economic, philosophical ... O' It's a complicated Reese's Cup, basically. Extremely. O' Chris, you said $600 every year, and that made me think, is it an every-year purchase? Is the shelf life an annual thing? Have they extended the shelf life at all over

the years? is, I think, about a year from what I read. So, typically, folks that need them, they'll buy maybe six to eight of them that they'll need for a given year, because it's something that you can't predict needing. But when you look at Mylan as a company, this brings in about $1 billion in revenue. Far bigger impact on the bottom line for this company. And so, if something comes up where it's taking a little bit of that EpiPen business away from Mylan, I mean, I don't know if this is a business that I'd want to own anyway, but with this sort of headline going on, I think I'd steer clear.

Well, and you're absolutely right. We do like companies that have pricing power, and Mylan is perfectly within their right to exercise pricing power. Sure, absolutely. And they have clearly done that. On the other hand, to your point, Ron, part of the criticism here has nothing to do with Heather Brush's compensation, because let's face it, there are plenty of CEOs who are paid a lot of money and overcompensated, you can argue. A big part of this story is actually the fact that the EpiPen as a drug delivery device really hasn't changed all that much. This is not like Gilead Sciences spending a ton of money to revamp

hepatitis C drug as they did. The EpiPen as a device is largely the same. And so, while they've made minor upgrades here and there, they haven't made enough upgrades to warrant the increase or warrant going out and getting a new patent on it. Yeah, and this is more about the delivery and less about the drug. The drug itself is just, it's like a buck, $2 or something like that from what I've read. It's the delivery itself. And there have been other names out there that have tried to bring product to market here, but either the FDA gets involved and pulls it out because they say the delivery method there is such that because the EpiPen is so easy to use and so sort of worry-free

from that perspective, if you have any other product out there where the delivery method might even be just a tiny bit more difficult to understand, then they're going to really sort of pull back on that and make sure that they're not putting patients in danger. But the bottom line is, you've got a situation today where there's flat out no competition out there for this. And I mean, again, on the one hand, I get it. It's a business. They're trying to make money. On the other hand, these headline risks are real. There's nothing you can do about it. And so, as an investor, you've got to be able to make that decision. Where do you fall on that spectrum there? And then you invest accordingly.

Coming up after the break, the biggest battle of activist investors in 2016 just took an unexpected turn. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argesinger, and Ron Gross. Ulta Salon's second quarter looked good. Solid profits. Seventh straight quarter of double-digit sales growth. Ron Gross, why is the stock falling? It's expectations versus valuation, what we always talk about. Numbers look great. Comp sales plus 14.4%. Those are huge numbers. Growth in transactions and average ticket size. Online sales up 55%. But the stock's at 22X cash flow, 48X earnings. Again, just

like with Splunk, you've got to knock the cover off the ball if you're going to trade at a valuation like that. Their guidance going forward, a little bit light compared to expectations of analysts, therefore the stock sells off. But it's doing a great job firing literally on all cylinders in every way, except for that valuation. This is a super reliable market. I mean, the valuation typically is going to be pretty optimistic, because I think the cosmetics market is about as reliable as the sun coming up. Right, Ron? You got it. And when I say literally firing all cylinders, perhaps literally was used

incorrectly in that case. Yeah, figuratively. Yeah, figuratively. Shares of Herbalife falling this week in the wake of a Wall Street Journal report that activist investor and Herbalife bull, Carl Icahn, is likely to sell his stake in Herbalife to a group that includes Bill Ackman, his adversary on this one, Matty? The verbal ping-pong match of this stock and this company, it's extraordinary. And Ackman came on television and confirmed this, that he was in this pool of investors that

could essentially buy at least a part of Icahn's stake in the company. If this is real news In other words, if Icahn is trying to sell, he's got an 18% stake in the company, he's got five board members on Herbalife's board, and he's been very bullish on the company even after the FTC slapped the company with a $200 million fine, basically said their marketing was illegal and that they're going to have to revamp the way they reward all their distributors. So, if Carl Icahn comes out now and tries to sell his 18% stake, I think that is a fundamental change to the company because I think the way the stock's been trading, it's all built

on confidence. And that confidence is there because of Carl Icahn. And so, you've got an impaired business, in my view, a business with a much shakier future. And if your biggest investor and a guy who controls a good amount of your board is trying to exit the door, I see why the stock is selling off sharply. Sears down another 10% this week after reporting a loss for the second quarter. But fortunately, Jason, billionaire CEO Eddie Lampert's going to help out with a loan. Surely. And as well as Best Buy performed this quarter, Sears is basically the opposite there.

And honestly, I don't know that there's anything that stanches the bleeding here. I mean, if you look at this company's top line, that tells the tale. And sales, they're falling off a cliff. The good thing for Eddie Lampert is he's got Ceritage Growth Properties, which sort of was born from this sort of Sears investment of his here over the past couple of years. That's a real estate investment trust that he runs. And he can sort of leverage that real estate perhaps into a more productive vehicle that's not based on retail, which Cedars just obviously isn't very good at it these days. The bad thing for investors is, there's just nothing here. I'd steer clear of the stock. This is what we call a dog with fleas. And in this

case, I think even the fleas have fleas, so I would stay away. O' Great. Uber is still a private company, but this week we learned more about the company's finances. Uber reportedly lost $1.2 billion in the first half of this year. Ron, we see these reports that it's worth $60 billion. $69 billion. It's really interesting to me. I love the product and am an avid user of it. It's going to be interesting to see how they can make money. If they're losing money at this rate, as we said, first half, $1.3 billion almost, but yet the business is doing really well from traditional metrics, with revenues up 15% and bookings up 32% sequentially.

doing what they have to do. Market share more than 80%, fighting lift at the company in a price war a bit, but not in many markets at this point. So, the driver subsidies is what's hurting this business and not covering that revenue and leading to the losses. And when and how do they turn that corner to, A, first of all, be profitable, and then, B, come anywhere near justifying a $69 billion valuation? I don't know the answer yet. Just getting a little taste of these numbers, Matty, makes me want them to go public. I want to see the S-1. I want to see everything that they've got. I do. There's so much underneath the hood right now with this company. But again,

I'm with Ron. I like the service. This is a meaningful, disruptive company. We'll see. It's questionable whether they deserve that $69 billion valuation, though. Jason, you get the last word. I think the quickest path to profitability for them is self-driving cars. Nobody knows how soon that is, how close it is on the horizon, but I think that's going to be the easiest path to profitability, which is obviously not very good news for drivers, because that means they're not needed. Alright, guys, we'll see you later in the show. Up next, a conversation with best-selling author Charles Duhigg. This is Motley Fool Money.

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if you're looking to buy a home, do yourself a favor. Check out Rocket Mortgage today at QuickenLoans.com slash fool. Equal housing lender, licensed in all 50 states. NMLSconsumeraccess.org number 3030. Welcome back to Motley Fool Money. I'm Chris Hill. Charles Duhigg is a Pulitzer Prize winning reporter for the New York Times, a bestselling author, and his latest book is Smarter, Faster, Better, The Secrets of Being Productive in Life and Business. Charles, welcome back to the show. Thanks for having me back. A lot of ground has been covered when it comes to the world of productivity.

You are someone with many varied interests, so I'm curious, what got you interested in writing a book about productivity? Well, you know, I was writing this series about Apple, and as I was talking to executives who worked at the company, What I initially figured, because they weren't supposed to talk to me, right? I'm a reporter for The Times, and no one was supposed to return my phone calls. And what I figured is that the low-level or mid-level folks would give me a call back because they would have time on their hands. But what I found was that all of those executives, they were just too busy. They didn't have time until I got to the upper echelon,

at which point I realized that there were all these people who, the reason they had been successful at Apple was because they actually, in many ways worked less than everyone working for them. And it wasn't that they were lazy or unproductive. It was that they were actually making different decisions, that they were thinking differently. And as a result, they were getting more done with essentially less time and stress. Well, that's one of the things you get out in the book, you know, because there's productivity and there's efficiency. And I think sometimes people confuse the two. They think, well, I'm being efficient, so therefore I must be productive. But that's not actually the case,

is it? That's absolutely right. And in fact, one of the characteristics of the age we're living through is that it's so easy to conflate efficiency and productivity, but they often turn out to be at odds with each other. One of my favorite examples of this is an excerpt that we recently ran in the New York Times Magazine about how Google spent four years and millions of dollars studying how to make the perfect team. And what they found is that who is on a team matters much less than how that team interacts. And in particular, the best teams, they do these things that to an outside observer might at quick glance look inefficient, right? People tend to spend more time talking about their lives outside of work on great teams. They spend more time

getting to know each other. They usually have rules where everyone at the table has to speak up before they can end the meeting. And those might look inefficient, right? We would think that it would be much better to just kind of get down to business. And if you're the expert, then you speak up. And if not, don't have anything to say. But it turns out that that's how you make a terrible team, that on those teams where people feel like they can speak up in roughly equal proportion

and that other people are actually listening to them and they know something about their lives, those are teams that tend to become much, much more productive over time. Well, and you mentioned Google, but one of the other examples that you get into in the book is Saturday Night Live, which has, you know, it has its ebbs and flows in terms of the quality of the show. But the fact is, it's been on the air for four decades. And some of the things you write about with respect to Saturday Night Live and the cast, you just sort of look at it and you if you didn't know anything about the show and you see how the cast interacts with each other, with the writers, with Lorne Michaels, who is the executive producer. If you didn't know anything about it, you would think there's no way in the world this group of people is going to produce a television show this week. Right. And not only that, but it's a live TV show that they have to prepare in seven days. It's amazing, right? And even more so when you realize that it's filled with all these like egomaniacal actors and comedians, the types of people who like aren't supposed to get along well with others to begin with. But when I was talking to people from the early seasons of Saturday Night Live, they all said the same thing.

They all said that Lorne Michaels runs his meetings in these very specific ways. He forces everyone in the room to speak. If you're not piping up, Lorne Michaels will look at you and he'll drag you into the conversation. And he also kind of ostentatiously demonstrates what's known in psychology as high social sensitivity. So if someone looks upset or if they look particularly excited, he'll stop the meeting and he'll ask them, you know, Jim, why are you looking like so down? Or Susan, you look really into this idea. Do you want to take the lead on it? And that's because what we know is that when everyone can speak up and when people feel like there's this high social sensitivity that other people are really listening to them, it creates what's known as psychological safety.

And psychological safety is the single greatest correlate with an effective team and an effective meeting. It means that everyone feels like they can participate and that they're being listened to. And it tends to make teams much, much more productive. I'm going to use a sports movie analogy for this next question because I think there are two schools of thought when it comes to leading teams and how to get the best results out of teams. And one is the Mighty Ducks and the other is the Bad News Bears. And the Mighty Ducks approach is it's the coach who needs to sort of work out his or her stuff. And once they do that, they become a better leader, and therefore the team produces better. And in the Bad News Bears, the coach looks at the talent on the team and says, you know what we need?

We need a couple of ringers. And that's when the team starts to produce. And I'm wondering, from where you sit, is one approach better than the other, or do both schools of thought work? Well, I think both schools of thought work if they're in tandem, right? So one of the most interesting pieces of reporting for the book came from looking at Disney Studios, in particular looking at the story of the making of Frozen. Now, most of us know Frozen as like this huge mega hit, right? That like it's earned more money in the box office than any other animated feature.

Anyone with children knows Frozen very, very well. But what's really interesting is that Frozen was on the brink of catastrophe until just a few months before it appeared in theaters. And the reason why is because most films at Disney, they'd have like five years to develop. But because another film had fallen through, Frozen only had two years to make it into the theaters. And the team that was working on it, they kind of freaked out. They didn't have enough time to actually figure out how to make this movie.

And they kept on hitting these creative roadblocks. And so the folks that were running that team who believed deeply in the Disney creative process, they said, look, we don't have to reinvent the wheel here. We don't have to be the most creative people on earth. But what we do need to do is we need to find and talk about things that we know. And this is something that has happened again and again. When we study the most productively innovative companies, they seem to do this over and over again. They have a creative process that relies on drawing on what people already know. So at Disney, what happened was that they said, look, we know princesses, right?

Like, Disney knows princesses like nobody's business. And what was interesting about Frozen is that there were a usually large number of women working on that particular project. In fact, one of the directors was female, and it was the first female director in Disney's history. And as those women were trying to figure out what do we know, what can we draw on, a lot of them said, look, we have sisters. We know how relationships between sisters work. And so Frozen became this thing where they said, let's take these two ideas, the ideas of princess and the idea of sisters, and let's jam them together. And instead of having a prince come in and save the damsel in distress, let's have the sisters, these two princesses,

save each other. In fact, we can make the prince the bad guy, the villain, and reveal that at the end. And that's Frozen. And it goes on to do amazing business at the box office, but it's because Disney has a system in place that says anyone can be creative if you know how to draw on those things in your background, in your experiences that seem real and true. You're listening to Motley Fool Money, talking with Charles Duhigg. His new book is Smarter, Faster, Better, The Secrets of Being Productive in Life and Business. One of the things you write early in the book is about motivation. And contrary to conventional wisdom, you write that motivation is more of a skill. It's something that can be learned.

Absolutely. And actually, study after study has shown that this is true. And this really came home for me when I was learning about the Marines. So most of us think about the Marine boot camp as a place where people go to learn discipline, right? We've all seen those movies. You show up and, like, someone yells at you, and you learn to follow orders. And at one point, that's what boot camp was. But in the last 15 years or so, they've actually completely redesigned boot camp, particularly as millennials have started coming into the armed forces. What happens now is that they're trying to teach people how to generate motivation,

particularly self-motivation. And the way you do that is you teach people to start seeking out choices that make them feel like they're in control. How do they do that? Well, it's really interesting. So when you show up for boot camp pretty early, like in your first week, usually your drill instructor will take you into the mess hall or some other place, and he'll say, okay, your job is to clean this place up, but I'm not going to tell you how to do it. And you have to go and you have to figure out how to straighten everything up, where the ketchup bottles go and how much detergent to put in the washing machine, and you have to kind of take control. And then what they do is they only compliment people for unexpected acts of leadership or unexpected successes.

So they'll never tell someone you're a natural-born leader because being natural-born, that means that you don't have to work hard at it. Instead, what they'll do is they'll go to the shyest guy and they'll say, you did a great job of leading. Or they'll go to the guy who has a real trouble running and is kind of puny and say, you did a great job on that obstacle course. What they're trying to do is they're trying to teach recruits to feel this kind of emotional satisfaction that we all get from taking control of a situation. It's the same thing that your brain feels when you're stuck in a traffic jam and you want to turn the wheel and take that exit just to get out of traffic, even though you know it'll take just as long to get home. We all have this craving to take control, and that's how we generate self-motivation. But for some of us, it has to be woken up a little bit. And the way you do that is you put people, whether they be our kids or marine recruits in situations, where they get to practice taking control and they get to learn how good it feels until it becomes an automatic almost habit.

Was there a eureka moment for you when you were working on this book? Was there a moment where a light bulb went off, whether it was about productivity in general or something that you saw that you could apply for yourself? There was actually, you know, right when I first started working on the idea, I was calling other authors to kind of ask for advice because my last book, The Power of Habit, was about to come out. And I found that there was one guy in particular that I reached out to, this writer named Atul Gawande. Now, Atul Gawande is like a best-selling author. He works at The New Yorker. He's a surgeon.

And I emailed him, and he said he didn't have time to visit with me. And I said that was fine. You know, we have a friend in common, and I said, you know, I'm sure he's, like, saving lives. And our friend in common said, no, no, it's not that. It's that he's going to a rock concert with his kids tonight, and this weekend he's going on vacation with his wife. And when I heard that, I thought to myself, you know, there is some secret that other people have. Because people like Atul Gawande, they get more done than most of us, and yet he still has time to hang out with his kids and go on vacations. He's always relaxed.

And I realized that what's going on is that the most productive people in companies, they actually train themselves to think differently, right? There are so many potential distractions nowadays between smartphones and email and the Internet and everything that's on television and politics. You can be distracted almost continuously. But the people who are most productive, they spend more time thinking about how to govern their thoughts. They spend more time really thinking about how to create processes and time in their life to be reflective. They know that if they seek out choices that make them feel like they're in control, it's going to be easier to generate motivation. And so, for instance, when they need to do email, they start by, in a response, typing a sentence that makes them feel like they have some power over this situation, that they can decide whether to go to the meeting or whether to stay home and how long the meeting should last.

They know that to sharpen their focus, they can do a better job of paying attention to the right things if they're in the habit of what psychologists call building mental models, sort of constructing little stories about what you expect to happen today. All of those things take a little bit of time, not much time, just a couple of extra minutes each day, but it takes us stepping back and thinking about how our day goes instead of just reacting, being proactive, and asserting ourselves into our schedules and into the choices we make. The most productive people, they don't work harder than us. They still only have 24 hours in the day, but they do work smarter. They do think more about the choices that they're

making, and they make space in each day in order to have the time to do that. So what have you done in your own life as a result of writing this book? Do you deal less with email. I'm just curious how this has changed you, whether in your personal life or just the way you do your job. It's actually changed. It's changed a lot of what I do. I have to say, like, one of the best parts of doing this reporting is learning how I could do things better. And there's two ways in particular. I mean, one thing that I definitely do is I spend a lot more time thinking about the choices that are in front of me. So now when I'm replying to emails, instead of waiting until the end of the day and feeling like it's such a chore and just dreading it.

What I do is I sit down and I type these half sentences where if someone has asked me to have lunch, I say, yeah, I'll have lunch, but we've got to go to an Indian restaurant. Or if they ask me for a meeting tomorrow, I say, yeah, I'll meet you at 2 o'clock, but only for 20 minutes. Something that allows me to sort of make a choice right away and assert a little bit of control because I know that that's going to make it much easier to get motivated to actually deal with all these emails. And it works. It's cut down how much time I spend actually dreading and then dealing with emails. Another example is to-do lists, right? One of the things that I came across in the research is that there's a right way and a wrong way to write to-do lists. That most of us

write to-do lists by jotting down like a couple of easy tasks at the top of our page. And then we write down everything else we want to do that day. And maybe at the bottom of the page, we'll put the hard things, right? And that way, when we sit down, it feels so good to cross off those things that we maybe already did or that are easy to get done. But psychologists say that's exactly the wrong way to write a to-do list. That's using a to-do list for mood repair rather than for productivity. So what psychologists say you should do is that at the top of your page, you should write your biggest goals, what they call stretch goals, sort of these big ambitions of what you really want to get done this week so that that way you're constantly reminded that there is this

thing you're moving towards. And then under that, because that can be kind of overwhelming, is just to write out a plan, like specifically what you want to get done, how you're going to measure it, what you need to change in your schedule to make that achievable and realistic. What's the timeline? Should this take 30 minutes or should it take two hours? That's how I write my to-do list now every morning. And it has kind of transformed how much I get done because instead of doing a couple of easy things and then wasting half an hour on Facebook as a pat on the back because I feel like I've accomplished something, I'm always reminded of what my bigger goals are, but I have a plan so I know how to start right away. The book is

Smarter, Faster, Better, The Secrets of Being Productive in Life and Business. It is available everywhere. It is yet another batch of great stuff from Charles Duhigg. Charles, thank you so much for being here. Thank you for having me. I really appreciate it. Up next, we'll give you an inside look at the stocks on our radar. This is 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, Matt Argersinger, and Ron Gross. Guys, time to get to the stocks on

our radar, our man Steve Broido, on vacation this week. So, you'll just have to deal with me. Ron Gross, you're up first. What are you looking at? Chris, this week, three of our Foolish premium services all recommended Starbucks, S-B-U-X, which is a company I don't own. We're obviously all familiar with it, but it made me have to go back and put it on my radar, because obviously a lot of our analysts are seeing something here that I haven't seen in the past. Everyone knows the story. Coffee's obviously the big deal. Diversification, though, into juices and baked goods and sandwiches done well. 13,000 stores, 6,100 in Asia. Probably that number could get up to 10,000 here in the U.S.,

opening 600 new stores in 2016 alone. So the growth story continues, trading 31 times earnings. So not cheap, but if they continue to grow and put up those numbers, then you could probably make some good money. What's your drink when you go into the Starbucks? Usually in the summer, where it's unsweetened iced coffee. Alright, Jason Moser, what are you looking at? Jason Moser. Yeah, I'm just going to imagine what Steve might ask if he were here, that could kind of make it easier. So, taking the glass half-empty approach today, going to tell you about a stock to sort of stay away from, Twilio, ticker is TWLO, and this

is a recent IPO on the market. They're in cloud communications. If you can define that for me, Matty, I think that would probably help the cause here. It seems like a pretty big market there. But very low float, big private equity interest, it's not profitable, it's not cash flow positive yet. So, in this market, there are enough reasons for me to say you probably want to steer clear of this one until reality sets in. It's trading around 20X sales right now, which is pretty high for an unproven business. I'm not saying it doesn't have a bright future. What I am saying is that I think a lot of people have bought into this IPO hype, and there are a lot of reasons to probably steer clear and let this

stock price come down a bit. O' All right. Matty, what about you? I'm going with BorgWarner, ticker BWA. It's a recent addition to our watch list and million-dollar portfolio. This is an auto supplier. They supply mostly engine components, turbochargers to car manufacturers. Volkswagen is their biggest customer, so the stock's been beaten down. It's trading at a very compelling multiple, about 12X earnings, but even on a cyclical basis, that's looking pretty good. A company I'm taking a hard look at with the team, and I think it looks very compelling for a rebound.

All right. Ron Gross, Jason Moser, Matt Argesinger. Guys, thanks so much for being here. Thanks, Chris. You can check out past episodes of Motley Fool Money and all of our podcasts here at The Motley Fool. Just go to podcast.fool.com, or you can subscribe on iTunes, Stitcher, Spotify, anywhere you find podcasts.

That is going to do it for this week's show. Thanks for listening. We'll see you next week. You