Motley Fool Hidden Gems Investing - Facebook's Big Surprise

Episode Date: January 29, 2016

Facebook reports record earnings thanks to strong growth in advertising. Microsoft connects with its cloud business. Apple loses some of its shine after projecting a decline in revenues. And McDonald's brings home the bacon thanks to all-day breakfast. Our analysts discuss the week's top business stories and share some stocks on their radar. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argesinger, and from Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen. How are you doing? More than 130 companies in the S&P 500 reporting earnings this week, and we are going to talk about every single one of them. Yes! Exhausted. We will dip into the Fool mailbag, and as always, we're giving you an inside look at the stocks on our radar. But we begin this week with the social network. For the

first time ever, Facebook's quarterly profit topped the $1 billion mark, and fourth quarter revenue increased 51%. Matty, I don't even know where to begin with this company. It is the social network, you said it exactly right. It's just hard, you have to marvel at Facebook's numbers. If we just start with the user base, monthly active users climbed 14% to 1.6 billion, as my MDP colleague Simon Erickson wrote. That happens to be the combined population of North America, South America, and Europe, in case you were wondering. Mobile monthly active users jumped 21% to 1.4 billion, also a lot of people. It's phenomenal, growth. Revenue, and of course revenue, most of which is advertising still, surged 52%

to $5.8 billion. That crushed expectations. But here's the really fascinating statistic I thought from the release. Speaking of mobile, 80% of Facebook's ad revenue in the recent quarter was mobile. If you go back just three years to 2012, it was 23%. That's a massive shift in the business. And I think at the time, a lot of us, analysts, a lot of people smarter than me about social networks said, wow, you're never going to be able to monetize mobile as well as you can on a desktop or PC, but they've certainly done it. If you look at the average ad revenue per user, it's $3.73 in the most recent quarter. That's up from $2.81. I thought, I was one of the guys who really thought social networks would be

very difficult to monetize, but Facebook's doing it on a massive scale. It's so impressive. O' Where does the growth come from, two, three, four years down the road, in your mind? I don't, they certainly can't sustain 50% growth rates, but I mean, it's hard not to imagine that can be 30 or 40% growth. And then you're looking at your 10 to 20 billion in revenue. And now that he's back from paternity leave, I mean, come on. On fire.

On fire. But I mean, to that point, Ron, if you think about the big questions that Mark Zuckerberg and his team have faced, first, as Matty said, it was how are they going to monetize mobile? I'm not saying this was as big a question, but certainly when they spent a billion dollars on Instagram, that was a big question facing, what are they going to do with that? And you look at this latest quarter and the way they're monetizing that. So, I'm not sure, but I also know that I'm not betting against these people. Yeah, sometimes being a cynical analyst in a space where you've got a high-growth

space with innovators, really, getting the job done and in the trenches every day, sometimes being a cynical analyst is the wrong way to be. I mean, you wouldn't bet against, I think, any company that has access to this many eyeballs, right? And this is more or less just becoming your online ID card. So, even if you don't really use Facebook, you still probably have a Facebook account, and I think that's going to continue to grow. I think they're going to capitalize on opportunities in India and other international locations. You mentioned the Instagram acquisition, which was just a tremendous acquisition in hindsight. On the flip side of that coin, you look at

WhatsApp, and we're still faced with a lot of questions there, as to what in the world are they going to do with that? They paid $20 billion for WhatsApp, and they've been able to get away every quarter with saying, well, we're just going to wait until we build the user base up to $1 billion, and then we'll start talking about our monetization strategy. So I think that's still a big question in investors' minds. But regardless, I think a lot of the growth down the road here is just going to come from the fact that they can go out there and basically do whatever they want, they can buy whatever they want. So when they see talent early on, and they have the minds that are able to identify it,

they can really bring that talent in-house, make it a part of the Facebook subsidy, or get a subsidiary of the big Facebook network there, and probably do pretty well with it. Shares of Microsoft closing in on an all-time high this week after second quarter profits came in higher than expected. CEO Satya Nadella doing a little cost-cutting too, Ron. Yeah, they're getting it done. It looks nice. A lot of the headlines here are misleading, so this is where it kind of pays to drill down a bit, because revenue and profits were down, and they beat expectations, as you said, but they were down. But that's where we need to look a little bit deeper and understand that there's a lot of currency translations going

on there, as I think we'll see with a lot of our companies. And they're moving to a deferred revenue model, which mucks up the profits a little bit. But profits were actually up 8%, not actually down 15% if you just look at the headlines. Cloud business, the big story that continues to be, really, the driver of growth. Let's talk about the real story here, OK, guys? I mean, is Nadella a closet Denver a Broncos fan, because this was the big headline, right? The Patriot Surface tablets go down on the sidelines. What's the deal? Oh, man. You're just trying to rub it in Matty's face.

Wait a minute, now. I'm not rubbing it in anybody's face. I just got over it. The hardware business actually was pretty strong. They're actually selling those Surfaces and the laptops. That business was up 29% excluding currency. That's not something that I would have bet would have been the case. That phone business is a complete mess and continues to be. But cloud and hardware, not too shabby. Did I see that they also slightly increased their market share on Bing, the search engine, which apparently still exists?

Well, it's not too hard to increase a share from a low number. But I think that's certainly not the story. That Azure business, the cloud business, Azure grew at 140%. Still a relatively small piece of the business, but clearly the growth part of it, and that's what we have to keep an eye on. Apple sold nearly 75 million iPhones in the first quarter, and Wall Street was unimpressed. Shares down 5% this week. Jason, they are projecting a revenue decline in the current quarter. First time that's happened in 13 years. Sure. I mean, that Apple can unleash numbers like these, and the market actually

finds a downside to it, I think is a testament to not only how really big the company has become in its success to date, but it's also, it reminds us that this really is, for all intents and purposes, a phone company, right? I mean, Apple does a lot of things, and they do a lot of things very well, but the phone continues to be the overwhelming majority of their sales. And so, look at these results, and I think this is just another reminder, we need to remember exactly how groundbreaking the iPhone really was. The smartphone in general, but really the iPhone. I mean, that is lightning in a bottle right there, and to expect a company to be able to come up with that twice, I think, is probably asking a lot. And for investors

who think Apple will just do it because they're Apple, you're probably not doing yourself any favors. So, we look at Apple and say they're going to continue to be very successful with the iPhone. I don't think that's going anywhere. iPad, those sales shrinking. Mac sales shrunk a little bit. The balance sheet, $215.7 billion in cash. Worth noting that $200 billion of that is international, so we're probably not going to see much done with that. To me, I think this is a fundamentally different company than it was three years ago. This This is an income play now. For me personally, I would much rather see them juice the dividend here. They're doing a good job returning capital to shareholders and buying back shares and

paying a dividend, but that dividend yield is still somewhere like 2.2% or something like that. They have the means to juice that dividend and put cash in shareholders' pockets today. I know the counter to that is that when you buy back shares, you shrink that share count, and ultimately that should result in more value in the shares. But that also is facing market psychology, and you still have to realize the value through the market actually bidding those shares up. So, I'd like to see them juice that dividend. O' But Jason, what about the electric car? What about the electric car? I don't think we're going to hear anything about

that anytime soon. O' Just buy it. Drop it in the bucket. I'll tell you, the one thing I do ... it starts getting old listening to their calls and hearing them frame how many iPhones they sold in the context of this many per minute results and that many per day results and that many per week. Listen, I get it, sold a buttload of them, right? Tell me about what you're going to do next, right? Is that the technical term? It is, it's the technical term. Shares down 20% in the past year. It's an income play. Is this also a value stock

at this point? Just as we were saying, what was it, maybe a year and a half ago, two years, that it's a value play. The multiples are not high on this stock. They don't need to put up a lot of growth for the stock to go up. So, I think profits are immense, cash flow is unbelievable, balance sheet rock solid. I I think the stock's cheap. I said on Twitter, instead of trying to figure out whether they're going to meet expectations, beat expectations, or miss them, try to look at this and say, is this a business I want to own for the next five years? And I think, absolutely, yes, it is.

Amazon's fourth quarter saw a rise in sales and membership to its Prime service, but it also saw a big rise in expenses, Matty, and the stock down more than 3% this week. Yeah, it was funny, because it was up a lot going into earnings, and then, of course, Thursday night reports, Friday was down quite a bit. It's really only giving back what it gained in the week. Revenue was up 22% to $35.7 billion in the quarter, just shy of estimates. You have to put that in context. We saw really no growth in retail this past quarter, especially from brick-and-mortar stores. And eBay, which we'll talk about later, also showed no growth. So, the fact that Amazon's putting up 22% growth, very, very impressive.

It's also, I'd like to point out that half of the merchandise sold on Amazon in the fourth quarter, came from third-party sellers. I thought you were going to say my wife. Oh, Ron Gross' wife. But that's so important, because those are generally higher margin than Amazon's own sales, and it just shows you the immense amount of people using and retailers using the platform. Again, grateful year for Amazon as well. They surpassed $100 billion for the first time. Walmart took four decades to do that, so Amazon did it about half the time, which is so impressive. Amazon Web Services, again, huge grow in the quarter, up 69% to $2.4 billion. Not growing as fast as Microsoft's Azure, but pretty fast. Operating

profits there tripled to $687 million, so that's certainly where a lot of the profitable growth for Amazon is coming. But you said it, Chris, the expenses is where Amazon's facing a lot of trouble right now. The shipping costs alone were up 37%, and 12.5% of sales versus 10.9% a year ago. And that's from really trying to invest and make sure that the experience that Amazon buyers have and getting stuff on time, especially in the holiday season, they had to make a lot of investments there. But we've had this question from listeners before, Jason, are they going to be competing with UPS and FedEx? And the answer to that may be yes, but the answer is also, if they are, that's not cheap. It's not cheap to compete

with companies that have a lot of trucks and a lot of airplanes. No, no question, it's not cheap. And I would say a couple of things. No. 1, in regard to the shipping costs going up, that's something that I think investors need to go ahead and accept. It's going to be the case, because when they were asked that question on the call, they were like, listen, two-hour shipping, it's really hard, it's really difficult and it's expensive, but you know what, our members love it. And so, that's all you need to say. They are focused on their members, their buyers, their subscribers. And the question was asked in regard to the logistics and the shipping, and I think really, at this point

in the game, what they're looking to do is find new ways to take care of busier times for them. I don't know that we're going to see them jumping into directly competing with UPS or FedEx anytime soon, but they are looking for new ways to be able to handle the surge in volume when it comes during holiday times, or if they're going to have another Prime Day sale or whatnot. I'll just say also that we're seeing Amazon fall after reports earnings. I feel like every other quarter, Amazon reports, it falls 10% or more. And usually that's been a time, it's always been a time over the last five years to buy the stock, and I see that opportunity right now as well.

Coming up, we've got sports apparel, Dow Components, and more. Stay right here, you're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger and Ron Gross. Shares of Under Armour up 20% this week after fourth quarter the profit came in higher than expected. The quarter was nice, Jason, but the guidance for 2016 was really nice. Yeah, really nice is a nice way to put it. I think the market obviously appreciated it. We were hoping for some challenges this quarter in MDP to give us a chance to add to our existing position. Man, I guess we

got that one wrong, Matty. It's a nice problem to have, though. I think it was interesting to look at the real performers in this business. You look at direct-to-consumer, that growth was up 25%. Direct-to-consumer now represents 30% of total revenue. Footwear sales up another 95%. I think this is important, because if you look at this, 10 years ago, they had not sold a single pair of shoes. Today, footwear represents 17% of their business, at about $700 million in sales. And it wasn't that long ago where I think a lot of people were actually laughing at their foray into running shoes. So, they've obviously done a lot of really good things here. We always talk about weather, and I think it's probably apropos

here to talk about weather because of the blizzard we just had. But the question is always asked of management there, what about the weather? And Kevin Plank is not going to use that as an excuse. As a matter of fact, he seems to stare that thing right in the face and tell you they're going to do the opposite. He says that, quote, we do not let weather play a decisive role in dictating our success." So, it will be very interesting to see this quarter that they're in, if they can back that up. Two years ago, 2014, the Men's World Cup, Nike was pretty upfront about the fact that they were going to be increasing their marketing spend going into that. We've got

the Summer Olympics coming up. I'm wondering if Kevin Plank and his team gave any color on potentially spending a little bit more in advance of the Olympics. Sure. And in the call, in the context of these coming Olympics, that word was mentioned precisely one time. What they are doing is maintaining flexibility. They do a very good job of bringing in a lot of high-profile athletes who do a lot of advertising for them. And they'll have a lot of athletes out there in the Olympic Games who are representing the Under Armour brand. But international sales represent a decent slug of the business today versus what it was even just five years ago. So, I suspect we'll continue to see them

grow that global footprint. And I'll just say, I know the Olympics, but gosh, up into that, who are we watching? We're watching Steph Curry, and we're watching Jordan Spieth. Yeah, we're getting ready to watch Cam Newton here soon. And Cam, there you go. Wow. The Dow Jones Industrial Average being pushed up this week by a couple of key components. 3M stock up 8% after fourth quarter profits came in much higher than expected.

And shares of Caterpillar up 4%, which is a little strange, Ron, when you consider fourth quarter results weren't that great, and they lowered guidance for 2016. Let's go with 3M first. Sure. It's both a little strange. Both industrial companies, both struggling, both companies doing what they have to do. I like what 3M's CEO said. He said, we controlled the controllable while investing in our business and returning cash to our shareholders. And that's all you can do in a time where the industrial economy is weak. They've been cutting costs. They've been laying off people. They've been taking

expenses out of the business. Everybody's being hurt by currency effects. Things are not necessarily very strong right now, so you do what you can do. Profit in the quarter was down 8% for 3M. Revenue was up slightly in some areas on an organic basis. Revenue was up 4.5% in healthcare, 2.7% in the consumer business. Better than expected results makes the stock lift, but things are not so rosy here, and they're cost-cutting their way back to health. Now, we transition to Caterpillar, and this is tricky. Things are very, very weak in Caterpillar's business, in mining, industrial equipment. Their 2016 guidance is weak, but yet, stock went up and guidance was relatively healthy. So, what's going on

there, you may ask, Chris? Go ahead. Believe me, I'm asking, because when Caterpillar, which has not performed well over the last few years, comes out and says, our profit this year is going to be so much better than all of you Wall Street analysts expect. And the stock pops, all I can think is everyone's just saying, oh, okay, we'll take your word for it. Right. So, there's a lot of accounting things going on here. So, if you exclude all the restructuring charges that have come and will come, and then you take into account that they had a big accounting change for their pension plan, that makes things look

significantly better than they actually are. So, it's kind of a little bit of fuzzy math there, in my opinion. You need to look through that. You need to understand that Caterpillar business is weak. It will continue to be weak through 2016. They're controlling what they can control by cutting costs, 10,000 jobs being cut. But we won't see top-line growth for quite some time until that global economy really strengthens. One of the big spinoffs of 2015 was eBay spinning off PayPal. Both companies reporting this week, and both stocks going in different directions. PayPal's fourth quarter profit slightly higher than expected, and revenue was up as well. eBay's fourth quarter

results almost didn't matter, Matty, because their guidance for 2016 sent the stock down more than 12%. Awful, awful. Let's start with PayPal. I mean, 6.6 million new users in the fourth quarter, including 1.6 million from their acquisition of Zoom. Somebody's better. I'm looking at Jason. PayPal's total user base up to 179 million. Revenue up 17%. Merchant service payments, which is their core payment transactions metric, up 36%. Very, very strong there. And they announced a $2 billion buyback plan. It's kind of like, what's not to like

about PayPal? With eBay, it's kind of like, what's to like? Because if you think about it, in the e-commerce world we live in, we saw how Amazon did. It's amazing to see that eBay, which really, I mean, if you go back eight or nine years ago, I'd say eBay and Amazon were pretty much neck and neck. And you could find investors who were willing to bet either way on who would be the king of e-commerce. We know that for sure, and it's Amazon. But for eBay to report virtually no growth in the quarter, just $2.3 billion in revenue, gross merchandise volume was flat, net profits actually fell 12%, and they're guiding, Chris, you said, between 2% and 5% growth in 2016. So, you're talking about an

e-commerce leader by all standards, but they're predicting growth that's going to be in line with the economy. It's really not impressive at all. Up next, earningspalooza rolls on. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger, and Ron Gross. Radioatfool.com is our email address.

That's radioatfool.com from Forrest Klontz in South Carolina. What in the world is happening to Ford Motor's stock? This entire past year has been a mystery to me. And this week, they beat on fourth quarter profits. They beat on revenue. and confirmed good guidance ahead. There were even articles popping up entitled, Ford is running on all cylinders. That's trademark infringement.

Whoa! That's fraud slash. Call my lawyer. Did you get a royalty payment for that? Jason, what is the story, though? Well, I mean, you know, to steal Iranism, I mean, they are firing on all cylinders. There's no question about it. You know what's not firing on all cylinders?

What's that? This stock. You're very correct. That's a good observation. Let's talk about that, Chris. I think the biggest problem that Ford and its ilk face at this point is that the market, as we know, is forward-looking, and it is looking to what is next. Now, here's the reason why that's a problem. The U.S. new car market just hit a record 17.5 million cars here in 2015. Remember that technical term about iPhones, I threw in a little buttload? Okay, there was a buttload of cars sold, too. Dealers were doing all they could to move those things

off a lot. They were offering great incentives. With the cost of money being very low, there was a lot of incentive to get out there and buy new cars. Trucks are big sellers right now because fuel prices are so cheap. The market is thinking, hey, they just had this banner year. What do we expect here coming down the pike? I think it's reasonable to assume that it's going to be a bit of a challenging environment over the coming years here. Ford sold more than 6.5 million cars in 2015. That was up from the year before. And again, they they're doing a great job building cars that people want to drive, and they're moving them out the door. But I think that we are hitting a point now where a lot of people have gone

out there and bought new cars, and I think that the question is a valid one. What kind of sales numbers can we expect from these guys? Guidance notwithstanding, because guidance is just guidance. Let's see how 2016, 2017 is going to shake out. This actually may be a great time for something like a CarMax, because as the cost of money starts going up, as people start saying, hey, well, maybe trucks aren't the way to go if fuel prices start going up. Maybe something like a used car dealer like CarMax, which has really done a great job in that experience. Maybe that's something worth looking at. We saw recently with the Consumer Electronics Show, the reports leading up to it were that

Ford and Google were going to be presenting some sort of joint venture together. That didn't happen. Is that something that Ford needs to consider if it's going to do anything as a business to propel the stock. We joked earlier about Apple and the electric car, but let's face it, all indications are, Apple's working on some type of vehicle, and I'm wondering if Ford needs to find a dance partner. Well, I think it probably helps to find a dance partner in that case. They are, if I understand correctly, setting it up so that their 2016 models going forward will be compatible, I believe, with Apple's car ecosystem and Google's as well. I think there

are going to be some options there. In regard to the electric car initiatives, I think that all of the big automakers out there are trying to be a part of this space. They're investing a lot of money in trying to move forward with that technology. It's certainly a good reminder that Tesla is not the only game in town when it comes to that, and that automakers like Ford and GM have the scale and the resources to definitely invest in that space. Second quarter profits for Coach came in higher than expected, and sales rose for the first time in 10 quarters, Ron. That's a nice streak to break. look who's not dead yet. As you said, first quarterly sales gain since June 2013.

So, investors who have been patient are seeing a little bit of a turn. Now, we need to understand that almost all of that goodness there is due to the acquisition of Stuart Weitzman, the shoe company. The Core Coach brand was actually still down 3% globally and 7% in North America. But believe it or not, Chris, that's actually quite an improvement over previous That's just kind of sad. And it looks like perhaps that business is turning the corner, and they've scaled back promotions, and they've shut underperforming stores, they've upgraded some designs. So they seem to be making progress, and the Stuart Weitzman business is kind of towing

the line for now. Profits were down 8%, so they haven't turned the corner to profitability yet. Gross margins have narrowed still. China looks strong, Europe looks strong, double-digit increases in both. They've raised guidance as a result of this strong quarter. So, things are better, but we haven't gotten quite there yet. A couple of years ago, I remember one of the narratives with Coach was, well, they've got a new designer coming in, and we're going to see how that works out. Based on what you just said, it seems like, yes, you want a

good designer, but it sounds like what they need is a really good operation. They need a real strong operator. What's going to drive this stock is how well they do in terms of sales per square foot and that sort of thing, and managing inventory. Maybe they need that. I think that's right. But if you recall, when the new design chief came in, the whole real senior management team turned over from the top down. I think that's what led to the shutting of underperforming stores and new promotional strategies. I think they're kind of doing both, which is maybe why we are seeing the improvement, they're also doing some creative things like exploring the sale of their New York headquarters, since Manhattan real estate

is so high at the moment. Maybe that would be a way to unlock some value. So, there's some financial engineering here, as well as strategy, as well as design. Ron, a question for you. We know with fashion companies, apparel companies, it's natural for them to go through these cycles, I think, where they're either out of fashion they're in fashion. Is Coach one of those that you think is a sustainable long-term brand? In other words, people will be buying Coach 10 or 15 years from now, the same brand, obviously it'll look different, the purses will look different, but we'll still ... I think the answer is yes, but that doesn't really inform you as to what to do

about the stock. I think the stock is going to go up and down and up and down, and this is the kind of thing, fashion in general, specialty retail in general, you need to buy buy it right. They're not always great buy-and-hold investments. While I think Coach will be around, you need to catch it at the right part of the cycle in terms of an investment, otherwise you won't make money. Shares of Coach up 15% this week. As you said, patient investors getting a little bit of a reward. McDonald's stock hitting an all-time high this week after fourth quarter profits and revenue came in higher than expected. Same-store sales in the U.S. up more than 5.5%. Jason Moser, you were skeptical about

the all-day breakfast, and it is paying off. It paid off. The question is, will it continue paying off? So, as of now, I think we all should doff our collective caps to Steve Easterbrook, because he really has done what I consider to be a phenomenal job in changing the narrative on McDonald's. For a very long time, it was really in the gutter, for lack of a better description there. In my, how times have changed. Chipotle now is really more or less being dragged through the mud, and for good reason. I think they're sort of working on turning those operations around. We've seen a lot of optimism on the McDonald's side. I think that's for good reason.

The breakfast all-day initiative certainly has worked. It's worked very well. That was a big credit to the sales numbers that they've been able to turn in here this past quarter. A buttload of Egg McMuffins sold. I mean, it's a technical term. It applies for all segments, all markets, Ron. But I think that the biggest question is, is this going to be sustainable? Because it did bring more customers in at more times during the day. They did witness incremental sales from it, so it wasn't like people were just swapping out a McGriddle for a Big Mac or the other way around. The question is, is that sustainable? And time will only tell

But I do think that Steve Easterbrook, what he's done a really good job at is being very proactive and trying to figure out exactly what customers want now. We've made a little fun of it before about trying to become this modern, progressive burger company, but there is something to that. At least, that's his vision. Part of that is understanding what the consumers want. It's a matter of quality of food, quality of service, and the environment. What they're doing on those last two points, focusing more on digital initiatives. They've seen 7 million plus downloads of the app. They're throwing in more ordering kiosks and stores so you can go in there and just order, and it reduces the friction of actually dealing

with a person. Accuracy of orders tends to be a little bit better. And they're going to move to some more franchises. It's already an 80% franchise model. They're going to become even more of a franchise model, which allows them, I think, to focus on their real strengths, which is supply chain management and nurturing that brand. Well, we know breakfast worked last quarter, but we know what's going to work this quarter. It's the chocolate fries! When they hit North America, watch those same-store sales rush. It's going to explode. Yuck! And they just might get to America. We'll talk about that in the next segment. For a while, this was a stock that, to the

extent that there was a case for it, it was, well, this stock looks cheap. Easterbrook took over March 1st of last year. It's up 23% since then. This doesn't look nearly as cheap as it used to. No, it definitely doesn't. I think investors looking at this as a potential buy today need to at least recognize that. But also, I think if you're buying McDonald's today, you're probably buying it more for the income than anything else. I mean, Easterbrook was very clear on the call. They feel that it's going to take a couple of more quarters before they can really sort of change the conversation from turnaround to growth. I think growth is going to be a little bit more difficult for them to come by, given the

size already and sort of the changing competitive landscape there. But regardless, I mean, they've done a very good job of returning value to shareholders via buybacks, via dividends, and I expect that to continue. Coming up, we will dip into the Fool mailbag and we'll give you an inside look at the stocks on our radar. Stay right here, you're listening to Motley Fool Money. If you've got the money, I got the time. We'll go honky-tonking and we'll have a time. We'll make all the night spots, do the town a fine. If you've got the money, honey, I got the time. 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, Jason Moser, Matt Argersinger, Ron Gross. Guys, a couple of housekeeping notes. Two new radio stations to welcome this week. Our first affiliate in Minnesota, Brainerd's Business Radio, KVBR, AM 1340. And in Tampa, Florida, WWMI, AM 1380, The Biz. You're a Bucks fan. I am a Bucks fan. Radio stations across America, but we've got listeners around the world, thanks to the podcast version of this show. And last week, as you indicated, Matty, we talked about McDonald's

unveiling the McChoco potato in Japan. This is French fries drizzled with chocolate sauce. And our listeners in Japan did some on-the-ground research and told us about it. Jay Melton included some photos in his email as he wrote, As you would expect, there's not enough sauce for the whole order of fries, but that's a blessing in disguise. From Danny Simard, I can say with confidence, this is a hit here. It's delicious and mysterious. Hopefully, they'll bring it to America. And from Michael Patrick, to all you doubters out there, have you never dipped your fries in a chocolate malt? that isn't just a Midwest thing, is it? I don't know.

That is a very good point. Now that I think back to my days as a kid on the swim team and McDonald's was always where the after-swim meet parties went. And man, dipping those fries in chocolate shakes, that was a thing. You were on the swim team? Oh, yeah. What was your specialty? Oh, baby, it was all. Butterfly?

It was everything. It was a buttload of things. The IM. It was butter back breast free. It was non-stop. You did it all. That's so impressive. Before we get to the stocks on our radar, one non-earnings story to get to, but hopefully this will be an earnings story at some point in the future, and I have to thank Ron Gross for flagging this one, which is that we've talked before about Radio Shack and how it filed for bankruptcy, but one fellow electronics retailer, Circuit City, is apparently back from the dead and is going to be opening up new locations starting later this spring,

acquired by a couple of private investors. They acquired the brand, the domain, and all the trademarks, and they plan to open 50 to 100 corporate-owned stores by this time next year, Ron. Important to differentiate the old and the new, they're not going to be super stores. They're thinking more of electronic boutiques, which, what could go wrong there? There's very little competition in that space, so it should be fine. But it's interesting to see them back. Let's bring in our man, Steve Broido, from the other side of the glass. Steve, you know more about electronics than anyone I know. First, how excited are you for the

prospect of Circuit City opening up a location near you? Well, not very. I will say, even the name Circuit City, it's just a city built of circuits, right? It's just better than Radio Shack. It's great. It's terrific. Not exciting. But it's better than, as a name, you will ... It is better than Radio Shack, yes. But a low bar to clear? Low bar, and there's definitely too much competition in this space as is. Alright. Do you have any interest in the chocolate fries? If they're really

this big a hit in Japan? Absolutely. I'd give them a shot. Yeah, it's all good. I saw they have vanilla sauce as well. You can mix the chocolate and the vanilla. There's two. You get fries and they give you two packets. One is regular chocolate sauce, one is more of a white chocolate sauce, and apparently there's not enough to cover the whole thing. Glad to see they're doubling down on the health aspect of the menu. My wife and I dip everything in Nutella. A lot of things we dip in Nutella. It's not going to be a stretch for me.

Alright, let's get to the stocks on our radar this week. Our man, Steve Broido, will hit you with a question. Ron Gross, you're up first. What are you looking at this week? I've been focusing a lot on blue chips, so I decided to go the other way this week with a recent re-recommendation by our hidden gem service, which is Decker's Outdoors, D-E-C-K. known, I would think, for their UGG brand. Also, they have the Teva sandals, the Sanook, the Hoka One One. The HD guys really ... O' Are you just making up names now? No, you know Teva sandals, come on!

O' Yeah, it was that last one that made no sense to me. Hoka One One. O' Okay. You know. Oversized, ultra-cushioned, ultra-running shoe. O' I'm completely unfamiliar with these, but go on. So, with the reinvigoration of UGGs and the potential growth in Teva and Sanic, the HG guys think margins and cash flow will improve here. They think the stock could be worth $70, and we're really only at around $50 right now, so 40% potential upside. But

they do highlight, and I will as well, that this is a high-risk stock, mostly because they are really, really dependent on UGGs, which provides more than 80% of the top line. O' 80%?! 80%. All those brands, and they're just betting everything on Uggs? Big, big number. Steve Broido, question about Decker's Outdoors? If I wanted to buy some Hoka shoes, where would I go to do so?

I would go to Zappos. How about that? Sounds like you've got to go to Hawaii. You know who's the big Uggs guy? Tom Brady. Oh, heck yeah. Tom Brady. Jason Moser, what are you looking at this week?

Touchdown Tommy? Sure. So, the Stock Advisor team and I have been talking with them recently about some of their favorite ideas, and Critio is one that keeps on coming up to the top there. The ticker is CRTO. Critio, for those who are not familiar with the company, uses predictive software to deliver targeted, personalized advertising across display, mobile, and social media sites for thousands of advertisers worldwide. O' What a memory you have! So, what that means is, they use technology, and I have no idea how it works,

but it seems to be working, because now they have more than 9,000 clients with a retention rate better than 90%. All of this information goes into feed what they have, it's called the Criteo engine. As it feeds that engine, it gets smarter and smarter, which grows their competitive advantage. It's one I'm definitely looking at bringing over to the watchlist for MDP, learning a little bit more about, because it certainly seems like an interesting opportunity. Steve, question about Criteo? Well, advertisers just lose faith in the fact that they won't have 8 billion views. It's 1,200, but it's really qualified leads. Are they going to go for that?

I'm not quite sure what you're asking. Are you saying that the leads seem to be less and less quality? No, they're higher quality leads, but they're lower in number. Well, I think lower in number is OK, as long as they are higher quality. We saw another good example in TripAdvisor, as they moved over to their meta search. It reduced the actual number of clicks, but it made those clicks more valuable. So, actually, that works out pretty well for the business, if they can execute. Matty Argersinger, what are you looking No, I'm looking at Tesla Motors again, ticker TSLA. Anytime the stock drops below

$200, I start to get more interested in the company. I think it's one of the most exciting companies out there. Such a huge ramp-up for what this company could become. I think a lot of people are saying, well, low gas prices right now, no one's buying electric cars. But trust me, that's not the reason people are buying the Model S or the Model X, so Tesla. Steve Broido, question about Tesla Motors? Would you spend that kind of money on a car, Matt, personally? That's a lot of money for their ...

Well, I'm not a big car guy, but when they come out with the Model 3 in a few years, which is supposed to be priced around $30,000 to $40,000, I'm going to be very interested. How does it handle the blizzard? Snowzilla, it might not do so well, but I'll probably stay in if that happens again. I think that's one of the more interesting things to watch with Tesla Motors, is you look at how the big automakers, for the most part, Ford, as we talked about before, GM, et cetera, they really haven't gone after Tesla Motors because they understand that Tesla is, first and foremost, a luxury car maker. So, they look at Tesla and think, well,

that's not really competition. But I think it'll be interesting to watch when they come out with this $30,000 to $40,000 vehicle, if then the knives come out. That's right. And so, I think Tesla's innovating so well at the high end, and having a sustainable business, I think they'll innovate just as well at the lower end. What will also be very interesting, to me at least, is a luxury car maker, yes, and they've been able to maintain very high levels of service, and they're known for that. So, if they come out with a car that appeals to the masses, will they still be able to maintain that high level of service that they're so well-known for today?

We were kidding around before that Apple should just go ahead and buy Tesla. Give me odds. What do you think? Odds are low. A few years ago, odds were high. Odds are very low now, I think, because Tesla's got a sustainable business, a good enough balance sheet. I think Elon Musk wants to be on whatever Mount Rushmore he's going for by himself, and not on Apple's shoulders. So, I'd say it stays independent. Steve, Tesla Motors, Criteo, Decker's Outdoors, one of those you think you want to put on your watch list? Criteo sounds unusual, and I'm interested.

Yes! All right. Ron Gross, Jason Moser, Matt Argersinger. Guys, thanks for being here. Thank you. You can check out all of the Motley Fool's podcasts. Just go to fool.com slash podcast. That's fool.com slash podcast.

Take us with you when you go on your commute or when you're just doing stuff around the house. Fool.com slash podcast. That is going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.