Motley Fool Hidden Gems Investing - Disney's Magic Touch

Episode Date: May 8, 2015

Disney reports big earnings. Whole Foods thinks small. And TripAdvisor flies higher. Our analysts discuss those stories and share three stocks on their radar. And Freakonomics co-author Stephen Dubner shares some insights from his new book, When to Rob a Bank?     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 Matt Argesinger and from Motley Fool Pro and Options, Jeff Fischer. Good to see you as always, gentlemen. Hey, Chris. How's it going? Earnings Palooza continues. We've got the latest results from Wall Street. Freakonomics co-author Stephen Dubner is our special guest this week. And as always, we'll give you an inside look at the stocks on our radar. But guys, let's start with the Magic Kingdom.

Second quarter profits for the Walt Disney Company up 10%. That was better than expected because a year ago, the big story was frozen. So good news that they beat Jeff. But despite the beat. Stock down just a little bit this week, which makes me wonder if this stock is a little pricey. There's no question it's a little pricey, but I don't believe it's overpriced. Disney is doing so well on every front, really, even ESPN. But from their movie department to their theme parks to their cable networks, they're just doing extremely well. And they have so much that's going in the right direction going forward. So Marvel Age of Ultron this

weekend, one of the highest-grossing weekend films of all time. The other two, so two of the top three, or all three, are Marvel, Avengers, Age of Ultron, and Iron Man 3. So, Disney has three of the highest-grossing opening weekend films of all time, all bought from Marvel, which they paid only $4 billion for in 2009. What a steal. What a steal. Huge steal. They have Shanghai Disney Resorts opening next year, and they're very excited about that. Shanghai, pretty big market over there. Pretty big, I would say.

And of course, Star Wars, coming out December 18th. But they're already making money on that from Star Wars Rebels, and a new game is coming out in November. So, Chris, they paid $4 billion for Lucasfilm in 2012, which I think was, again, just a steal. Yeah, Mattie, we were talking about this earlier. Bob Iger, the CEO, gets a lot of credit. And yet, I still feel like he doesn't get enough credit for these acquisitions, is, we're not even talking all that far in the past, when you look at Marvel and Lucasfilm for less than $9 billion, they're going to make that back in no time. No, I know. And each time, investors, including myself at times, when we looked

at the Marvel buyout, we looked at the Lucasfilm buyout, we thought, gosh, paying a pretty penny for those. But my goodness, what Disney can do with those properties at those value points is incredible. No one else can do it. We can go back to Pixar, now that's 13 or years ago now, but the $7 billion they paid for that has just paid over and over again, and I expect the same with Marvel and Lucasfilm. Jeff mentioned ESPN, though. The one thing about Disney that has me a little bit concerned is the higher sports costs are just getting very high for ESPN. When you talk about buying college football games and NFL and all that, the costs are just getting higher. That's only one segment of the business, but one

of the things that Bob Iger has done for Disney, if you look at the operating margins of this company over the last 10 years, they've almost doubled. And that's remarkable for a company of Disney's size, and they've been able to do that because of his actions to studio business and increasing the efficiencies across the board. But those margins, you might start to question those if the content costs that Disney has to pay start to go up. And it's just something to be concerned about. That's a good point, Matt. That said, advertising revenue grew 18% at ESPN this last quarter. And of all companies, of course, Disney has the wherewithal to pay up for that content.

And I think they have the smarts to make sure that it'll be profitable. But it's a true concern, as with Netflix, as with – I mean, content is becoming king. It's expensive stuff. Speaking of content, it's estimated that Star Wars has brought in $27 billion as a franchise since its inception. And a lot of that, more than half, is toys and games, while the movies have only brought in $4 billion. It's nice to see them placing these bets, so to speak, on things like Star Wars and getting – an even more diverse revenue stream, because I think the big question is really with ESPN, how they embrace that digital age and mobile entertainment. And it remains to be seen how

we're going to see this all play out with sort of the traditional cable package slowly but surely disappearing. So, I mean, again, I can't help but wonder if Disney hasn't sort of hit that Under Armour moment, where really the market just expects nothing but perfection. And if they fail to deliver that perfection, well, then you won't see the stock really do anything special. But that doesn't take away from the quality of this company. And then I think the bigger question is leadership. And once Iger's gone, who's taking over? It's true. Shares are at about 19 times forward earnings estimates. So, they're a trade about in line with the market, but I think it's an above-average company. Final thought on

Disney is, rumor is, and it might be confirmed now, that there's going to be a Boba Fett or Boba Fett? We have this debate at home all the time. My son's like, it's Boba, Dad. Get it right. A Boba Fett-only movie. A movie that just tells his backstory. And you can start to do that with so many Star Wars characters. Oh, there are a million characters. Awesome character. On the face of it, second quarter results for Whole Foods were pretty good. Record revenue, same-store sales up more than 3.5%. But the company also announced a new retail concept

aimed at millennials. And Jason, Wall Street really doesn't seem to like this idea. I have to mention, co-CEO John Mackey sits on the board of directors here at The Motley Fool. Shares down this week. What do you think of this new concept? The new concept will be interesting to see. It's worth noting that it is something that will be additive to their opportunity they see of 1,200 stores. Those 1,200, that's not inclusive. We'll see potentially additional stores on top of that 1,200 they see the market opportunity for. I think with Whole Foods, the low-hanging fruit has been picked here. They're not special anymore. There are plenty of other concepts out there that are more

or less trying to kind of replicate what they're doing. And that's not a bad thing. I mean, you have your imitators and the people that are trying to sort of do what you're doing. That means you're doing something well. But along with that, we see greater competition, which is playing out on their margin line. Margins were down a little bit. And I think the market was certainly not too enthusiastic about the comps number that they gave out for this current quarter that we're in. They see a comps number of this current quarter running at a 2.8% rate versus 4.3% last year. We're seeing something that's playing out that's not surprising any of us. It's a much more competitive industry than it was even just a year ago. That doesn't

mean, though, that this isn't an investment worth hanging onto. I think the market actually was giving us a gift this week, because when you look at this, they're going to double their store base at least here in the coming decade and beyond. So, if you can be a patient shareholder and hang onto those shares for a while, this is probably going to turn out be a winner for you. Well, and I think there's a little part of this that has nothing to do with Whole Foods, and it's not their fault, but Tesco tried this type of concept, smaller footprint stores aimed at affluent millennials. It did not work at all for Tesco, and I think that,

to some degree, Matty, people are looking at this and saying, well, it didn't work for them, we're not sure it's going to work for you. Right. And I would tend to give Whole Foods the benefit of the doubt and see what they can do with this concept. To me, especially at that millennial level, urban, walking neighborhoods is what that generation wants. The idea of having a premium bodega, a premium deli or a place where you can get fresh groceries and maybe prepared meals seems pretty good to me. I agree with Jason that the sell-off here, the stock is down well over almost 15% now from when that earnings came out. That just seems a little too harsh.

It's very interesting Buffett's comments on Whole Foods this past week or something. He was saying something to the extent that he doesn't see smiles on people's faces in Whole Foods. Right, yeah, when I go in there, I don't see anybody smiling. It's still a Coca-Cola world after all. I just kind of have to believe that sort of old-school thinking. He's kind of talking his book there. Yeah, sure. I love it there. It's a great place. So I think Wall Street, as you guys just talked about, is most concerned that Whole Foods has been trying to value approach.

They've been lowering prices, and it hasn't resulted in the sales uptick that has been hoped for. and this small new concept that they haven't named yet. It won't be called Whole Foods, these mini-stores. Some other name they're going to reveal in the next month or two. They're taking a value approach there, too. So concerns or margins will be lower, and they're going down that path. Probably worth soliciting our listeners to come in with some ideas for names. Radio at fool.com, if you have a suggestion for Whole Foods, we'll pass it along.

I think Quickster is available. A pretty good first quarter for Tesla Motors. Revenue came in higher than expected. Guidance for 2015 is looking good. But, Matty, some investors wondering not just about the future of battery-powered vehicles, but battery-powered homes. The event where Elon Musk unveiled the Powerwall battery, you can get it for your home. Are you excited about this? It was a little bit, no. I mean, I'm excited about the concept. I'm excited about the idea. and I think it's going to have some serious legs to it. But just for Tesla's quarter, let's focus on the core business for a moment. They delivered over 10,000 vehicles. Revenue

was up 55% year-over-year. They're now at a production level where they're delivering more than 1,000 vehicles a week. On track to get over 55,000 Model S and Model X deliveries in 2015. That's huge. The automotive gross margin, 26%. We've talked about that before. That is the envy of the automotive industry. That puts them in luxury territory. And the Model X is on target for Q3. So, the core business, very good. Now, the Tesla energy business, Chris, Powerwall, it came off a little bit of a dud

because I think people were probably believing that there's this revolution that Elon Musk is going to start with these batteries. It's the start of that. I mean, if you look at the actual batteries themselves, they really are kind of either, it's a glorified kind of backup generator for your house, but it also allows you to stop paying peak utility rates

because essentially one of the things the battery does is it buys, if you don't have solar panels charging it, it'll buy power during the day when electricity rates are lower and deliver that power in the morning or at night when rates are higher, you know, so you can save some energy costs there. That said, at a price point of between $3,000 and $3,500, you know, one of these things, fully charged, will basically power your refrigerator for a few hours, maybe some other appliances, and maybe charge your phone or laptop. So, it really, the technology is not quite there yet, but I think it's a great start to what I do think is going to be a pretty big revolution.

O'Reilly. TripAdvisor, first quarter profits and revenue, lower than expected. But Jason, stock's still up for the week. What's going on? Jason Moser. The numbers they brought were just really impressive. This is like the online shopping mall for trips. You want to find anything out about anything where you might want to go, this is really the place to go. Excluding currency effects, their top line grew 36%. That's pretty impressive. What I'm encouraged by with this company is, they continue to diversify their revenue stream away from advertising. So they have subscriptions and transactions and other revenue they generate.

That represented, a year ago, it was 15% of overall revenues. This quarter, it was 21%. So that's encouraging to me as well, in that they continue to diversify that revenue stream. And I've always said it's going to be easier for TripAdvisor to try to become more like Priceline than it's going to be for Priceline to become more like TripAdvisor, because TripAdvisor has really gained the trust of travelers worldwide in being the place to go get really relevant and accurate reviews. And then, you know, look at the monthly unique visitors now.

This quarter they reported 340 million versus 260 million a year ago. And, you know, we always say advertisers go where the eyeballs are, and they are certainly on TripAdvisor's platform. I'll just point out that TripAdvisor is recommended across many Motley Fool services. Welcome back to Motley Fool Money. Chris Hill here with Jason Moser, Matt Argesinger, and Jeff Fisher. Current green mountain falling this week after second quarter results came in lower than expected. Management was optimistic about the new brewer, Matty, and the new pods.

Thought they were going to be a hit, and that is absolutely not the case. Right. I mean, if you look at the past results, we're actually mostly in line, but it really came down to the guidance, and Chris, you said it. I mean, they're expecting now flat to low single-digit sales growth for the year, down from high single-digit growth. They really cut their EPS and cash flow expectations, and it really comes down to the fact that the Keurig 2.0, the new pods, are not selling well. And I think that's pretty obvious.

I mean, if you think about it, you have a lot of people who own Keurig machines, and why do they feel like they need to upgrade? They're also selling, of course, more of the branded pods, you know, Starbucks, Kraft, Dunkin' Donuts, and the margins on those are much lower. they're kind of cannibalizing the Green Mountain's own cane cups. So, getting hit from both sides, and you know, the stock's down actually about 35% from its all-time high, but still trading for close to 30X earnings. So, given the year they're going to have, I'd say this is one you probably still want to avoid.

And I've got to give credit to our colleague Ron Gross, because he called this months ago when they came out with the new pods that weren't going to work with the old machines, and he said, boy, they better manage this right, or people are going to get annoyed. And they certainly haven't. So, Ron was saying that Green Mountain was indeed not going to be firing on all cylinders. Exactly. Shares of Papa John's hitting a new all-time high this week. First quarter profits were up. Revenue was up. They raised guidance for the full fiscal year. What's not to love, Jeff? You know, Disney is a fun stock to own for your family. Pizza as well. So if you're trying to get

your kids involved or your family in general, pizza. Papa John's is up 600% the last 10 years. Domino's is up 500%. So you could be eating pizza and getting paid to eat it, making money while you eat it. So, everything's going well. North American same-store sales were up 6%, more than 6%. And as Billy Kipperstock, the pro-analyst who covers Papa John's, pointed out to me, that's 18 consecutive quarters where same-store sales have been up. By a boom. International sales are up big, nearly 8%. Same-store sales up 8%. They're focused on growing international further. Their mobile app is really driving sales. They've tackled

technology early. It's so easy to click on your phone and order a pizza, that's driving a lot of sales. Now they just rolled out PayShare, where you can share the bill with your friend as you order it. I like the idea of someone paying for my pizza. Yeah, we talked before the show, I think companies like Papa John's, who have figured out the mobile ... I mean, their mobile app is so simple to use. It's very easy to customize your order and your pizzas. It makes it all simple. Restaurants that figure that out are going to do really well.

Yeah, it's making a big difference. It changes your habits. Sure does. SolarCity out with first quarter results this week. Installation's up 87% from a year ago, so more customers with solar power. They're growing installations, Matty. They're not really growing revenue, though, to the same degree. Right. Yeah, again, with SolarCity, the model's really hard to understand. Essentially, there's so much upfront cost for a revenue stream that will stretch out for decades with SolarCity. So, it's tough to focus on the revenue. But what I focus on is, 28,000 new

customers in the quarter. They deployed 153 megawatts. That's more than a double, that's almost a double from a year ago, I should say. The backlog is huge. They have 237 megawatts worth of installations that they booked in the past quarter that they've yet to install. And they've got two new kind of interesting products coming out. They've got the home storage segment, which is really coming off of Tesla's Powerwall, which is going to combine solar panels with the Tesla battery pack. And then they've got this microgrids concept that's really interesting, which is essentially, you know, they're going to combine residential solar panels, battery packs, and inverters to essentially develop these microgrids that

are smart demand response, that they can manage supply and demand, either for entire cities or maybe small corporate office parks. Really good stuff with SolarCity, and I think don't sweat the short-term stuff when it comes to this company. This week, Fitbit, the maker of wearable fitness tracking devices, filed the necessary paperwork to go public. Later this year, we'll see if that is popular with investors. But I know it is a hit with investors, guys. Chicken and biscuits. Bojangles, the restaurant chain, went public on Friday at $19 a share. The stock up more than 25% on opening day. Jason Moser, I know you love the food.

The jangler. Do you like the stock? This is probably one of those occasions where I like the food, not the biggest fan of the stock. The problem is, with this IPO, none of the cash from this IPO is going towards the company and growing. I mean, this is just going to current shareholders of the company. So, that's a bit of a concern of mine. The other concern I have is, I am just not quite certain that they will be able to translate across the country as they think they may be able to.

Very popular in the southeast United States. Exactly. I mean, growing up in South Carolina, moving up here from Georgia, I mean, there are lots of Bojangles and a lot of people love it, and for good reason. It's good stuff. But I'm not quite certain that the market opportunity is as big as they see it. Now, with that said, I do like the fact that they own a good chunk of those stores. They franchise some out as well. But owning a lot of those stores, I think, is encouraging. You'd kind of be interested to see how that strategy plays out over time.

But this is one where I'm going to sit here and just watch it on the sidelines, probably just go get me a Cajun biscuit. Steve Broido, I know it's never going to topple Olive Garden as your No. 1 restaurant of choice, But have you ever been to a Bojangles? Ever sampled the fare there? Probably at some point. It seems like Bojangles feels like a McDonald's sort of restaurant. So probably driving down south, I have been to a Bojangles, I believe.

But it doesn't sound like it was necessarily a memorable experience. Not so much. You know what? I think we'll get Jason to take you on a little tour. I'm all in. Let's do it. Mr. Bojangles. Mr. Bojangles.

Mr. Full Tango Oh, damn All right, Jason Moser, Matt Argersinger, Jeff Fischer. Guys, thanks for being here. We'll see you a little bit later in the show. Attention all listeners, if you're looking for a little extra money, I've got some good news. Freakonomics co-author Stephen Dubner is up next

to talk about the best time to rob a bank. Stay right here. You're listening to Motley Fool Money. you got my money you got my money you got my money welcome back to motley fool money i'm chris hill joining me now from freakonomics studio in new york city is stephen dubner he is the co-author of the best-selling freakonomics books he's the host of freakonomics radio and his latest book with co-author stephen levitt is when to rob a bank and 131 more warped suggestions and well intended rant. Stephen, welcome back. Hey, Chris. Thank you very much.

So 10 years ago, you're getting ready to publish Freakonomics. It's your first book with Levitt. You obviously have to have a website to go along with it to promote the book. There's a blogging feature. And in what I can only guess is something that sort of sets the tone for your relationship with Stephen Levitt for how you're going to work over the next decade. You basically just say, let's try blogging. Yeah, that was exactly it. So I wasn't devoted to blogging. I mean, blogs, this was 2005. So blogging was, I would say, about to hit its, about to enter its heyday. I mean, there were certainly a lot of blogs around, but the next few years would turn out to be really great for blogs, which we kind of lucked into. And our web designer said, she literally said,

you know, this has a blogging function. Do you want me to turn it off? And I said, I don't know. what do you think? You know, should we think about blogging, blah, blah, blah. And I like the idea, honestly, immediately, because when you write a book, the minute you put it out, it's unchangeable, right? Even e-books, you know, books aren't updated very often, especially print books. So the idea of a blog was, hey, we can respond to stuff or if things change or if we find out more information. So both Levitt and I, we just started writing a little bit together but mostly separately uh 10 years ago as you say and we just kept at it and for reasons that we could never explain we just loved it um and i think if you had to come up

with an explanation which we tried and mostly failed to do we just it was nice to have a conversation um with readers and nice to have a reason to stay very interested in anything in the world going on that you might have an interest in so really it's a journal in a way but an online journal related to topics that we've written about in Freakonomics, but then going way, way, way beyond that as well. And out of the thousands and thousands of blog posts, you've sort of cherry picked some of the more interesting and fun and provocative ones. So let's just start with the title. When is the best time to rob a bank? I'm asking for a friend. All right. Tell your friend, Chris, easily the best time to rob a bank is never. Bank robbery

is a crappy crime. Now, this may be because the typical bank robber is a pretty crappy thief. So, you know, the data on this turned out to be pretty interesting. If you look at the most successful time, for instance, to rob a bank, there wasn't that much variance in days of the week. Friday was kind of a bigger day, but there wasn't that much variance in days a week. But time of day, there was a lot of variance. So it turns out that you're much more successful robbing a bank if you rob it in the morning. And yet the majority of bank robberies take place in the afternoon. And as it turns out, most bank robbers, a bank robber will get caught on average after three robberies. And since the average take is not very much in this country, let's say maybe

a thousand dollars, it's just a stupid crime to do. But the interesting part in there for us then became, well, if mornings are better, why so many in the afternoon? Maybe they just don't know, right? Whenever you're analyzing data, you have to figure out there may just be a lack of knowledge. Or it could be that, you know, the kind of person who gets to bank robbery gets to bank robbery because they can't get up in the morning. And if they did, they'd have a, you know, regular job like the rest of us. Do you think Hollywood is to blame? It does seem, you know, you look at some movies, it does seem, it can be kind of glamorous. Bank robbery? Yeah, you know, the the image of the gentleman bandit that sort of thing butch cassidy yeah yeah yeah i think that

uh you know um i'm trying to think you know if if it were i i would much rather embezzle than rob a bank yeah it's just too obvious you know it's like like the famous quote it's where the money is it's like everybody knows that and therefore banks have had hundreds of years to come up with ways to minimize i mean look when you walk into a bank you'll notice there isn't a whole lot of machinery in place to prevent bank robberies. Why? Because not that many people rob banks. If there were a lot more robbing them, we'd see a whole lot more invested in that. But the fact is, is that not that many people do it and get away with it. So yeah, if you're looking for a real crime, this post about when to rob bank actually began, was related to this woman

that I'd heard about when I was visiting in Iowa. She lived out there and she had embezzled from the bank where she worked. It was actually owned by her father. And the way she did it was basically by keeping two sets of books. And then when she was ultimately arrested and she helped prosecutors figure out how to stop this kind of crime in the future, she realized one insight of hers was that if you're keeping two sets of books like she was, you can never take a vacation because there's the risk that somebody else is going to discover that. And so one great metric to look for, for embezzlement, let's say, or any other kind of crime, is when people are not using up their vacation days. So for those of you out there who are, for whatever reason, not using up your

vacation days, you've been put on notice. There are several themes that you explore in the book, and one of them is cheating. You're a sports fan. What do you think it is about cheating that we generally find to be so captivating? Well, I came to a conclusion that's probably a bit counterintuitive for most people and quite possibly totally wrong, which is that maybe cheating is really great for sports. And what I mean by that is cheating is really, you know, one step over the line. Sometimes maybe it's five steps sometimes, but it's one step over the line of really, really wanting to win within the rules, but you want to win so badly that you go beyond, right?

So what cheating really is, is a manifestation of desire to win, which is what sports is about. Now, the reason that the ninth circle of hell is reserved for people who cheat to lose, right? Who throw games. And why does that upset us so much? It's because it goes against the nature of sport.

You don't cheat to lose. You don't throw a game to make money for yourself. You cheat to win. And so when you look at when I look at the obsession we have, I mean, if you read the sports pages on a given day, it could be like half the articles are about some form of cheating depending on what season you're in. And so right now, my son, Solomon, he's 14. He's a soccer nut. He won't let me call it soccer, so I'll say a football nut. And when you just look at the different, you know, the whole play site, the way football is played on the pitch, you know, flopping would be one of the most drastic forms of it. You know, trying to get away with a foul, trying to pump up a foul, trying to deke and create an offsides or avoid one.

And, you know, cheating, trying to get an advantage, even if it's not quite within the rules, I think we love it. And then it goes up the ladder all the way to performance-enhancing drugs. And, you know, we kind of wring our hands and ask our teeth, say, that's terrible. It's setting a bad example for kids. On the other hand, you say, first of all, we're fascinated by it. And second of all, you say, man, here's a guy or a gal who so badly wants to kick somebody else's ass that he's willing to put some crazy medicine in him that's going to shrink his testicles and probably, you know, end his life prematurely. I can get behind that. I love how badly he wants to win.

I wouldn't want to do it. So I think that there's I think that we kind of secretly applaud cheating. You're listening to Motley Fool Money, talking with Stephen Dubner. One half of the Freakonomics team, the new book is When to Rob a Bank and 131 More Warped Suggestions and Well-Intended Rants. And it's the well-intended part of your title I want to focus on for a second because one of the things you write about is one of the early blog posts that Stephen Levitt wrote that generated a very quick and very angry response from readers.

And it was Levitt posing the question, if you were a terrorist, how would you attack? Yeah, that was brilliant, wasn't it? Brilliant is one word, I suppose. All right. So let me give you a little bit of the context in that. So we'd been running our blog for maybe two years or something like that on our own. Our first book had come out. And now we're working on our second book, Super Freakonomics, which actually had a we were working on a story that involved a pretty complicated algorithm trying to catch terrorists.

We were working with a British bank trying to catch terrorists. So we were thinking a lot about terrorism generally. And after we'd had our blog independently for a while, we were asked to bring the blog over to The New York Times and to live on their site, which was, you know, nice for us. I used to work at the New York Times. It was a nice homecoming. It was a big deal for us. And I think it was the first time they brought an outside blog within their site. And I was asked for an article published, I believe, in the New York Observer that day, you know, why do you think you guys were the first blog that they were willing to bring in? And my answer was something like, well, you know, because I used to work there, I know their standards and they know us. We'd written a Freakonomics column in The New York Times magazine. And I said, and it's not like we're going to issue a fatwa or something like that. Right. That's what I said. And then the next day, on the first day of our blog on The New York Times, Levitt writes this post.

If you were a terrorist, how would you attack? And it was, I swear to God, a really interesting, thoughtful, thought-provoking, obviously, post, basically saying that, you know, there aren't that many bad guys out there, but they can cause real havoc. So wouldn't it be good to know as much as possible about their possible methodology? Well, if we ask them, they're not going to tell us, even if we know who they are. But why don't we just open, you know, open thread, essentially? Here's a couple ideas of how one might think about creating the optimal terror, the maximum terror for minimal investment, let's say. But what are some other ideas you might have? So it really was meant to be, you know, I don't know about a public service move, but it was meant to be an open thread that could produce some information and ideas that law enforcement and scholars, researchers and others could think about. But I will say that the majority of our, especially brand new readers on the New York Times, did not take it that way, Chris. Were you at all surprised by the response?

And did Levitt run this by you before he posted it? Yeah. I mean, honestly, I don't really remember how much now. But back then, yeah, I was kind of the de facto editor of the blog. So he would write things and then I would take a look and maybe edit it a little bit and then post it. So, yeah. So, I mean, to this day, I will still absolutely defend every word he wrote in it. There's nothing, quote, wrong about it. But it was incendiary because, look, our whole style of thinking is that, yeah, you can get in line and think the way everybody else does and try to solve problems the way everybody else does and come up with the same four ideas everybody else does, even though none of them have worked. Or you can really suspend your need to sound, quote, smart or your need to be, quote, polite or whatever, and really try to have some new ideas. So I'm all in favor of that. And in terms of the response, whether it surprised us, I think what surprised us was just the magnitude because, you know, the New York Times website gets a lot of traffic, it should go without saying.

And it was getting so much, not all of it negative, by the way, but getting so much of the Times itself, the people who are responsible for kind of shepherding our blog, they just hit the panic button and turned off the comments, which only all that did was it made everybody email to us directly. One of the things that comes out in this book, I think a little bit more than the previous Freakonomics books, has to do with your personality, Stephen Levitt's personality, beliefs that you have, interests that you have. And one of the things that comes out that I did not know about you that comes out loud and clear in this book is, boy, you really hate the penny. I mean if if you get the magic wand you are eliminating the penny from our monetary system if if I get the magic wand I will definitely eliminate the penny but only if I have like 20 wishes and that's number 20 all right so I I know I sound like an anti-penny zealot and I am but only because I don't even know how it got started Chris it just I think I just casually wrote about you know throwing away pennies when I get the change because who on earth

You know, the penny is just a ridiculous thing. Inflation has rendered it literally almost valueless, plus which we're paying taxes to our government to make the penny, which costs a lot more than a penny to make. And when you look at who are the biggest defenders of the penny, one of the biggest organizations is a group called Americans for Common Sense, C-E-N-T-S, which tells us how great it is for the penny, how great the penny is that children do penny drives to raise a lot of money. to which I say, why can't they do a dollar drive and raise more money? Is the penny some magical thing? They tell us that if you round up to a nickel, think of how much more expensive things would be for people, which is totally idiotic in my view. And it turns out that the biggest lobbying group for the penny

is basically funded by the zinc industry, which supplies the raw material for the penny. So to me, it's a slam dunk. There's no use. The only reason we still have the penny is because of tradition and inertia. And if you look at other, you know, modern countries, they routinely eliminate their smallest currency that inflation invalidates and why we haven't is beyond me. But I have to say, I've stopped caring. It was just too much. It was to care so much about something so stupid was just a waste of my time. So I give up. To anybody out there who wants to take up the anti-penny baton, power to you. You can read everything I've written about it. I'll give you some ammunition, but I'm off that train. But it's nice to know that if I'm behind you in line and there's a take a penny, leave a penny, you're not taking it. You're the guy who's only leaving pennies in the little dish. I am. I'm definitely leaving. I love the leave a penny thing because it's it's stupid to have them. But I'd much rather leave a penny in a bowl than have to throw them away. But I promise you, if you are behind me in the line and I get pennies, I do. I mean, I feel bad about it. It looks un-American. It looks it looks, you know, it looks crazy.

but what I just do is when I get the change, I will put the receipt. If I use cash, I will get, I will get the receipt and the change in my hand and I will just sort it. And then I will drop the receipt and the pennies in the bag, which doesn't look so bad. And then I'll put the silver change in my pocket. Honestly, I throw away nickels too. So I'll throw the nickels and the pennies. I'll leave them in the bag. And then when I get home and I take out the groceries, the whole bag goes in the trash. But I do put the coins in the recycling because I'm a good citizen, damn it. The book is When to Rob a Bank and 131 More Warped Suggestions and Well-Intended Rants. It's available everywhere, so pick up a copy. Stephen Dubner, always so good to talk to you.

Thanks for being here. Ditto, Chris. I really enjoyed it. Thanks. Thanks very much. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. Chris Hill. 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, Matt Argersinger, and Jeff Fischer. Guys, it is time for the stocks on our radar this week. Matt Argersinger, what are you

looking at? And get ready for Steve Broido to hit you with a question. Right on. Well, I'm going to take one of Jason's favorites this time around. I'm going with Twitter, TWTR. Results came out a little while ago, stock got crushed, but gosh, revenue was up 74%. This is a platform with 300 million active monthly users. If you think about what Periscope did with the Mayweather Pacquiao fight about a week ago, and I just think that almost disrupted the media landscape around that, I just think this company either gets new management or gets bought out. Either way, as an investor today, you probably do pretty well.

Steve, question about Twitter? I love the concept of one communicating to many in a simple way. Can you give me a parallel of a business that is doing something like Twitter is, also maybe not in the most profitable sense? Wow, Steve. Tough question. You got me stumped there. One to many businesses that are not profitable outside of Twitter. Gosh, I'm totally stumped. Why don't we throw that out to the listeners? Radio at Fool.com. If any of you listening out there have an idea, send it in.

Jason Moser, what are you looking at? So, one I'm kicking around for our watch list over at MDP is U.S. Ecology, ticker is E-C-O-L. This is a little company, just about a $1 billion market cap, and it's an interesting business. They treat hazard as waste, so it's a sexy business, Steve. It's something that really gets your attention from the get-go there. But really, that is the attractive part of it, is just tremendous barriers to entry in this business. Because it's so regulated, because it's so risky, they actually handle radioactive material. I mean, you know, bottom line is, something has to happen with that stuff. And U.S. Ecology

is the company, one of a few, that is equipped to handle it. They just made a big acquisition here recently that will offer more services and help grow the business. So, it's certainly one that I'm going to be digging further into. Steve, question about U.S. Ecology? The question is more about the market cap. With a $1 billion market cap, how small will you look in terms of companies for your comfort level? My comfort level, typically, I like $500 million or bigger. I think that when you start getting under that $500 million number,

those are companies that tend to have just a bit more of a tough time in gaining any kind of an advantage. Jeff Fischer? A company I've been watching about two years since it went public is Restoration Hardware, ticker RH. They run now six of their new high-end, full-line, gigantic gallery stores. They're destinations in and of themselves, and they're really driving higher revenue and higher profits for the company. They plan to open between 60 to 70 of these large stores. I love that they're turning retail back on its head and saying, hey, a larger store can still work today and work very well. Steve?

Price points are incredibly high at that store. Every time I've gone in, I don't think I've ever bought anything. Does anyone buy anything from there? If I have $3,800 laying around, I guess I'm in for a couch, but barring that. They are targeting families that make, you know, at the top, you know, one or two percent of the country. So if you, yeah, yeah, that's, yeah. Anyway, they are expensive. All right, guys, thanks for being here.

That's going to do it for this week's edition of Motley Fool Money. Our producer is Matt Greer. Our engineer is Steve Broido. I'm Chris Hill. We'll see you next week.