Motley Fool Hidden Gems Investing - Microsoft's New High

Episode Date: October 21, 2016

Microsoft hits an all-time high. Netflix delivers. Hasbro gets a boost from princess power. And Snoopy gets sent to the doghouse. Plus, best-selling author Roger Lowenstein talks about his newest book, America's Bank.  Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode of Motley Fool Money is brought to you by Rocket Mortgage by Quicken Loans. Rocket Mortgage brings the mortgage process into the 21st century with a fast, easy, and completely online process. Check out Rocket Mortgage today at quickenloans.com slash fool. Everybody needs money. That's why they call it money. The best things in life are free, but you can give them to the birds and bees. Chris Hill. 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 Motley Fool Funds, Charlie Travers. And from Motley Fool One, Ron Gross. Good to see you, as always, gentlemen. Ron Gross. How are you doing? It is earningspalooza. We've got the latest results from Wall Street. We will talk with bestselling author Roger Lowenstein. And as always, we'll give you an inside look at the stocks on our radar. But we begin this week in the Pacific Northwest. Microsoft's first quarter profits and revenue came in much higher than expected. And Ron Gross, we've been saying

this for the last few quarters, the cloud. The cloud, baby. The cloud is getting it done. Stock broke through. The all-time high set back in December 1999 this week. Nadella has done a great job turning this behemoth of a ship. And as you said, the cloud business, known as Azure, more than doubled in revenue this quarter, up 116%, big numbers. Microsoft now ranks second in that business, decently behind Amazon, who still has a 31% market share. Microsoft's at about 11%, but they're making great headway, and that's really boosting both the top and bottom line. We saw strength in a lot of different businesses. Even the Windows business, which is not the best business in the history of

the world, was only down 1%, but we saw many of the other divisions up 5-10%, allowed them to increase their dividend by 8%, now a 2.6% yield, returned $6.6 billion to shareholders in the latest quarter, and they authorized another $40 billion in share purchases. If I asked you right now, anyone around this table, on a daily basis, how do you encounter Microsoft's cloud platform, Azure? Or do you have any idea? I don't think I do. I would suspect we might without even knowing it. Right, and that's the question, I guess, really, because I can at least entertain the notion that I do encounter Amazon Web Services to some extent. But I'm trying to put, how do

we point to what Azure actually does? If you use Word or Excel in the cloud, you're certainly accessing part of their cloud businesses, and a lot of people do access the Microsoft Office suite in that manner now versus the old way where you would download them specifically onto your PC. But let's not forget their foray into the LinkedIn world. That acquisition is expected to close in 2017, probably the second quarter. I'm still on the fence about it, not sure I get it, but more power to them. So, you know, Nadella gets a lot of credit for focusing the company on the enterprise business

and really moving back from the consumer products that were, you know, they were kind of a losing battle. But then again, they can't get away from their history of doing these large acquisitions that just leave you scratching your head of like, what do you guys do? Or Skype or, you know, name them over the years. They just spend so much money on these, you know, acquisitions that just rarely seem to pay off for them. But, you know, Nadella overall has done a pretty good job. It seems like the argument with LinkedIn for the most part has been the data, right? I mean, just the enterprise, the employment, the professional data that they can get there. But LinkedIn to me, as a platform at least, from the user side, seems to be getting worse, not better.

Which then begs the question, how engaged really are users going to be going forward? Because less engagement really means less value for its ultimate owner in Microsoft. I just don't know how valuable that data really is 10 years from now, perhaps. Well, like they say in sports, winning cures everything. I think in the world of investing, a stock hitting an all-time high cures just about everything. So, I think that's why they're probably willing to forgive, or at least put aside any questions they have about the LinkedIn acquisition. In terms of the stock, though, Ron, you've got some people on Wall Street now saying it's overvalued. Is it pricey?

27X earnings, 14X EBITDA, certainly not cheap. It's a blue chip, and it pays a nice dividend. You probably won't get hurt too badly if you own it, but I would certainly not call it cheap. Third quarter profits for Netflix came in much higher than expected, pushing the stock up more than 20% this week. And the international growth that they're seeing, Charlie, is really strong. Yeah, there's two stories here with Netflix. The first, as you mentioned, is the subscriber growth. Year over year, 25% growth. They now have 83 million paying subscribers, which is just a mind-boggling number to me. But really, the international side, as you mentioned, is the

lion's share of that growth. International is up over 50%. They have just under 37 million international subscribers. So what this company has done to move from a pure US-based movie distribution business to move so fast overseas and be so successful, I think a couple of years back, that was a question mark. If this business translates into other markets with other languages and other restrictions on the rights around the content they're showing and how hard that would be to execute. I mean, I got to say, hats off to them. They've really looked like they've nailed it. Well, we've talked before about their increasing push into original programming and how for people in the creative part of the business, Netflix is just such a great option and reportedly

a great partner to work with. That seems like another thing that they could export to other countries, just the ability to work with filmmakers in Europe and elsewhere. Right. So, I mean, going back a couple years when they first floated the idea, we're going to make our own shows. I mean, there's a lot of skepticism. People are like, it's expensive. You guys have no experience doing this. How well is it going to work for you? I think the answer is unclear. They're doing very well with it. They did 600 hours of original content this year. Next year, they're ramping that up to 1,000 hours of content. You could probably do nothing all week, but watch Netflix original content and never run out of things to watch. That's how much content they're putting out there. It's just really impressive what they've been able to do with this business. And I think the key there to the original content side is they took kind of baby steps, right? They didn't just jump into this thing head first. I mean, they sort of work with

partners there where they don't actually fully own some of that content in, I'm thinking, House of Cards or even Orange is the New Black, for example. But more and more, they're seeing the benefits there in really owning it from start to finish and owning that content outright. In the longer run, they see the economics as more favorable as it ultimately becomes less expensive. And I think that makes a lot of sense. And so, that early experience, learning how the process works, really, I think, has benefited them to this point now. Because now, you're right, Charlie, they are producing, I think, very compelling original content. And it makes them a company that now

controls their own destiny. They're not beholden to negotiating deal after deal with various studios because now they can bid for their own projects that they want to do, finance them themselves, and then they own the intellectual property in perpetuity. They've turned from a distribution business into an IP business. We've seen with companies like Disney how powerful that can be over the long run. I think therein lies the rub. For all of that content, they're going to have to keep on raising a lot of capital in order to keep that great content flowing. So, as long as subscribers keep coming, it doesn't even really, at one point or another, they don't really have to grow that much. If they

don't churn subscribers out so much, they're just going to have to keep that subscriber pipeline really full in order to keep the content coming. They're going to have to rely on raising a lot of capital to run the business. Tough third quarter for Boston Beer Company. The parent company of Sam Adams saw It's sales down, shipments down, and the company cut their guidance. Is there any bright spot here, Jason? Jason Moser. It's beer. O'Reilly.

Other than the obvious. O'Reilly. Need we have more bright spots? O'Reilly. Ron said it, right? Yeah, you look at the quarter, there are a lot of takeaways, I think, from this quarter. Very challenging numbers. I think, speak to how competitive this craft market has become. But I think the market's reaction to the stock is actually really telling here. I mean, I think it probably surprises some to see the stock actually performing well after reporting a quarter like this. It wasn't terribly surprising. I mean, we know that they've had some challenges, and so guiding down never really helps the cause.

But I think they're getting a lot of credit for the success they've had to date. They have been through a spell like this before. Back in the mid-'90s to 2000, when craft beer sort of first made its big mark, there was actually a stretch there from 1996 to 2001 where Boston Beer's top-line revenue fell. And so, they have dealt with this type of competition before. I think to this point now, they've got the scale and the facilities where they can batten down the hatches and deal with an uber-competitive market. On the flip side of that, you look at some of these other craft brewers out there. I'm going to pick on Stone Brewing here for a minute. Stone Brewing out in California, popular,

very good offering. Recently announced they're going to lay off about 5% of their workforce, because they're running into some challenging economics and a very competitive space here craft beer. Now, Stone Brewing is the ninth-largest craft brewery in the United States, with about 325,000 barrel output per year. Boston Beer's scale is giving them the advantage of dealing with a very competitive market. They're still able to produce some pretty attractive economics dealing with the fixed costs of that big brewery, and they buy back some shares here now and then and keep those earnings per share numbers up. And I think as we see this market sort of the herd thin out, so to speak, Boston Beer will still be in there producing great

offerings. Third quarter revenue in Hasbro's boys division grew just 2%. Revenue in the girls segment was up 57% year-over-year. Charlie, I think I know why shares of Hasbro were on the rise this week. Yeah, this will surprise nobody who's a parent listening to this show who has young children in the house. The Disney princesses and the Frozen franchise, where Hasbro has the agreement to sell all the toys and the dolls and yeah they're popular it's uh and so hasbro said that uh this year they expect these partnered brands to be 30 of their business so it's it's a really uh nice spot for this company to be in uh this year it happens to be the frozen and the

princesses out of disney that are doing it for them they're also uh dreamworks trolls which is a movie that comes out uh next month uh which is you know seeing a whole lot of media around that And those are going to carry the torch for them this year. But if you look at their broader portfolio, you know, we're not even talking about things like Star Wars or Transformers, My Little Pony. They just have one brand after the next that can carry it for them in different years. But right now, yeah, the girls' products are really doing it for them. And they had a record-setting quarter for sales and profits. Well, and you got the new Star Wars movie coming at the end of the year.

So, presumably, that's going to push that segment forward. Right, right. And so, next year, it'll be a Star Wars story. But right now, it's all Disney. Coming up, we've got online retail, pizza, and donuts. What more could you possibly need? This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Charlie Travers, and Ron Gross.

The third quarter results looked good, but shares of eBay falling 10% this week after the company lowered guidance for the fourth quarter. Jason, they didn't lower guidance that much. Yeah, but I think the market's probably a bit more concerned about the forward-looking picture here, beyond just their numbers, really the competitive space here. We know that Facebook is making inroads into becoming their own marketplace. Last I heard, there were more people on Facebook than were using eBay. To put some numbers around that, eBay has probably around 165 million active buyers versus 1.21 gajillion users that are on Facebook now.

The bottom line with any of these platforms, the real value is in the network. I think that it's reasonable to be concerned about other bigger, more competitive networks out there. There are a couple of things with eBay. I think it was more attractive when it had PayPal and it no longer has PayPal. Something they recently did here, which honestly I disagree they sold off their big stake in MercadoLibre, which is essentially like the Amazon of Latin America. And they had a very big position in MercadoLibre. And yes, they realized a good return on that investment. But honestly, I think there was a longer-term opportunity to be a part of that and to see that they liquidated that investment. To me,

you see how they're setting this business up. They're going to continue to manage modest top-line growth, try to bring it down to the bottom line, buy back some shares, help shareholders out there by growing earnings per share at some relatively decent clips. But all in all, I just don't see this as one of the more compelling e-commerce plays out there over the course of the next five years. Domino's Pizza's third quarter profits rose 25%. Their same-store sales were up 13%, the stock hitting an all-time high this week. Ron Gross, take a victory lap. You were on this bandwagon years ago. I was, but if I take a victory lap, then I have to apologize for all of the bad ones, too.

So let's just let it sit where it sits. But hey, for a company that makes mediocre pizza, their results are phenomenal. Let's face it. As you said, same-store sales in the U.S. and internationally, really strong. 22 consecutive quarters of increases in the U.S. I want to say 91 consecutive quarters internationally. That's an extremely strong business. Obviously, they revamped their menu in 2010. That has been the big driver over the last six years of both the business and the stock. They've reduced shares outstanding in the latest quarter by 12%, which led to a 43% increase in earnings

per share. So, the company continues to just really do a great job, and there's still plenty of growth out there. Obviously, they have a ton of stores, mostly franchised, 5,000 in the U.S., almost 8,000 internationally, but there's still room to run. Yeah, Patrick Doyle, who took over as CEO in early 2010, has just done an amazing job with this company. I feel like we've got the title for Ron's memoirs, whenever he wants to publish it. Mediocre Pizza, Excellent Returns. I mean, that's it right there. I like it. And also, we had talked about this earlier, Jason, you look what they did with

their app, and just how that drives sales, and it also lowers costs for the business. Absolutely. And it opens them up to such a large consumer base as quickly as we've all gone mobile. And I don't think it's any accident, really, if you look back over the last five years and you see the way that Domino's has performed and the way that Papa John's has performed, they both have executed very much the same way over these past five years and the stocks have reacted accordingly. And franchises usually get in trouble by letting poor franchisees open up stores. And what Domino's did back six, seven years ago is they took a really hard look, and they

took franchises away from those that were considered to be subpar operators and put them in the hands of better operators, or they took them back in to make them company-owned stores. And that really, in conjunction with turning the menu around, has led to these great results. Shares of Dunkin' Brands down slightly after third quarter revenue came in a bit lower than analysts were expecting. Why the the lower sales, CEO Nigel Travis cited a few reasons, including changes in gas prices and quote, the overwhelming, dampening effect of the presidential election. Is he serious? Grab him by the donut, Chris.

Seriously? We're not buying donuts? I'm not saying the presidential election doesn't affect some businesses, Charlie. But come on, this seems absurd to me. It doesn't really fly for a low-ticket retail business, I wouldn't think. Certainly, I think if you're talking about big-dollar items, cars, trucks, utility vehicles, sure, it matters there. I think if you're in the healthcare business, you worry about changing regulation and pricing, but donuts for a dollar? It makes no sense. And even if they thought it, they shouldn't have said it, because it just opens them up for ridicule. Well, and we talked about this with the bad winter and how that affected the Northeast

East United States, that has a material effect on a business like this. But the presidential election? What are you talking about? It just makes no sense. After 31 years, Snoopy has been given the pink slip. No. Yes. Insurance giant MetLife announced this week it is launching a new global branding effort that will not include Snoopy, Charlie Brown and the entire Peanuts gang. MetLife brought in the Peanuts characters in 1985 to make the company more friendly and approachable, apparently the new global branding effort does not need them to be friendly or approachable." I don't own shares of MetLife, I don't really

have a stake in any of this, but as someone who grew up with the Peanuts comic strip and the TV specials and that kind of thing, and certainly the blimp that you see at games, I don't know, I'm a little saddened by this. Ron, what about you? I would say, messing with a brand, one that's relatively iconic, is pretty bold. They've got to have something up their sleeve that they think can replace it, because they're kind of synonymous in a certain way, those characters with that company. Other than that, this company to me is a bland insurance company that feels like every other one. So, I'm not sure it's a great idea. Let's go to our man behind the glass,

Broido. Steve, I'm sure you have an opinion on this. First, which is your favorite Peanuts character, and where were you when you heard this news? I was right here when I heard the news, and my favorite Peanuts character probably would be Linus. I like his little blanket. He's a good man. He's a boy. I like that you're looking at a Linus' heart and just taking that away from him. Good soul. All right. Ron Gross, Jason Moser, Charlie Travers. Guys, we'll see you a little bit

later in the show. Up next, a conversation with bestselling author Roger Lowenstein. Stay right here. You're listening to Motley Fool Money. All right, we'll get to the interview in just a second. But first, if you've ever bought a home, you already know how frustrating and time-consuming getting a mortgage can be. Rocket Mortgage brings the mortgage approval process into the 21st century by taking all of the complicated, time-consuming parts of applying for a mortgage out of the equation. You can easily share your bank statements and pay stubs at the touch of a button, helping you get approved in minutes for a custom mortgage solution that's been tailored to your

own financial situation. And best of all, with Rocket Mortgage, you can do it all on your phone or tablet. So if you're one of those people who's looking to refinance your mortgage or you're looking to buy a home, check out Rocket Mortgage today at quickenloans.com slash fool. Equal housing lender, licensed in all 50 states, NMLS, consumeraccess.org, number 3030. Welcome back to Motley Fool Money. I'm Chris Hill. Roger Lowenstein is a financial journalist whose best-selling books include The End of Wall Street and Buffett, The Making of an American Capitalist. His most recent book is America's Bank, The Epic Struggle to Create the Federal Reserve. And he joins me now from Massachusetts. Roger, thanks for being here. Chris, always good to be on the show.

I like that in this age of blockbuster movies about superheroes that are origin stories, you have essentially written the origin story of the Federal Reserve. Yeah, and who knew that it would involve, you know, a secret conclave on a forbidden island of Wall Street moguls or, you know, tremendous panics and bank runs or a presidential election with as much chaos and, dare I say, as many demagogues as our own. It was quite an exciting time. So let's get to that. I mean, you're someone who's been interested in finance for a very long time. When you set out to write this book, did you already have a sense of the backstory or were there, as you did your research, big surprises along the way? Well, I knew that it was very

difficult, that is to say, to establish a national bank, a central bank in this country. I knew that Unlike in all the countries of Europe and every other developed country in the world, for Americans, it's a very tough thing to agree, yes, we should have an organized modern banking system. In fact, we've had two central banks early in our past. Of course, one formed by Alexander Hamilton, the next formed by James Madison, and they were both abolished. It was a very touchy thing. What I didn't know is how much the conflicts of, we're talking the early 1900s, late 18, very late 1800s, early 1900s, how the conflicts of that time would resonate with today, that the fight against centralism and central government seems to have been torn out of the pages of the Tea Party of today. the cries against big bank domination and so on could have been stated by Bernie Sanders,

Elizabeth Warren, and so on. So I just was surprised at how much the conflicts back then seemed to presage those of our own time. It really does seem like over the last couple of years in particular, there's been more attention paid to the Federal Reserve and the question of interest rates and are they going to raise rates, if so, when, by how much, all that sort of thing. Is this how it should be? Well, all that attention, by the way, that's what got me into the book. Don't forget, we had a fairly major financial debacle not too many years ago in 2008, 2009,

and so on, and the Fed was the lender of last resort. They were the ones, like it or not, I think you've got to stomach it and like it. When nobody else was lending, when banks were failing, they came along and said, okay, we've got to be the lender. We've reached the last resort. And they are what enabled the country to sort of stagger to its feet and resume some sort of normalcy. I was very interested in what it was like 100 years ago when we had a similar panic, a terrible financial and banking panic, and there was no Federal Reserve.

And that's, you know, what got me into the book. The other part of your question about is it normal to focus so much on interest rates, you know, I can sort of answer in two ways. That has certainly grown over time. If you look, say, before the 1970s, you look in the era when William McKenzie Martin was the Federal Reserve Chairman, the average person had never heard of William McKenzie Martin. He was not a figure, a popular icon like Alan Greenspan or Ben Bernanke, that the popular culture paid much attention to. Don't forget, up to the 1970s, many interest rates were regulated.

Foreign currencies were, there was very little foreign currency trading because of the Bretton Woods arrangement where they were fixed. The financial world was a lot less volatile. It didn't seem to affect people's lives the way it does now. So, you know, people had other things to do. They followed their baseball team or whatever else they cared to do. Starting in the 1970s, there was this tremendous deregulation of interest rates, what banks could charge, foreign currency trading, markets became much more volatile. We've had this increasingly frequent succession of financial bubbles and booms and bursts. So people have gotten very interested. Ordinary people have gotten very interested in the financial world, and the Federal Reserve, being at the center of it in our country, and really in the Western world, has come into greater focus.

People like Paul Volcker, Ben Bernanke, and so on, they're big names, Alan Greenspan and Janet Yellen. I think in our own period, right now, 2016, there's so much attention because Janet Yellen and her confreres have been promising for a year, we're going to raise interest rates, we're going to real soon, we're real close. And then they keep backing away, and people are beginning to get a little bit frustrated. You know, they're impatient for the Fed, since it has announced it's going to get on a course of higher rates to start doing it. And, you know, there's a certain amount of user frustration or impatience setting in. So is that a communications problem that the Fed has? Or is that just how complicated the job that Janet Yellen and the Fed Board of Governors have?

Well, I don't think it's communication. I think they're communicating their hesitance and their lack of their irresoluteness, honestly, maybe too honestly. I'm not sure the public has to know every time a seed of doubt is planted in the minds of one of the Federal Reserve Board governors that we have to know that. I think it points to a lack of perhaps resolution and to a tendency in the modern Fed to try to please all people. What will the markets say? Politicians say? What will the public say? At a certain point, I think you have to decide what monetary policy is best for the country

and let the chips fall. You know, Paul Volcker raised rates 20%. Nobody liked it, but he did it, and he did it for a very specific reason back in the early 1980s because we had double-digit inflation. It didn't last long. It was very painful. Had he taken a survey or whatever, believe me, he never would have raised rates that high. And so I think there's almost too much focus on communication and two-way mirroring with the public.

At a certain point, you've got to marshal your troops and move forward. You're listening to Motley Fool Money, talking with bestselling author Roger Lowenstein. You've written about not just the Fed but Wall Street, the big banks. where are we now do you think with the big banks particularly in the wake of the recent scandal at wells fargo when you think about how the big banks operate what goes through your mind well look wells um you know really got caught in in bad practices when i say they got caught they deserved to be caught uh stump had to go his um john stump the ceo former ceo and chairman uh his uh somewhat half-hearted apologies uh didn't cut it his his uh protest that this didn't play the

culture wells fargo didn't convince when you have 5 000 people doing something that's the culture you know that's that's uh that's what culture is it's what it's what a whole lot of people do in your organization. And believe me, 5,000 people didn't wake up at Wells one morning and have the same bad idea by coincidence. Somebody was, they were getting the idea that it was okay to stoke their sales figures by setting up these dummy unwarranted accounts, unauthorized accounts from somebody. It wasn't a coincidence. So they had a real problem. And big or small, The bank has deserved the reprimands that it's gotten, and it's very good. I think that Stumpf had to cough up, what was it, $40-odd million of prior compensation, and that he's gone.

That's the best lesson there can be. I would say this, by the way, if Wells Fargo were a medium-sized bank, and I would say it if it were a small bank. The concern about big banks per se, you know, the only reason to be more concerned about a big bank than a small bank isn't because, say, it's people doing something wrong, but because if it failed, it could pose a threat to the stability of the system. There's nothing in the recent Wells Fargo episode that poses a threat to the system. It involved people setting up these dummy accounts. They were very small. They were trivial.

The amount of money, a million or two million or something that was in unauthorized fees was then paid back. It never affected the capital wells. It never affected the solvency and so on of wells. So I don't think the bigness of wells is the issue here. And I have to say that I think bigness has been overdone as an issue coming out of the financial crisis. The results of banks, of big banks in the mortgage crisis were really awful. The results of small banks were really awful.

You know, in general, I would say that big banks tend to be a little safer because they're more diversified, they're in different areas of the country, different lines of business, and so on. But I think this is sort of a throwback to the early 1900s when the common citizen was against the big trusts, monopolies, and John D. Rockefeller and everything. And there's an echo of that today, a very strong echo, in the Occupy Wall Street movement and the 1% against the 99%. But banks in other countries have big banks. In Canada, they only have five. We have 14,000 banks or something in this country. In Canada, they only have five banks. They haven't had the same sort of crisis we had because they had better regulation.

That was the problem, that we didn't have good mortgage regulation. It wasn't the size of the banks. We've got analysts here at The Motley Fool who are really smart, and some of them will say, I'm not interested in investing in a big bank because I don't feel like I have an edge as an investor, I feel like there's a black box quality to the way that some of them make money. Which leads me to this question, with all of the research that you've done in your adult lifetime about Wall Street and how it operates, how has your research and your writing affected the way that you approach investing? Well, obviously, first, that's a

decision that every investor makes for their own. That's not a policy decision. That's a personal decision. Now, a lot of people must feel like you're smart guys at The Motley Fool, because If you look at where big banks are trading, banks like Citi, Bank of America, and some others are trading something like 70 cents on book value, meaning for every dollar of tangible equity, they're trading at 70 cents. So is a dollar worth only 70 cents if it's locked up in a box called Bank of America? You know, that says there's an awful lot of investor unease about these banks, about what sorts of write-offs they might have. And that's pretty interesting because these banks have gone through such a ringing out of bad assets that to think, you know, to mark them down to that kind of a discount,

That shows an awful lot of investor mistrust. And, you know, what does my research tell me? Many times in the past when things are trading at that sort of a discount, at very minimum you've got a margin for safety. You've got that 30% cushion so that if your analysis is wrong, you know, the first 30% you're covered, so to speak. Now, there are other questions about, you know, will digital banking make inroads? Are we never going to have growth again?

You know, the same level we had so that these bank assets just, you know, can't provide a return. But there's no doubt that the market is saying, and even with the better respected banks, you know, JPM and Wells are trading. They're trading above book value but a lot closer to book value. Very modest. The market with those banks is saying the Wells brand name, the J.P. Morgan brand name, it's worth next to nothing. And that's certainly a reversal from many years of experience. So you can say for sure the market is discounting these banks. And if you have a little confidence about the bank's ability to continue doing business and making money on their assets, for that investor, they'd be more attractive. The New York Times says that America's bank, the epic struggle to create the Federal Reserve, should be required reading.

That's the good news. The better news is that this week the paperback edition came out, so you can pick up the book and save a little money in the process. Roger Lowenstein, always good to talk to you. Chris, always great to talk to the Motley Fools. Coming up next, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against,

so don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. Chris Hill here in studio once again with Jason Moser, Charlie Travers, and Ron Gross. A couple of housekeeping notes before we get to the stocks on our radar. If you would like more investing insights from Charlie Travers and his colleagues, you can sign up for Declarations. It is the free monthly newsletter from Motley Fool Funds. Just go to foolfunds.com and you can sign up for Declarations. It's that easy. You can also check out past episodes of Motley Fool Money and all of our podcasts by going to podcasts.fool.com. And there's a brand new bonus episode of Motley Fool Answers featuring our own Ron Gross.

What can people look forward to? Give me a sneak preview of what's on the bonus episode of Motley Fool Answers. Always fun to stop by Answers and tape a podcast with the gang. This time around, we talk about the fact that over the next several years, you're going to have millions and millions of baby boomers retiring. And a lot of those folks really desire a conservative, defensive portfolio. So, that's what we talk about. So, it's for those folks entering that stage of life, or it's actually for anyone who really is more focused on conservative investing versus maybe growth investing. All right. Check out that bonus episode of Motley Fool Answers on iTunes, on Stitcher,

and podcast.fool.com. All right. Time for the stocks on our radar. Ron Gross, you're up first. What do you got? So, speaking of conservative investing, lately I've been looking at a lot of dividend stocks just for that very reason. And I came across Verizon Communications, VZ, a stock most people, I'm sure, are aware of. 112 million wireless subscribers and counting, probably the best coverage, arguably the market leader in the business. Their 5G network coming out, scheduled for 2020. Stable cash flows, a lot of debt, but easily serviceable, 4.7% yield. Our folks over at our income investor service think there's still 43% upside left in the stock. So it's

Definitely one to take a look at. Steve Broido, question about Verizon? It's more about yields. When do you get nervous? So, 4.7%, if that's 8.7%? I would say, even anything over 4%, I just start to wonder why. Because sometimes it could be because the stock has gotten crushed, which the way the math works, raises the yield. But 4% is fine.

Anything over 5% or 6%, then I start to really want to dig in and just understand why. Jason Moser, what are you looking at this week? Yeah, a couple of weeks ago, Ulta Salon Cosmetics and Fragrance, ticker ULTA, came out with a pre-announcement, sort of raising guidance there for their earnings that'll be coming up here in the next few weeks. It was impressive guidance, certainly. I mean, the midpoint for earnings, they raised 8%. Comps guidance, they raised up 20%. But I think the point that really hit home for us and MDP, we've got this on the watch list right now, is that They now see the opportunity for the range of stores out there. It used to be around

$1,200. Now, they see a range of somewhere in their neighborhood of $1,400 to $1,700. And given that they really do make their hay as a physical retailer, that to us was important because it's a sign of how much growth we can expect from an investment like this. Tied a price range around $200 to $220 per share. The stock is starting to creep back now after that pop from the pre-announcement, and we are going to be looking very closely at it. Steve, question about Ulta Salon? What am I buying there that I'm not buying online? Well, Steve, I don't wear makeup, so I don't know.

Charlie Travers, what are you looking at this week? Panera Bread, ticker PNRA, reports earnings next week. I think in the last few quarters with this company, you really start to see the payoff of years of investment in their technology to encourage customers to order their sandwiches and soups online. The company has been doing some interesting things, putting their consumer products into the grocery stores, like Starbucks and Dunkin' Donuts did. And what they're testing out right now this year is delivery, just like the pizza chains.

So, there's a lot going on with Panera, and I'm just curious what they say next week. Steve? Has it become too complicated just to get a sandwich anymore? You've got to go online and make a profile. Gracious. Don't worry about it, Grandpa. Yeah, we're good. Steve?

Panera Bread, Ulta Salon, Verizon, you got one you want to add to your watch list? That yield sounds pretty tasty, so I might go with Verizon on this one. Well, clearly the ordering of sandwiches was a little too complicated. All right. Ron Gross, Jason Moser, Charlie Travers. Guys, thanks for being here this week. Thank you, Chris. That's 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.