Motley Fool Hidden Gems Investing - Money Advice from Dad

Episode Date: June 17, 2016

Microsoft buys LinkedIn. Lumber Liquidators bounces back. We analyze those stories and more, and share the best money advice from our Dads. Plus, technology columnist Charles Arthur analyzes the Brexit vote, Apple, Google, and hot tech trends. Learn more about your ad choices. Visit megaphone.fm/adchoices

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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 and Matt Argesinger, and from Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen.

Hey, hey, hey. We will dig into the latest headlines from Wall Street. Tech journalist Charles Arthur is our guest. And as always, we'll give you an inside look at the stocks on our radar. are. But we begin with the deal of the week, and that is Microsoft buying LinkedIn for the tidy sum of $26.2 billion, all in cash. Jason Moser, a 50% premium. Christmas comes early to Reid Hoffman and all the other LinkedIn shareholders out there. Sure. I think a lot of investors, certainly Foolish investors, LinkedIn was a very popular

recommendation across a number of services, and you can see the bittersweet sentiment there. I think a lot of people wanted to see this one keep on going. I'm going to take a little bit of a ... Going which way? I'm going to take a little bit of a contrarian view. I think this really is probably the best bet for shareholders here. I think that LinkedIn is a good business, but I think the platform has been in a state of decline, frankly, for at least the last year. I think that, of course, endorsements are meaningless. I think that opening up the content platform to everyone has really taken away from the luster and the uniqueness, what differentiated

it. I think the technology is clunky. It's not very user-friendly, it's not intuitive. I think they've had a lot of trouble really trying to figure out that engagement dynamic to the business. This acquisition, unfortunately, doesn't fix that. Now, with that said, I think there certainly is an opportunity for Microsoft to go in there and help them fix it, because technically speaking, it does open them up to a far larger user base when you consider all of the people that are out there using Microsoft Office. I think it's something in the neighborhood of 1.3 billion people today in the enterprise world using Office. That is a big opportunity. But again, if I don't really have a reason to go to LinkedIn, then

it's all for naught anyway, because the real value in the business is selling companies that data. Well, if that data is not good and up-to-date, the companies eventually aren't going to want it. LinkedIn's not going to be able to command really any pricing power for it. That was the trouble we were facing with LinkedIn as an independent company. We're not going to have to worry about that now, because obviously Microsoft will acquire it. But again, I don't think this is the magic pill that solves all of their problems. But for shareholders, I think you take the money and run. Yeah, I'm a big fan of Satya Nadella. I think he's done a great job. I don't love

this acquisition. I like it for LinkedIn shareholders. I don't really love it for Microsoft shareholders. Certainly not for the $26 billion or so. Not for that price tag. They can say the synergies or they can give the reasons many different ways. It always kind of says the same thing. I just don't get it. But, Matty, this news was very much a surprise on Monday when it first broke. As the week went on, and we started to learn more about what was going on behind the scenes, one of the things we learned was that LinkedIn was being sought after by a couple of companies, including Salesforce.com. Yeah, that was the interesting news

late in the week. Because, if you look at Salesforce, this would have been much more of a stretch, a merger for Salesforce, as opposed to where Microsoft's doing a relatively small acquisition, at least compared to Microsoft's size. So, that was a surprise. Ron mentioned that it's good for LinkedIn shareholders. I agree. Who it's really also good for is LinkedIn employees. We've talked in the past about certain stocks, certain companies having momentum. If you think about Silicon Valley companies who use a lot of stock-based compensation, a lot of stock options, LinkedIn had hired a lot of developers over the past few years who were probably, for the most part, underwater in their stock options.

And now they get this big deal. LinkedIn, in other words, they have a bunch of satisfied now employees who are probably facing a good chunk of their compensation that was valueless before this deal. So this is something that I almost think LinkedIn saw that, A, their market opportunity wasn't as good as they thought it was and we thought it was. And B, they were facing an employee base of developers who probably were not very satisfied with their compensation over the past few years. And this is a deal that kind of bails them out.

in a certain way. Ron, I'm in the same boat as you in terms of, when this was being explained by management, I found myself scratching my head a little bit. I didn't see all of the value that Microsoft was talking about. That being said, I give Nadella the benefit of the doubt on this one. Everything he's done in his two-plus years as CEO has worked out in general for Microsoft, and therefore for their shareholders. So, I'm going to give him time to figure it out. I think that's fair. We'll revisit in a year, let's say. They claim they're going to let it run as an independent subsidiary kind of in the Berkshire model. Let's see a year from now if that's actually true.

Jason, you get the last word. This is through no fault of Satya Nadella's, but Microsoft's history of acquisitions is just, let's say, less than stellar. They haven't done all that well. Now, the flip side of that is that the expectations here are so low, they're almost impossible to not actually meet. All they have to do, really, is keep the lights on at LinkedIn, and they've already exceeded expectations. Everything from there is upside. So, hey, look at it from that perspective. Lumber liquidator shareholders getting a bit of good news. The U.S. Consumer

Product Safety Commission ended its probe of the company after testing showed no unsafe levels of formaldehyde in its flooring, and shares of lumber liquidators up more than 20% on Friday, Matty. Is the worst over, or is what we're seeing a bunch of short-sellers just recovering and running? No, I'd have to say the worst is probably finally over for Lumber Liquidators. The big win here, really, is the fact that they don't have to do a recall from all the hundreds of thousands of households who have bought the Chinese laminate flooring over the past few years. That would have been a massive expense for the company. Yes, they tested 17,000 homes, the error in 17,000 homes for

formaldehyde, and not a single one tested above the Consumer Product Safety's guidelines. They stopped selling the product, they stopped doing that. In a way, I think there was certainly some wrongdoing here. They paid a fine to California for selling the products there, but I have a feeling that this is an example of short-sellers making a meal out of probably bone that had some scraps on it. The CEO and CFO left. The brand has been hurt. Customer traffic was way down. Margins, of course, have come down. But I have to say, really, there wasn't a lot of bad things going on here. And now, going forward, you have a company that has a clean balance sheet, doesn't face this massive potential liability that we thought

they might. You might have a good turnaround situation here. And I feel like some of the things that have been done to the company and the stock price have probably been a little unfair. I think that's right. I'm really interested to see what happens to the shareholder lawsuits that are out there. Do they go away or do they get settled? Because the company isn't squeaky clean here. There's a lot of mismanagement going on. No doubt. So, shareholders might be able to collect some money there. So, the liability is not completely behind them yet. I don't

know how big the exposure is, but I think it's still there. This wasn't as big as Microsoft and LinkedIn, but for the cosmetics industry, it was a big merger. Revlon is buying Elizabeth Arden for $419 million in cash. That is a a 50% premium, Ron. Shares of Revlon, though, also up around 10% on Friday. You don't usually see that. So, that means the street likes it on both sides. So, both companies not doing that good. So, you know, hey, let's get together and not do so great together. They're hopeful. Revlon thinks it will produce maybe $140 million in savings over the next three to five years. It increases the global footprint of both companies, obviously.

basically. Ronald Perlman, the largest shareholder of Revlon, was really pushing for some strategic alternatives to be explored here, and I think that was kind of the impetus for, let's do something here. Let's spend some money, get Elizabeth Arden. It's an $870 million deal altogether when you take into account the company's debt. This will allow them to kind of refinance the debt of both companies. Revlon has a fair amount of debt. That was important to this deal structure as well. So, I think it's fine. I don't think they overpaid. I think it kind of makes sense. They're strong in different areas of the cosmetic world. And we'll see if that $140 million in so-called synergies actually happens. They never seem

to be as rosy as companies say they will be. But let's go back to what we saw with Microsoft and LinkedIn. Obviously, LinkedIn's shares popping because of the buyout. Shares of Microsoft were down a little bit. In this case, I mean, when you do see this type of situation where, unlike with Microsoft and LinkedIn, where you had some people coming out and saying what you said, Ron, which is essentially, $26 billion? Couldn't you have got this for a little bit less? No one's saying that with this deal. And I think that if you're a shareholder, obviously you're happy. But I think if you're looking for a new industry to get into, this seems like a green light. It does. But the reason that Revlon

is actually up on the deal is because they paid a good price. If you overpay, that's when you often see your stock go down. As well, it takes some of the pressure off that balance sheet, that refinancing they're going to be able to do, because they have $2.6 billion of new financing commitments coming in. So, that takes the pressure off of Revlon's balance sheet at the same time as they make a good acquisition. From cosmetics to groceries, Kroger's first quarter profits came in higher than Wall Street was expecting, but same-store sales growth is slowing down and shares down a little bit this week, Jason. Is that why?

Just a wee bit. Well, this seems like a good quarter. Yeah, it was. I wouldn't let the headlines steer you in any other direction. I think it was a good quarter. I think Kroger, to me, is one of those ideas that's really in plain sight, but I think it's probably overlooked because it's kind of boring. Groceries aren't necessarily the sexiest industry out there, but they are necessary, right? I mean, we all go grocery shopping. I think the market tends to focus on the Whole Foods and Trader Joe's of the world, because they're a bit more of a niche market, kind of playing into

that natural and organic space. But we've seen, certainly over the course of the past couple of years, that that natural and organic space has really spread to all concepts out there. And I think this is really working out in Kroger's favor. It's a bigger company with a broader customer base, I think a bigger market opportunity, it really, I think, has a key advantage in being able to attract the crossover consumer. We talk about this all the time, but there are certain things you just can't get if you go to a Whole Foods or a Trader Joe's, and then you have to go somewhere else. And that's just ultimately not convenient. And I do a lot of grocery shopping as the cook in the family, and I

find myself focused more and more on really that convenience factor, because I know I can get what I want at a number of different places, but I only want to go to one place. So with Kroger, it's not just Kroger, it's Harris Teeter, they have almost 2,800 stores. You compare that to something like Whole Foods' base of something like, what, 350 stores maybe today, and they're going to be opening up the 365 concept, which I hope will open themselves up to a new market opportunity there with millennials. But still, if you look back over the past five years here, the difference between Kroger and Whole Foods as the stock goes, Whole Foods is clearly the winner trouncing whole foods the entire time there, especially

starting in 2014, where really we started to see more and more concepts bring naturals and organics into their inventory, so to speak. So, I still think Kroger has a lot of room to grow and perform very well, thanks to its scale and thanks to the market opportunities and the diverse store base. Does Harris Teeter still represent better margins than the Kroger location? I think it can. I think they can realize a little bit more pricing power at Harris Teeter because it does cater to that higher-end consumer. But by the same token, just as Whole Foods did, Harris Teeter can bring in that store brand label that will, I think, also

attract people perhaps looking to trade up in some capacity. Rodney McMullin's been CEO of Kroger for two years. 36 years before that, he started as a stock boy. He knows stuff. He barely knew what he wanted to do when he grew up. Coming up, more earnings, and we will dip into the Fool mailbag. 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.

Ctrip is China's largest online travel agency. First quarter results came in better than expected. But, Matty, you wouldn't know it from the stock. No. Anytime a company reports 80% year-over-year growth, you're thinking that's probably a good quarter and good for the stock. But in this case, that 80% has a caveat to it. They acquired Chouinard last year, or at least the companies did a stock swap. Chouinard was the largest online travel flight booking company. Ctrip was the leader in hotel booking. They brought those companies together. That growth reflects

Chouinard as well. The organic growth, which they don't disclose, is probably a lot slower than that. I think that's what the street's probably paying attention to. Nevertheless, results, impressive growth. Gross margins were ticked a little bit higher, which is good to see, because the OTA market in China has really been just a fury of upstarts, and so the profit margins have been tough to come by. Nice to see some consolidation in the market now, gross margins are going up. And I like what James Liang, I hope I'm saying his name right, the CEO and co-founder of Ctrip, he said that they're going to really focus now on the outbound travel from China, which is a massive market, more than 100 million

Chinese do significant travel outside of China every year. So, if Ctrip can capture that market as well, that's big. Rite Aid's first quarter profits and revenue both came in lower than Wall Street was expecting, but the shares were only down a little bit. Was this priced into the stock already, Ron? Probably. They missed on both revenues and profits, but it wasn't horrible. The problem is, all pharmacy benefit companies are seeing this, it's the continuing pressure in pharmacy reimbursement rates, specifically for generics. They're just not reimbursing, and generic

pricing is actually going up now, and so they're kind of slow to make up for that difference. When the pricing is down, by the way, they're real quick, and they jump right in there, the payers, but not when prices are going up. So, there's been a lag there, and margins have gotten squeezed, and the company admits that they didn't act quickly enough to offset that pressure. They claim to get on the ball in the second half. So, earnings per share came in at a penny, and they were at two pennies this time last year. So, a big percentage decrease, but not the end of the world. So, the stock is probably relatively stable as a result, but not a great quarter.

Walgreens announced it was going to buy Rite Aid almost a year and a half ago. What is taking so long? You must be patient. It's antitrust. They're just taking a long time, the Department Justice to look at this. They still say it's on track to close second half of this year. You think CVS Health is worried about this combined entity? I don't think they're staying up at night, but I think it certainly will create a more ominous competitor. Radio at Fool.com is our email address from Alex Bozzo in San Francisco, California, who

writes, I started listening to your MarketFoolery podcast the last few months on my dad's recommendation and I've enjoyed it tremendously. My dad, Gus, and I both travel frequently for work, but when we connect, we always discuss the latest episode of MarketFoolery or Motley Fool Money. He's always been my guide for financial advice, but adding the Motley Fool podcast into the mix has been really helpful. I'm in the beginning of my investing career, but I appreciate how the team takes complex market issues and is able to break them down into digestible bites, all while making it informing and very entertaining. I'm really enjoying becoming a more informed investor, keep up the great work. That's a great quote.

Awesome! Alex, appreciate that. I have to give a plug to podcast.fool.com, so Alex and his dad can check out all five of the Motley Fool podcasts. And hey, if you're traveling frequently, you definitely want to listen to Industry Focus, Motley Fool Answers, and David Gardner's Rule Breaker Investing. This leads us nicely into Father's Day weekend, and great that Alex's dad has been his guide for financial advice. Let's go around the table. One thing that your dad helped you with when it comes to money, it can be money, investing, anything financially related. You go first, Ron.

All right. So, my dad was my baseball Little League coach for my whole childhood. And the one thing he would tell me day after day after day was, keep your eye on the ball. I think that kind of advice, it goes to life, it goes to investing, it goes to your career. Keep your eye on the ball. And that's why, in your entire Little League career, you were never hit by a pitch. Exactly. I would duck a lot. I see. Who wants to get hit by a baseball? Jason? Sure. Wow. If it's one thing that my dad and I probably talk about more than golf, it's

stocks and investing. He's the reason why I learned how to invest in the first place. So, happy Father's Day, Dad. I love you. He always instilled with me this mentality of, when you decide to buy a stock, you need to just consider that money spent and move along. Now, I don't always adhere to that philosophy as far as practicing, but it does make me take a look at these companies before I make any purchases and really, really think hard before I determine whether I really want to own it or not. O' Matty? Yeah, real quick, my dad. I was buying comic books, video games, all kinds of stuff

when I was working part-time jobs when I was a kid, but my dad first talked to me and introduced me to stocks. And I bought my first stock really early age, and I have my dad to thank for that. I have to say, the comic books I bought back then have probably performed better than that stock I first bought, but still, buying that first stock was so huge. All right, guys, we'll see you a little bit later in the show. Charles Arthur is next. Stay right here. You're listening to Motley Fool Money. This episode of Motley Fool Money is brought to you by Rocket Mortgage by Quicken Loans. You know, if you've ever bought a home, I don't have to tell you how frustrating and

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check out Rocket Mortgage today at quickenloans.com slash fool. Equal housing lender, licensed in all 50 states, NMLSconsumeraccess.org, number 3030. Welcome back to Motley Fool Money. I'm Chris Hill. We've got the Brexit vote looming. We've got headlines from some of the biggest tech companies in the world. Here to help make sense of it all is technology journalist Charles Arthur. He is the author of the book Digital Wars, Apple, Google, Microsoft, and the Battle for the Internet. He joins me now from across the pond. Charles, thank you so much for taking some time. Pleasure. There's obviously a lot going on in the world of technology, but let's begin with the big issue in your country, and that is the Brexit vote.

The referendum is set for June 23rd. This is the increasingly real possibility that the United Kingdom is going to exit the European Union. This is a story that's taken a variety of twists and turns, and the most shocking one being on Thursday when a member of parliament, Jo Cox, was attacked and killed in her district. Focusing on the business and economic aspects of this, are you surprised that at least at this point, the vote is looking as close as it looks when you have a lot of people saying, this is actually not going to help the UK economy leaving the EU, it will actually hurt it well certainly i i would have um if you've been asking me sort of this time last year i would have expected that the vote would be something like two-thirds in favor of

remaining and perhaps a third for leaving but uh as the campaign itself has ramped up during this year um the number of people who've who seem to be on the leading side uh has grown and grown i mean for myself i'm my opinion is uh i'm with the remain crowd on on the basis that i don't quite understand how cutting off the branch that you're sitting on helps your relationship with the tree i don't see how the uk going off on its own and then trying to negotiate with very large trade blocks such as the us and indeed the eu would actually improve its position that's not a great position to be bargaining from but uh the whole idea of leaving the eu does appeal to a sort of ingrained uh british mentality among some people which is an island mentality because the

uk is actually an island and so there are a number of people where the issue of immigration people feel that there's strong immigration pressure even if there actually isn't if the numbers show that actually it's not that important um and they worry about laws as they call it laws made in brussels even when you can show that these are a very tiny part of the laws that affect them if they do affect them at all. And the economic question, where all the evidence seems to be that Britain's economy would take a big hit. It's interesting to get the perspective from other countries, actually, where, for example, in the US, the view seems to be that it's a crazy idea to leave, which would obviously have a big economic hit. And on Thursday, the Bank of England said

there would be a big economic hit to the UK. And yet, when it comes to political parties, when it comes to general elections, the idea the economy would take a hit is the sort of thing that would instantly make an idea unpalatable. When it comes to the Leave campaign, it seems to make it just one of those things. So although it's something which I suspect in the city is not welcomed very much, apart from the uncertainty and the possibility of making some money on foreign exchange deals, it does seem to be a surprising possibility, which is not beyond the bounds of probability. You're listening to Motley Fool Money, talking with Charles Arthur, author of the book, Digital Wars, Apple, Google, Microsoft, and the Battle for the Internet.

Let's get to the biggest technology news this week, and that is Microsoft's acquisition of LinkedIn. This is something you've written about. Microsoft, historically, does not have a great track record when it comes to big acquisitions. I suppose the difference this time around is that Satya Nadella is the CEO at the helm for this acquisition. In the past, it's been Steve Ballmer. Do you think that makes a difference? And what do you make of this acquisition? Well, starting with the CEO difference, it's always difficult to integrate two companies, especially when there's a lot of money on the table during the acquisition. So with this, the point of the deal is to extend Microsoft's sort of spread of social networks into the business space.

And just in terms of trying to integrate it, it's a comparatively small number of people. It's only about 9,000, 10,000 people in LinkedIn who will be pretty much swallowed up within Microsoft. But what I found when I was writing my book was that, again and again, there would be instances where Microsoft bought a company, the employees were swallowed up, and the product might have been good, it might have been terrible. But the trouble was, it was such a big organization, it was very hard for things to make headway. So it's very easy to get the check signed to do the acquisition. But actually successfully making the integration is much, much harder. and it's interesting to contrast what google and apple tend to do which is to buy much smaller companies much smaller price tags um you know apple's biggest purchase ever was uh was to buy beats the headphones company and that's really just led to apple music but much more often it

tends to buy very small companies for a few hundred million tops and google much the same and they integrate them in and they get the technology in there i think that microsoft is once again going for a really big number, a really big idea, which is going to be very difficult to prove whether it's actually added that value to Microsoft in the end of the day. The last time you were on the show, Satya Nadella had been CEO of Microsoft for just a couple of weeks. Now that he has a couple of years under his belt, what do you make of the Nadella era so far? It's a less combative era. He's not as confrontational as Steve Ballmer,

but he's very effective in the way that he does things. So he's focused Microsoft away from hardware and much more towards the cloud. Nadella comes from the era which follows Ballmer really of saying, okay, so Windows is not now the biggest platform in the world. Actually, the smartphone is, Android is, iOS, Apple's iPhone platform is a substantial player, so we have to live with the realities of that world. Windows Phone just hasn't made an impact, and Nadella is, in effect, winding it down and just letting the lights go out very gently there, and is not focusing at all, really, on the sort of Surface hardware, the Surface Book laptop and the Surface tablet.

He's not making a great deal of noise about that. He's much more focused on getting Microsoft Word, Microsoft Office to be cross-platform, to be something which people can use anywhere, every time, because that's a much more profitable strategy long-term. If you look at the way that everyone's going to be using devices all over the place, they're not just tied to a PC. So he's a much more subtle sort of CEO than Steve Ballmer ever was, but no less effective for that, I would say. Also this week, Apple held its Worldwide Developers Conference. They announced a number of enhancements to the iPhone, the iPad, the watch, the TV. You're a longtime observer of this company. What was your headline from Apple this week?

The thing I thought most interesting about Apple was that they were talking about using your phone or your tablet, basically the device that's close to you, as something which has artificial intelligence built into it, which doesn't need to talk to the cloud in order to analyze data to make useful recommendations. And that's interesting because that's in contrast really to how Google especially has been doing it. Google is well known for things like Google Photos, which is able to identify animals or people or locations which are in your photos without being explicitly told about them. And that's just one manifestation of the way that Google is really putting a lot of effort into artificial intelligence or, as it's also known, machine learning systems.

But Google's thinking is always to pull stuff up into the cloud to have communication, to have processing power remotely. Whereas Apple is saying, actually, these devices are smart enough. They know enough about who you are, where you are, how fast you're moving, what you were just doing, where you're going, what the current situation is to be able to make useful inferences and tell you things without actually having to connect to the cloud without needing a connection all the time so what apple was showing off what craig federighi who's the the head of software at apple was showing off was uh interfaces for developers to hook into these things on the on the iphone on the ipad even to some extent on the on the tv set-top box itself without having to communicate

to the cloud and i think that's a sort of riposte on apple's part to the way that google's doing this but make no mistake the whole machine learning artificial intelligence space that's really where everything is going to be uh really focused on in the next few years facebook is doing it as well any major company that that actually wants to have a part in people's life is focusing on this in a big way. And it's only a question of how they frame it, whether they talk about it being done by bots, or whether they just talk about it being done silently for you. That's the only difference is just in that emphasis, but they all think it's a very serious area to focus on. I'm glad you mentioned Facebook, because the company didn't have a big event, or big

acquisition this week. But it did make headlines when one of their executives said that she believes that in five years, Facebook will be all video. I have a hard time wrapping my head around that, Charles. I find it quite difficult as well. It assumes a lot of things which I think are probably true in Silicon Valley, but probably not true in many of the places where Facebook is actually used. So consider that Facebook has millions of users in India, where the phone connections are not great and even if you give them five years you're still only going to be talking mostly about a 3g connection not a 4g connection and these are people who are also you know where the cost of data is a very large part of their weekly wage and you start to

consider that actually maybe that they're not going to want to have big video data downloads going to their handsets because that is how they consume facebook is they're not doing it on a pc or anything these are people whose first computer is the one that they hold in their hand i think that it's a sort of optimistic way of viewing the future that that video would be the the way that everyone consumes things because that's sort of how it looks in the movies but i think that if you're realistic about it actually people quite like the written word the written word has managed to survive you know many many thousands of years and it is often the most succinct way to to engage with an idea and to to get an idea to you i mean i i've lost count of the number of youtube videos

that i've clicked on and it started out with hey guys this is so and so and i thought i don't want to know who you are i just want to know what the idea is you're trying to put over and i've gone on to the next thing you know and or else i scroll down and see if i can find a transcript for something so uh if everything goes to video then then i'm not sure that's necessarily an improvement but my feeling is that's not actually the direction that things are necessarily going You might say a lot of the sort of the raw storage is going to be video because text is a tiny fraction of the amount of storage needed compared to video. But that doesn't actually mean that the way people consume it is necessarily video. One more question, then I'll let you go.

You had written something recently about Google and for all of their success in search, I was pretty surprised by this. you wrote that Google's actually having trouble with mobile search, that 50% of people do zero searches per day on mobile. And that seems like a trend, if it holds up, that spells doom. Well, maybe doom is overstating it, but spells trouble for Google. So this is a very counterintuitive finding, which I was surprised by myself. It came out of a talk that Sundar Pichai was doing last year at the RICO conference where he was talking about the number of searches that were done on mobile and he gave out a figure and I then put that into the number of smartphones that we know exist in the world and the number of days

in the month and it came out to a number where I thought that actually means people are doing fewer than one search per day and on average this is obviously you know this is the average as in the mean, that is the aggregate. The most common number of searches people do is less than one. And while it seems really counterintuitive, the numbers do work that way because there are so many smartphones, because there's only a certain number of days in the month, and because of this number that he gave.

And when you think about it, it's actually quite logical. It's one of these things that sounds strange, and yet when you think about it some more, it makes complete sense. So, for example, on mobile you have apps, and you tend to go straight to apps. On the desktop, for example, a lot of people, and this will sound surprising, but it's absolutely true. I can vouch for it.

People who want to go to Facebook will go to the Google search page, which opens up when they open a new browser tab, and they'll type Facebook. Facebook is then the first result, and they click on it, and they go to Facebook. They don't type Facebook.com into the browser bar. I know it sounds crazy, but this is absolutely what people do. And that counts as a search.

But on a mobile phone, on a smartphone, phone, you just go to the Facebook app. It's sort of natural, it's instinctual. You go to the Yelp app straight away. You go to Maps. You do all these sorts of things without having to, the interceding step of going to the search bar on your browser. And that is the reason why search is actually less important in that respect on mobile phones. It's why apps are so important. And Google recognizes this. And it's been very interesting for me to watch the strategies that Google has been using to try to make sure that as people shift from the desktop to mobile in terms of the time spent and the sheer numbers of people using mobile compared to desktop, and there's some

evidence that desktop search is actually dwindling now. What Google is doing is showing more and more ads on the mobile site than ever it used to. It's putting more and more things in front of people before they can actually get to the organic search results, to the extent that you may sort of find that you're almost having to scroll down through a page to get to the the non-ad results so google is being quite canny about that it's it recognizes it and it's just one of those one of those things where if they can't make money through search well then they have to look to other things which is why they're doing all sorts of cross-platform efforts so for example they introduced a third-party keyboard for apple's iphone and that might sound like a crazy sort

thing to do. But it's great for them because it drives people to do searches direct from the keyboard. And for them, it's all more data, which is all to Google. More data is beneficial because it feeds into their artificial intelligence efforts. But yeah, search and Google and mobile is a very interesting, very surprising story, which I think the way that it plays out as the world goes more and more mobile is going to be really interesting to watch because I suspect there'll come a point where the search space is completely saturated where actually there's no one more to add who wants to do searches and actually people aren't trying to do searches because they've just got an aptitude to do everything in that situation what does google

do when it's trying to monetize mobile search you can follow him on twitter you can read his latest thoughts on his blog the overspill if you're interested in technology you got to be reading his stuff. Charles Arthur, always good to talk to you. Thanks so much. Thank you. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.

Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger and Ron Gross. Time to get to the stocks on our radar this week. Gentlemen, Ron Gross, you're up first. What are you looking at? Ron Gross New deep value radar stock from a Miller Industries, MLR, market cap of only $250 million. They manufacture towing and recovery equipment for wrecking operations, towing services, local governments. Profitable, great balance sheet, only 1.5 times tangible book, but 15 times earnings. Need to do more valuation work on there, but it's a really nice little company.

Let's go to our man, Steve Broido, on the other side of the glass. Steve, question about Miller Industries? Is this business live or die by government contracts, by someone in the government knowing this company and saying, yes, we work exclusively with Miller, that's our company? That's an excellent question. When I was trying to lay out the risks for a write-up I did recently, I called out the government part of it as being one of the main risks. For these guys, it's not nearly the majority of revenue or anything like that, but still, yes, you are correct, it's a risk.

Jason Moser? On Thursday, a couple of us went to go visit Marriott headquarters in Bethesda, Maryland. Ticker is MAR. I've got Marriott on the watch list in MDP. This was a really fun visit we took. This is an impressive customer-focused company with a good culture, I think, as well. Plain advantage in the size. They're not as reliant on the OTAs as maybe some of the smaller players in the space. So, we're waiting for that Starwood acquisition to go through. And once that happens, we're going to be keeping an eye on the stock to see if we can't get a price we feel comfortable with.

Steve? What do you think of when you think of Marriott Hotels? I have to be honest, I think of nothing. I just think of a generic hotel, kind of nice, not great, pretty good, OK. You know, I guess I think I'm probably going to think more and more about the actual visit that we took to the headquarters, because it was really neat, sort of at the very basement level, they have this huge area where they have all of these different rooms they've constructed for all the different brands in the hotel. Very, very focused on learning what the customers really like.

We sold Lumber Liquidators, ticker LL, in MDP a year ago. I just want to take another look at this one. I don't think it'll get back into MDP, but with most of the legal matters behind it, I just want to understand how profitable this company can be and how much damage has been done to the brand, because right now it does look to me like a potentially great turnaround story. Steve? Was that 60 Minutes story premature and unfair? What I'm hearing now is, man, they really took that company to town. Based on the testing they've done and everything that's come out since, I would

say, yeah, 60 minutes. And the short sellers were grossly unfair to this business. Steve, you got a stock you want to add to your watch list? I'm going with Ron today. Miller Industries. Love that guy. All right, Ron Gross, Matt Argersinger, Jason Moser. Guys, thanks for being here. Thanks, Chris. 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.