Motley Fool Hidden Gems Investing - Home Improvement's Bright Future

Episode Date: August 19, 2016

Home Depot and Lowe's may have more room to run. Sports retailers have a strong week. The wireless wars heat up. An activist takes on Buffalo Wild Wings, while McDonald's makes a rash decision. We discuss those stories and share three stocks on our radar. Plus, Frank Ahrens shares highlights from his new book Seoul Man: A Memoir of Cars, Culture, Crisis and Unexpected Hilarity Inside a Korean Corporate Titan. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. The best things in life are free 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, from MDP and Supernova, Simon Erickson,

and from Motley Fool Rule Breakers and Supernova, David Kretzmann. Good to see you, as always, gentlemen. Hey, Chris. We will dig into the latest earnings from Wall Street. we will talk cars and culture with our guest, Frank Aarons. And as always, we give you an inside look at the stocks on our radar. But we begin this week with home improvement. Home Depot putting up record sales and profits in the second quarter. Lowe's second quarter, not quite as good, Simon. We'll get to both of them. Home Depot, I don't know what more

you would want out of a quarter, plus they raised guidance. The stock didn't really move. Well, Chris, Home Depot really raised the roof this quarter. 5.4% comps, just overshadows those 1.9% in the U.S. at least. And I've got to attribute this to a stronger housing market in the United States. Home Depot has always gone kind of after contractors more so than those who goes after the do-it-yourself enthusiasts from homeowners. And when you look at just the Department of Housing data, we saw new housing starts this year up 5.6% over last year and new housing completions up 3.2%. So that really helps for those high dollar items like HVAC equipment and roofing, kind of the stuff like this that Home Depot

has really got in spades. That's really good for their contractor customer base. Expect more of this coming forward. Yeah, the thing I love about this space is, really, it works for pretty much any condition. I mean, is the weather too cold? Hey, that's great, because they sell de-icer. Is it too hot? Sure, because you're ready to plant that garden. It works out no matter what. You rent your home, it doesn't matter. You still want to do something. Maybe you want to paint a wall. Do you own your home? Yep. Well, absolutely. You've got to do some other stuff to that, too. So, no matter what the condition, it seems

like these stores are poised to perform well. And I think they've made both very strong efforts in the omnichannel department, where they're taking that big physical infrastructure that they've already established, and really leveraging that into a smarter e-commerce business. And again, they really are known for that specific purpose. We were curious, But I think over the past five years, would they be Amazon immune? And I think that the results speak for themselves. Clearly, yes, they are to a degree. Well, and you look at the performance, David, over the last five years. Yes, Lowe's taking a little bit of a hit this week, but you go over the last five years, both of these

stocks are absolutely crushing the market's return. Both of these are fine operators when you look at operating metrics. And Home Depot in particular is just a stellar retailer. And the company's done a really nice job leveraging its stores to build its online business. So, in the most recent quarter, over 40% of online orders were picked up in the actual stores. 90% of online product returns are returned to the stores. They're ramping up two-day delivery. They have three fulfillment centers around the country. And this year, they're rolling out delivery from the stores themselves. So, they're leveraging the stores that they have. They're not really building any more stores right now, but they're using the

stores to expand their online business. And so far, that's been paying off very nicely. And I think one thing we were talking about before getting into the studio today, you look at Home Depot and Lowe's and sort of the nature of what they're selling, they're a little bit less prone to have to worry about the pricing side of the equation, right? When you're going in there as a consumer, you're focused more on making sure you're getting the part that fits or the part that works. You're not so focused on how much you're actually paying for it. So, your big box, general retailers are competing for the lower prices. Whereas, Home Depot and Lowe's, I think they don't have to worry about that so much, and that certainly plays

out well for them on the bottom line. You're talking about the market has rewarded them. Yeah, they have. Both of these companies are selling about 19, 20, 21 times forward earnings estimates that they have. But you look at the consistency of their businesses and how established they are, they're not getting Amazoned out there. I think that this is reasonable, based on good performance. Well, and you were mentioning sort of the valuation. And you can look at Home Depot and say, that's obviously a little bit pricier on a valuation basis than Lowe's. But when you think about how many people are retiring every week, that's a trend that's not stopping anytime

soon. I don't own either of these. And I sort of look at this and think, why shouldn't I just put a little bit of money in both of these just for the next 10 years and forget about it? Yeah, there's a lot of macro that's a tailwind for all this, right? Like, people are retiring, like we talked about, new housing starts, gas is cheap, good discretionary income. There's a lot of stuff kind of pushing these companies even farther forward. The wireless wars are heating up right after T-Mobile announced it was getting rid of data plans altogether. Sprint announced the same thing and accused T-Mobile of stealing their idea. David Kretzmann, it's getting a little chippy out there. It's sort of the story at this point with both of these companies. They're

always going back and forth, taking advantage of this un-carrier movement, fighting against Verizon and AT&T, the established players in the mobile carrier space. But T-Mobile has far and away been the winner, both from a business standpoint. Their subscriber count has almost doubled since 2013. They have over 65 million subscribers. Sprint, their subscriber growth over the same time has been basically non-existent. They're still under 60 million subscribers. Sprint's producing negative free cash flow. They have far more debt than T-Mobile. And T-Mobile's cash flow and balance sheet look a lot stronger. And there have been rumors of a merger happening between these two companies at some point. And I think if you're T-Mobile, you don't want to

shoot yourself in the foot and merge with Sprint. At this point, at the rate they're going, they should be able to continue capturing market share as they've done over the past few years. You look at just the way the two CEOs are going back and forth at one another. I have a hard time imagining that these two are going to get together in a room and say, oh yeah, we're better off together. Probably not. And John Ledger, the CEO of T-Mobile, he's really, since he became CEO in 2012, he's done a lot to invest in two things, improving the network of T-Mobile. So better coverage, better speeds and reliability, and then also investing in the customer experience. So this summer we've already seen T-Mobile unveil the stock up plan where they're essentially giving

shares in the company to customers. They also launched T-Mobile Tuesdays where every Tuesday T-Mobile subscribers can get free goodies from a lot of different companies. And go figure, the more you invest in your brand, the customer experience, you're going to get more customers. And let's not forget about John Ledger's Slow Cooker Sundays. I mean, you follow that guy on Twitter, you're going to get some great recipes, and he's really out there teaching us the important things in life. Are you serious?

I'm dead serious, man. He'll even put that stuff up for a vote. He's like, it's Slow Cooker Sunday, what do we make this week? And it could be anywhere from pot roast to lentil soup or whatever. And then he gets in there with the Periscope feed and everything. He's great. Just a wonderful ambassador for the company, seriously. That's a CEO.

It's a good thing the business is humming along, because that's the type of thing that if it's not humming along, then shareholders get unhappy. Sports retailers are having a pretty good week. Dick's Sporting Goods reported an increase in same-store sales for the second quarter. And Foot Locker's second quarter profits came in higher than expected. Also, some pretty nice comps out of them, too, Jason. Yeah, I mean, I think these both companies, I think there are a lot of good signs here that they have been able to sort of perform well, thankfully, in sort of the face of an economy with some seeming tailwinds there. I mean, retail has been challenged, I think,

in some pockets. But generally speaking, I think when you have specialty retailers, whether it be Home Depot and Lowe's or sporting goods retailers like Dick's Sporting Goods and Foot Locker, they're doing a lot of good things. I think, unfortunately, that we're seeing probably more some short-term catalysts in play, where the stocks were a bit depressed, and I think the performance helped bring those multiples back up to reasonable levels. But I'd be hesitant to jump in to either one of these ideas, really, as a better long-term style of investment. And I think, really, when you look at it, Dick's Sporting Goods, there's a lot of money that goes into maintaining that big physical footprint. Now, they're

they're doing a good job becoming that omnichannel retailer and utilizing that store footprint. Foot Locker is more dependent on those mall locations. They're playing into that headwind of mall traffic, and they're seeing some challenges on that front. I think, ultimately, investing is all about looking for the opportunities and finding which opportunities are really the best ones. I think when you're looking at the sporting goods market there, to me, Nike and Under Armour seem to be the easier ways to make money here. I mean, that is really the key to both of these companies' success. I mean, Dick's Sporting Goods carries somewhere in the neighborhood of 35% of their inventory, which is pegged to Under Armour and Nike.

And Foot Locker, certainly, the performance was thanks to some excellent performance in the footwear department. So, to me, when I'm looking towards the longer-term trends and the bigger players in the space and the more important players in the value chain, Nike and Under Armour just seem to be the smarter ways to play it. But, it's not to take anything away from either company. They both turned in some very good quarters, and it looks like the remainder of the year should be pretty good. Also, probably a little bit of what we saw this week with them was almost an element of surprise in the wake of Sports Authority going bankrupt. The way Sports Authority very

quickly went from, we're closing some stores, to we're closing all of our stores, led a lot of people on Wall Street to say, you know what, I'm not sure this works at all. And in the case of Foot Locker and Dick's Sporting Goods, it just shows that not all operators are the same. Sure. And there were some surprises there. Dick's Sporting Goods turned in comps of a positive 2.8% vs. 1.2% a year ago, but also, they were guiding for anywhere from minus 4% to minus 1%. They also raised earnings guidance for the rest of the year. So, certainly, Dick's Sporting Goods surprising on all fronts this quarter. Looks like the remainder of the year is going to be a good one. But again,

With retailers like these, you've really got to keep on your toes there and mine the multiple. Look at what's coming down the pike there. It seems like there are a lot of long-term headwinds they're going to still have to deal with. Six years ago, Google rolled out Google Fiber, a plan to deliver high-speed internet access in select cities across America. This week, the company announced it is putting the plan on hold and suspending projects in San Jose and Portland, Oregon. Why the switch, Simon? This is a very interesting experiment for Google, the whole fiber idea.

The first city they launched it was Kansas City in 2012, where they basically would provide one gigabit per second internet for about $70 a month. So to put that in context, it's about 20 times faster than the internet that I have right now in my place for the same price. So please, Google, come to Alexandria, Virginia. But the reason I say it's an experiment is because Google was testing how much the costs are related to those subscriptions that they were going to be getting from people that wanted that internet. It's very expensive to dig up flowerbeds and put fiber optic cable all around a city. And they were trying to figure out how the equation worked out with the subscriptions versus the costs. And a lot of the analysis, at least that I've seen, was saying that up to $500 per household,

whether you subscribed or you didn't, was Google's cost in these different locations. So the economics, perhaps, were not as favorable as they thought they were. And so I think right now we're in a spot where they're pivoting from laying a bunch of fiber optic cable, as traditional telecoms have for internet connectivity, to going wireless. They're playing with wireless technologies now. You can put wireless access points around any kind of urban area. And I think that we're still going to see Google pursue the fiber project, but they're not going to jump into this without knowing exactly what they're getting into first.

Over the past five years, shares of Buffalo Wild Wings have returned nearly 200%, crushing the market's average return during that time. And one activist investor thinks, that just ain't good enough. Details next. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Simon Erickson, and David Kretzmann. Mick McGuire is the founder of Mercado Capital Management. His fund owns a 5% stake in Buffalo Wild Wings. And this week, he sent a letter criticizing the restaurant chain and asking for substantial changes. What does he want, David? I mean, this is not a business in crisis.

Everybody's a critic. No, he has a laundry list of things he wants Buffalo Wild Wings to do. Among them, bringing fresh talent to the board and the management team, refocusing on the core Buffalo Wild Wings brand, forget about our taco and pizza rep, get those out of there, and stop buying restaurants from franchisees. And he wants the company's future growth to come from franchisees, which kind of flies in the face of common sense with restaurants, I think. When you have a company that long-term has been one of the best restaurant operators out there, up among the ranks of Chipotle and others, you want to own those restaurants.

You generate far more cash flow over the long term, even if your upfront costs are higher. So, I don't know. I think the translation for what Mick McGuire and Mercado Capital want is, please juice your short-term profits over the next year or two, and we'll disappear within the next five years. Jason, I get that 2016 has not been a great year for this stock. But again, over the long term, the way Sally Smith has run this company, when this story broke a few weeks ago, that someone had taken a stake, we were talking about, really? What are they hoping to do?

It seems. You'd really have to give Sally Smith a lot of credit. Taking a relatively mundane concept in just wings, beer, and sports, and giving it a national identity and growing this business to the point where it is today has been a phenomenal achievement. It's one that she should be very proud of. I think David's right there with Mercado. I think they're looking for more of a short-term catalyst here, as opposed to what the business is trying to do over the longer term. Certainly, it flies in the face of their longer-term strategy of building out that portfolio with restaurants like Our Taco, Pizza Revenue, whatever else may come to them. But I think that, again, if for some reason they were

to have their way to succeed in getting the business to change its strategy, investors in Buffalo Wild Wings would definitely need to rethink this one, because that is a big change in the thesis here. The thesis, for the most part, is that they want to be this restaurant company, and it's going to be more than just Buffalo Wild Wings. They're going to get to that 3,000-store footprint. If that changes, well, certainly the store base is going to be a smaller one. And yeah, they could potentially realize maybe a more profitable model via franchises, but that doesn't necessarily mean they'll succeed in doing it either. Yeah, and to be fair, there are certainly areas where Buffalo Wild Wings can improve.

Their capital allocation has been a bit scatterbrained. They're increasing their share repurchases, they're investing internally in the restaurants, they're acquiring franchisees and opening new restaurants all at the same time. If I'm Buffalo Wild Wings management, I'd pick maybe two of those and really go all-in on those. You don't need to be increasing debt on your balance sheet and spreading your cash thin. You don't need to do everything at once. Focus on the top one or two key points and hit on those. Third quarter profits for Deere came in much higher than expected. They raised guidance for the full fiscal year, and not surprisingly, Jason, shares up more than 10% on Friday.

I played golf the other day, Chris. Did you know that? It just seemed like kind of a Deere thing to say. I mean, these guys run that kind of business. Yeah, it was good stuff. How was the grass? It was lovely. It was lovely. And I'm sure John Deere and company had a good part in making that happen. Are you taking credit for the quarter that Deere just put up? Hey, listen, you know, the golf courses don't maintain themselves. And if it's not for guys

like me out there using them, Chris, I don't even know that we're having the discussion. I mean, hey, whatever. I think that this has been a very interesting investment here, because right now, they are in the face of a very, very difficult economic time. You look at their top line, and that tells you all you need to know. They're having trouble really growing on the sales side. And the interesting thing is, when you look at a cyclical type of business like this, and you look at the price-to-earnings multiple, typically when multiples are high, that's when you start thinking, hey, I want to probably avoid this stock. these are the kinds of businesses when the multiple is high because of very depressed

earnings, that's when you have to start taking a look at them and thinking, is there something down the road here that's going to help send this stock higher? I think there are reasons to believe that the stock could go higher. I think they make a lot of their money. More than half of their operating income comes from the agriculture and turf segment. I think that when you're looking at a global population that is continuing to grow, that's going to continue to need more in the realm of agriculture and farming and whatnot. That plays right into Deere's strength. They have a very powerful brand where they can sell the equipment, the service, the aftermarket parts to help support that. So, a great network there. Very interesting

to note that Berkshire Hathaway has built a pretty big position in this company as well over the past couple of years. I'm not saying copy what they do, but whenever they do something like this, you want to take a look at it, at least understand what they're thinking. I think that's what they're thinking there. Tough time for them now, but I think there's reason to believe things will get better. The largest distributor of toys in the world is McDonald's. Roughly 20% of their sales involve Happy Meals, which typically include a toy. Recently, however, McDonald's started giving out fitness trackers instead of toys. This week, that came to an abrupt end. McDonald's issued a recall due to reports

of skin irritations associated with, and this is the key point, guys, actually wearing the fitness tracker. This is the most McDonald's story ever. They're trying to do the right thing. Isn't there an opportunity here, though? McDonald's-branded aloe, something to soothe your irritated skin. Let's turn this into a positive, right? Alright. Jason Moser, David Kretzmann, Simon Erickson, we'll see you later in the show. What's it like to be the only American working for a major automaker in South Korea? Frank Aarons shares his adventure in Seoul. Stay right here. This is Motley Fool Money.

I feel so good. Come payday. I think of all the things I'm gonna buy when I pick up my pay. This episode of Motley Fool Money is brought to you by Casper. Casper is revolutionizing the mattress industry by cutting the cost of dealing with resellers and showrooms and passing the savings directly on to the consumer. Casper's mattress is an obsessively engineered mattress at a very fair price. You can buy it easily online and completely risk-free. That's because Casper offers free delivery and painless returns within a 100-day period, so you don't have to lie down in a showroom. Who wants to do that? Get a Casper Twin mattress for $500 or a king-size mattress for $950. Go ahead and compare that to the industry average. That's an outstanding

price point. And you can save an additional $50 towards a mattress purchase by going to casper.com slash fool and entering the promo code fool. That's casper.com slash fool. Enter the promo code fool. Terms and conditions apply. Welcome back to Motley Fool Money. I'm Chris Hill. The last time I'd seen anyone drinking this way was during quarter beer nights at West Virginia University in the 1980s. That is how Frank Ahrens described a work outing after his very first week as director of global public relations for Hyundai in Seoul, South Korea. It is an adventure that he details in his new book, Soul Man, a memoir of cars, culture, crisis, and unexpected hilarity inside a Korean corporate titan. And Frank Ahrens joins me now from Washington, D.C. How are you, my friend?

Great, Chris. It's nice to talk to you. Thanks for the interest in the book. It is my pleasure. So I'm actually going to start before your book. I'm going to start with, because you and I have known each other for nearly 20 years, I'm going to go back to getting an email from you. I remember getting an email from you saying, hey, just wanted to let you know I'm getting

married, I'm starting a new job, and I'm moving to South Korea. And I can tell you now, Frank, that when I got your email, my first thought was, wow, if he had shared only one piece of information, any one of those three, I'd be happy for him. But I read all three of those and I thought, oh my goodness, do you have any idea how your life is about to change? And I didn't. And you didn't. So let's go with the beginning. What brings you to Seoul, South Korea, in the first place? And let's delve into the first week on the job. Sure. Well, this is the sort of thing that happens when you marry a diplomat. My wife, now wife, then girlfriend, Rebecca, was taking the U.S. Foreign Service exam. We'd been going out for a year or so. And she had gotten in, and she'd gotten posted to Seoul, South Korea, for nine months in the future. and we um i was covering you know i was at the washington post the business reporter and part of what i was covering was the business of publishing and the washington post company

and this was the pre-bezos era and i was i would watch the quarterlies and i would see the ad revenue and the readership go down and i could see my age go up uh and i figured it was going to be tougher to make a change if the first number of my of my age was a five instead of a four quite honestly. So I was looking around for different careers. I was looking into public relations, which is not unusual for a journalist to go into. But then Rebecca got posted to Seoul, and I said, well, you know, this sounds like an adventure in for a dime and for a dollar. And so we decided to get married so we could go overseas as husband and wife. And I just started calling people I knew. I didn't think about Hyundai right away. I was just calling everyone

I knew you have any ideas for jobs in South Korea. And through grace of God and some connections, I found out that the head of global PR at Hyundai Motor was retiring. And I got my resume in. And literally two days later, I was interviewing for the job. And we arrived, Rebecca and I arrived in Seoul in September, October 2010 on a Thursday. She went to work on a Friday and I went to work on a Monday. Well, let's talk about the work part, because it's clear that you didn't really know what you were getting yourself into in terms of the job. Because one of the things that you write about is that this isn't a nine to five job. You know, one of the things you write is your availability to the company begins before 8 a.m. Monday, and it ends Friday night, pretty

much when your boss decides it's time to call it quits. How did you deal with that type of adjustment? Right. So I was a career-long journalist used to being in a newsroom, which is at best a horizontal structure, is at worst is an anarchic structure, with maybe two levels or three levels between me and my top boss, the executive editor, who I called by his first name. And I was largely an independent contractor, as many journalists are, we work alone. And then suddenly I was in a corporation, which not only, you know, corporations around the world share a lot of top-down sort of vertical traits, But then you go to East Asia, which is Confucian, and so Confucianism suffuses everything in Asia.

And Confucianism is about hierarchy, rank, relationship, one to the other. Whoever you are, there's always a superior and a junior, and you address them by those titles, regardless of the different settings that you're in. And suddenly I was not only in a hierarchical corporation, but in a Confucian hierarchy. And it was incredibly difficult. I mean, working in a newsroom does not prepare you for working in a corporation, much less in an East Asian one. Well, and we can go back to the drinking. I mean, one of the things that surprised me in your book is the getting – co-workers getting together after work to have a drink. I think everyone can wrap their head around that.

What you went through was not only required, it was this almost heightened alcohol consumption competition. Right. So this is unfamiliar to us in the West. You're right. At work, maybe, especially if you're single, you don't have kids, a couple folks get, hey, you want to go get a drink after a drink? Yeah, let's go do that. In the Confucian corporate culture, your team leader typically, usually work on a team of five to ten people, let's say, your team leader may decide at 4.30 at night, okay, everyone, weishik, which means team drinking dinner. and you are compelled to call your wife or husband and say, I got to go worship tonight because your loyalty to your team is paramount. And this sounds martial to us maybe, but it was just one of the many examples of the things that I had to look at differently and look at from an Eastern perspective instead of a Western perspective.

One example is we say conformity as a bad thing. They say harmony as a good thing. And the drinking dinners are meant to increase the bond between you and your teammates and to produce more efficient work and also to produce a real esprit de corps. As one Korean executive said to me at one point in his nearly proficient English, everyone, same level of drunk, everyone the same. And so that's really, you know, and if you don't drink, if you don't participate, and with a caveat, there is an increasing awareness in Korean culture and society and government that there is a health cost to this, and there's a productivity cost to this even. And so the Korean government has just now begun airing kind of public service ads encouraging the big corporations and governments and so to ease back on the wayshik because, sure, you're at work the next morning at 7 where you're supposed to,

but you're no good until 10 a.m. or so, right? And you're commiserating in the smoking room, you know, with your buddies from last night. And so the foot's coming off the gas a little bit, but the wayshik will be part of the Korean corporate life for some time. And there are benefits to it as well. you just have to alter your way of thinking about it. But you're not a particularly big drinker. I am not.

So how do you thread that needle? Do you drink more, or do you try to come up with creative ways to avoid drinking? Right. So for me and for Rebecca and I, it really comes back. I mean, the limiting factor comes back to our faith. We're both Christian. And the Bible doesn't tell you not to drink. I mean, look at the Last Supper.

Christ is sharing wine. But it does implore you not to get drunk. So I said, okay, that's our instruction. But drinking together in East Asia is about getting drunk. There is no other reason to drink than that. So the last thing I wanted to do was, A, come across as holier than thou, because many of my co-workers there are Christian. And secondly, slap my new host country in the face.

And so I asked for advice from some other expats on what they had done. And they ranged everywhere from like dumping, so the drink in South Korea is soju, and it's about 20% alcohol, it's clear, comes in a small green bottle, it's a national drink. It's more than the drink, it's like more than what vodka is to Russians, Koreans think of it as their spirit, right? And it's the tool of bonding, and it comes in a shot glass, and you say Gun Bae or Wee Hai Oh and you down it. And so, you know, you can do 15, 20 shots a night, right? And so solutions range from dumping it into the soup when no one was looking and filling it with water to just going for it. And so with the help of my boss, quite honestly, and his endorsement, which sort of made it okay to everyone, at dinner when we were all making our endless toast and every male executive, typically male executive,

expected to make a toast to Hyundai's success, to global number one, to whatever it's for, instead of taking a whole shot of the soju, I would take a sip. So by the end of the night, I was participating in the ritual, and I was trying to fit in. But by the end of the night, I had, say, two shots of soju instead of 10. You're listening to Motley Fool Money, talking with Frank Aarons. His new book is Soul Man, a memoir of cars, culture, crisis, and unexpected hilarity inside a Korean corporate titan. I want to get to the automotive industry in a moment, but you tackle a number of social issues and conflicts with the way we're used to dealing with basic manners in the United States versus what is considered polite in Korea. And

one of them revolves around a napkin. What is the deal? If I'm in Seoul, am I supposed to ask for a napkin or do I reach for it myself? Yeah, you got to reach for it yourself. So So this, I call it the napkin episode, and it happened right before I left Korea, and I honestly wish it had happened right after I'd gotten to Korea. It would have made things easier for everyone around me. I'm having team dinner with my global PR team, and one young woman sitting next to me, all Korean, of course, except for me, her napkins are next to her, and I said,

would you mind handing me a napkin, please? So she did. Now, she had spent a year of college as an exchange student here in the U.S. She's familiar with us, spoke very good English, as did all my team members. She said, did you ask me to hand you that because in your culture it's considered rude to reach in front of someone while they're eating? I said, yes, yes, that's right. She said, in our culture it's considered rude to interrupt someone while they're eating to ask them to give you something. So aside from the hilarity of it, the fact was here were two cultures trying to do exactly the most polite thing, only doing exactly the rudest thing.

And so that's what I had to really learn. I ended up sort of thinking about it. If you put a glass on a table between a Korean and an American, they're both going to see a glass, but it's going to mean something different to each. The American will think, oh, thing that will soon provide me with a refreshing beverage. Korean will think, oh, thing that I must fill and serve to my senior here at the table to show him respect. You see? I do, but I'm also thinking about how I would really be a fish out of water in that situation.

Yeah, well, listen, all of us were, and I was my entire time there. I got better as it went along because, not necessarily because I learned more, even though I tried, but honestly because I dropped my sort of Western, I tried to drop my sort of Western, you know, natural American bumptiousness and, you know, blustering through and doing things. My wife used to call me an America bomb, dropped in the middle of Korea. So I tried to tone it down a bit. Now that you are back in the States living and working, is there anything you have brought back with you from Korea that you use in your work life, whether it's a custom or tradition or just something you learned about working with other people? Yeah, well, first off, I noticed my emails are a lot more polite. Because, you know, here in America, email is a sort of a value neutral delivery tool, like we use it for everything from breakup notes to contracts. And in Korea, it's an official tool, typically a tool of official business. and you don't just send somebody an email, say, hey, what do you think? You know, you start with an address, you know, dear title, name, it is a pleasure to speak to you today, et cetera, et cetera. We would call it small talk, but it's important. And then you address the issue. I've made my emails a bit more polite and also, you know, in my job now where I work at a PR

agency, we deal with a number of foreign clients and I've become a lot more sensitized to learning about how the email and all my communications will be received than how I'm saying them. Few industries have been as interesting to watch over the last five to 10 years, and I would argue as interesting to watch over the next 10 to 20 years as the automotive industry is. And I'm curious, having worked at the inside of a major automaker like Hyundai, what is going on in the automotive industry right now that is of the greatest interest to you is it clean energy cars maybe what they're doing at tesla motors is it self-driving cars what what catches your attention and makes you think as someone who used to be an executive an automotive

company this is where the world is going yeah it's convergence of all those things that you talk about that were irretrievably going those ways i mean the internal combustion engine will be around a bit longer and it'll be dominant for a bit longer, but it will continue to get better and be a part of the solution. You're going to see a continued rise in electric vehicles, hybrid electric vehicles, and fuel cell electric vehicles. Every Hyundai has a fuel cell electric Tucson, the Mirai at Toyota. More and more, a fuel cell is a magical car. You fill a tank up with hydrogen gas instead of gasoline. And the only thing that comes out of a tailpipe is water vapor, right? EV battery range is going to continue to increase. All that is fascinating.

And then the step to autonomous driving will continue to come in some leaps and steps and leaps and steps. So we'll start already. You have some autonomous elements on cars with lane keeping devices and adaptive cruise control and automatic braking, lane departure warning, haptic warnings, when your wheel vibrates, when you move out of the lane, things like that, pretty soon you're going to see car-to-car communication. You're coming to a blind intersection. Your car sees the car coming at you before you do and warns you. And then pretty soon we'll move to autonomous.

Now, I take that back. Probably not pretty soon. At some point, we'll move to autonomous. But it's going to be a big leap because essentially everything's going to have to be autonomous before something is, before one thing is, because they're all going to have to talk to each other. And then our cars, you know, I see a future where your car, and I think this is where people get it wrong, they say, oh, cars are going away. No, it's not going away. People still like that

personal space. But the personal space now will be one in which they don't have to worry about driving. They can get in their personal space, and they can work, or they can talk to their friends, or they can have a drink with their friends, and the car will take them where they want to go. And that's fascinating. I tell my three-year-old daughter, jokingly, I'm never going to have to teach you to drive or get you to go through the learner's permit thing. I will, of course, but maybe her daughter not, right? So it is absolutely fascinating time that's coming. All the automakers know that. They're all moving forward. Google has their self-driving project. It really is fascinating to watch, and the automakers do have to adapt.

All right, last question, then I'll let you go. Another big part of Korean culture that you write about is karaoke how did you how did you adapt and what is your go-to song so unlike in america karaoke or in korea norabong which means music room is no joke um every year you see some news story about some poor salaryman getting knifed in korea or china or thailand because he was butchering my way right and nobody could they couldn't stand it so it's an integral part again of the bonding but also the evening out experience you eat dinner then you go karaoke and everyone's got their go-to and i just i settled on dancing queen because wow because a everyone knows it everywhere in the world and it's fun and it's just hilarious to see a big

american guy singing an abba song and so it's a good leveling device you can never go wrong with Saba. The book is Soul Man, a memoir of cars, culture, crisis, and unexpected hilarity inside a Korean corporate titan. It is available everywhere. Fantastic stories. Frank Aarons, thank you so much for being here. Thank you, Chris. It's a lot of fun. Coming up next, 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, Chris Hill

here in studio with Jason Moser, Simon Erickson, and David Kretzmann. Time to get to the stocks on our radar, and our man Steve Broido will hit you with a question from the other side of the glass. David Kretzmann, what are you looking at? David Kretzmann, You know me, I like flashy, so I'm going with Exalta, ticker A-X-T-A. This is a global provider of specialty paints and coatings for new and used cars and other vehicles and industrial uses around the world. 90% of their business comes in markets where they're the No. 1 or No. 2 market share leader. Berkshire Hathaway actually bought a 10% stake in the company last year, so it's one on my radar.

Steve, question about Xalta? Is paint technology changing? Is paint different today than it was 10 years ago? It definitely is. You're having paints go from solvent-based paints to liquid-based paints. There's a lot of technology there, surprisingly. Jason Moser, what are you looking at? Sure. In the face of a very difficult energy market, taking a look here at clean Energy Fuels, ticker CLNE. Most recent quarter, gallons delivered grew 11%. Revenue grew 24%. They've done a lot of work here this year to shore up the balance sheet, which has resulted

short-term, a little bit of a dilution there for shareholders, longer-term, absolutely the right thing to do. Once we can see some sustainable higher oil prices, $45, $50 even higher, this business is going to benefit from that tailwind. So, it'll just take a little time. But financially speaking, they're back on solid ground there, and I do like what they're doing here in the natural gas space. Steve? The future of liquefied natural gas. I'd say is two thumbs up, Steve.

Simon Erickson, what are you looking at? Chris, I'm going with a small microcap called Disney, ticker DIS. Kidding, of course, Disney is one of the largest media entertainment groups in the world, and shares have been getting dissed in the last couple of months by analysts that are calling Disney out for a falling subscriber count in ESPN, which is true. They have dropped from about 99 million subscribers in 2011 to about 90 million today. But the company's just got such pricing power with those cable networks that they're getting great affiliate fees. Operating profits for media networks is up great. I think it's still a great opportunity for investors. Steve?

What age should my children be when I first take them to Disney World? I would say at least six. Three stocks, Steve. What are you looking at? I'm a Disney shareholder, so I'm going with Disney. All right. Jason Moser, David Kretzmann, Simon Erickson, thanks for being here. Thanks. That's going to do it for this week's edition of Motley Fool Money. Thanks for listening.

We'll see you next week.