Motley Fool Hidden Gems Investing - Motley Fool Money: 01.17.2014

Episode Date: January 17, 2014

Best Buy tanks on weak holiday sales. Google spends $3.2 billion on smart-home tech company Nest.  Plus, our take on Intel, UPS, Hershey.  Veteran automotive writer Paul Lienert analyzes the news from Ford, GM and Tesla Motors at the North American International Auto Show in Detroit. Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money radio show. Thanks for being here. I'm Chris Hill, and joining me in studio this week from Motley Fool One, Jason Moser. From Million Dollar Portfolio, Ron Gross, and back after a six-month hiatus in the Philippines from Motley Fool income investor, James Hurley. Ladies and gentlemen. Welcome back, sir.

Thank you. Welcome, James. We missed you. We have got the latest on consumer goods, banking, smart homes, and more. We will go to Detroit to get the latest on the automotive industry. And as always, we'll share a few stocks you can put on your watch list. But we begin with retail. Best Buy was one of the best-performing stocks of 2013, but shares fell more than 30% this

week after Best Buy said sales fell at the end of the year. And Ron, CEO Hubert Jolie, called the – Is that how you pronounce that? Yeah. I go with the French. Sounds festive. Wow. He called the holiday season, quote, intensely promotional.

Is that code for something horrible? That's code for doing what you need to do to compete against Amazon and to stop what they call showrooming. So they're doing what they need to do there. And how's that working out? Yeah. It's cutting margins. It is getting people in the stores, but it's not doing anything for profitability, but they're doing what they need to do. What else can you do? You reduce your footprint. You lower prices to compete. You differentiate yourself based on service. And

you go from there. I think you have to accept lower levels of profitability, lower levels of margins going forward. It's a new world and Best Buy has to adapt. It's very, very tough as we see here. Ron, are you a showroomer yourself? I mean, what do you feel about the ethics of showrooming? Well, they are combating it now, so they'll match the price. So if you go into Best Buy and you say, well, I can get it cheaper on Amazon, they'll say, well, don't bother. You're here already. Let me sell it to you. I see. I see.

I think the ethics of showrooming are fine, actually. It is a competitive world. So even without such a deal, you would showroom? Okay. Yeah, I don't have that much time. I'm the same about that. Jason, we're seeing this in other retailers. We saw it earlier this week, and last week we talked about Bed Bath & Beyond, SodaStream tanking this week on lowered guidance. I'm not changing what I've been saying for months, which is I just have this really bad feeling about the retail industry in general. Well, I mean, it's certainly in the midst of just a generational shift here.

I mean, e-commerce is still very young, and I think that we're going to see this play out over many, many years. And you look at Best Buy, and really, I mean, they were just fatally late to the most crucial part of this game, and that was making that switch over to e-commerce and focusing on the advantages of that business model. You know, one thing you want to pay attention to as this goes on, I mean, you need to look at – there's a metric called revenue per employee. And that basically tells you, it can give you an idea as to the potential of the business model, the profitability of the business model, how efficient it is. And so just for comparison here, Best Buy's revenue per employee is $291,712. Not too bad.

Amazon's revenue per employee, however, is $793,000. And that's a considerable difference, Chris. So, I mean, when you look at it from that perspective, you can see the efficiencies and the advantages of that e-commerce model. And I don't know that there really is anything they can do to combat this. I do agree. And they, of course, were late to online. But interestingly, that really was the only bright spot that Best Buy could point to where their comps were up 24 percent. So, you know, you go from a small base and any little bit helps. But they are they are at least moving towards that.

But I saw one headline that included the word bloodbath. And let's let's just step back for a second. keep in mind, even with the drop this week, if you go back to January 1st, 2013, the stock has still more than doubled. So, what are investors to think now about Best Buy? What should we pay attention to, the double of the last year or the latest quarter, which really just looks terrible? And again, I've said this before, retailers who can't get it done in the holiday quarter, which is the most important quarter, I'm just really suspect of that. The stock performance of last year can be tricky to get your head around. I would argue that

if you invested at Best Buy at those low levels, you were taking on a significant amount of risk. And therefore, the return should be commensurate with that risk. And it did work out. But you were really, you were taking a shot in the dark there that Best Buy would even stay in existence. And I think that that shot still exists, that Best Buy just has nowhere to go. And this could just be kind of a walking wounded kind of play. Yeah, I think a couple of red flags that you can keep an eye out for when it comes to these types of retailers. We saw it with Radio Shack a while back when they kept on referring in their releases to their total liquidity available. They're basically telling us about every possible resource they may have available to them. That's never really

a good sign. With Best Buy, we saw, I think, over the holiday season, a lot of reference to investments in pricing, which is just code for cutting prices to the bone to try to get stuff out the door. And when you hear companies saying investments in pricing, I think you need to look a little bit deeper as to really what that means. Look at those margin trends, because the chances are they're probably coming down over time. The last two times I've been in Radio Shack, I was literally the only customer in there. Were you there to buy batteries or something? My son was there. The first time he took off his diaper, I won't finish the story, but I was glad I was the only one in there. And what were you there for?

Buy some obscure batteries. Right, that's it. It should be called Batteries Shack. Well, there is a battery warehouse or battery depot, so I think they're going to be late to that game, too. All right, moving on. Morgan Stanley and Citigroup were just two of the big investment banks reporting quarterly results this week. And, James, Citigroup really had a pretty good 2013. Michael Corbat, the new CEO, the relatively new CEO, getting some kudos, but shares down this week on their latest results.

When you look at the big banks, what do you see? Well, Chris, overall, these results were not too bad. I mean, banks have had a good year since January of last year. But, you know, they just don't excite me anymore. I don't know what it is. I like to be excited, too, you know, but it's just I don't see the risk-reward tradeoff as an investor. And basically, this year will be kind of the year of the big legal settlements. Advisory-type work was not too good.

IPOs were good, but advisory work in general was not good. But bond underwriting was pretty bad across the board. Wealth management, you know, gouging the rich people basically was their one bright spot. Yeah, it is very good business, actually. That was pretty soundly up across the board. So, yeah, a good quarter. But, you know, banks are not – I mean, for perspective, Morgan Stanley is trying to meet a 10% target return on equity. Now, in maybe like 2007, I think that was probably 20%.

So we've got a long way to go. Jason, you were looking at Bank of America early this week. Anything stand out, good or bad? Well, I mean, I think that James keys in on something there that's pretty important. I mean, there isn't a lot to be excited about with these banks because so much of what they're doing right now is focused on cutting costs. You know, they're getting a lot of this litigation behind them, and now they're trying to figure out ways to sort of eke out all of the efficiencies in their business model. But, I mean, with Bank of America, they're doing a good job of meeting consumers on their own terms. You could see that in 20% growth in mobile banking app users. But by the same token, I think the greater – the bigger picture there, I think, is just really the commoditization of what these big banks do.

And so they just have to rely on making their money fewer ways. You know, it's going to be the investment banking wings and, you know, lending. But that isn't enough to me, you know, to really justify investing in these banks because they're already so big to begin with. Before the financial crisis and subsequent litigation, the banks basically engaged in a sort of like conglomerate arbitrage, you know, where they could use the benefit of safer deposits and then do riskier banking activities with that money. And that's become harder. So the golden days of banking are over as far as I'm concerned. There is a startup company called Nest that sells internet-connected thermostats and smoke detectors. This week, Google bought Nest for $3.2 billion.

and Jason, some people were saying they overpaid, but shares of Google were up this week. So clearly there are some investors who don't think they overpaid. Yeah. I mean, I guess that remains to be seen. I mean, Nest, because it was a private company, the sales numbers have always been kind of estimated. I've seen estimates everywhere from $150 million per year to around $300 million a year. So depending on what they make per year, you can get a better idea of what Google paid. Any which way you cut it, Google paid a lot of money for this investment. Now, they did have an interest in Nest before this with Google Ventures, so I would argue that they have had some insight into the potential of this business model, at

least, before they made that offer. But it lends itself just to the greater argument of this Internet of Things trend that we're going to see play out here over the coming decade, where virtually everything in the world is going to be connected in some capacity, and the smart home is going to play a big, big role in that. And so thermostats and lighting and audio and entertainment systems and things like that, those are going to be things that people continue to connect in their homes. And I think that Nest was a good first step to really get Google a position as being a major player in this movement. Ron? Yeah, Google has its hands in so many different things. And you have to ask, is this a distraction or is it innovation? Is it the next stage in Google's

evolution. You know, I think it probably is, but whether we're looking at robots or cars or non-thermostats, they all have data collection in common. You can learn a lot about people when you're involved in the connected home and you're constantly collecting data on folks through their viewing what their habits are. So there could be a lot of use for all that data down the road, and Google certainly is in the data business. But, you know, they're tricky. They're like Amazon. They've got so many things that they're doing outside of their core business that, you know, my feeble mind has no way to project where this is going. Yeah, they're like Amazon, except they're staggeringly profitable. But I mean, you know, the fear I think a lot of people have with this is because Google is known for mining their data and sending us advertisements based on the data they collect.

I mean, it's reasonable to at least be concerned that maybe somewhere in the not-too-distant future, you're going to be pitched an ad from your refrigerator or your thermostat or something like that. Who really knows what they're going to do with this? I mean, it is just a thermostat, that's for sure. But the implications are certainly interesting to think about. Last month, UPS said it would not be able to deliver some packages in time for Christmas because of so much last-minute online shopping. This week, shares of UPS fell after the company lowered guidance for the fourth quarter,

probably not a surprise, Ron. How bad is it, though? It's really a function. I think of poor planning. I mean, they knew that there was going to be six less days of shopping during the holiday period. They knew it was going to be cold. It's that time of year. So I think there's just some poor planning here. They needed to hire an additional 30,000 temporary workers. That's an amazing amount of people that they needed to get this right. So, short holiday season, cold weather, increased workers, poor planning overall. 2014, I think, will be fine. It's just they kind of bungled this quarter.

Should we expect a similar announcement sometime soon from FedEx? Because FedEx, at least according to the reports, was in the same boat in terms of not being able to deliver some packages. Yeah, I can't imagine why it wouldn't be consistent. Coming up, one of America's most dominant brands has a surprising new partnership. Stick around. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Ron Gross, and James Early. Before we get back to the headlines, James, you've been away for

about six months. A couple quick questions. First, to what extent, if any, did living in the Philippines impact the way you think as an investor? We were in the Philippines, but we had the fortune to travel to a number of different countries, Japan, Singapore, Thailand, into Malaysia. I went to Hong Kong, China. And so we saw a lot of different cultures. And I would say the idea of getting people aligned under a single idea or a single concept, the idea of buy-in is more powerful than I realized. You know, if we try to get onto the subway in, you know, country X versus country Y, you know, there can be a pretty big difference. And you realize you spread it across a whole society or even a company, and it can make a big difference. Now, long-time

listeners know that you're a very healthy guy when it comes to your diet. You're very health conscious, far more than I am. How did that work out living in the Philippines? Well, you know, Chris, I'm just going to be honest. My cardiologist had warned me. He said the Philippines is the heart disease capital of Asia. So you be careful. And so I went there and I was careful. There's a lot of fried food, a lot of sugar. And so I was lucky to have a personal chef here. So I work with him it took several weeks to a month to actually make him understand my my diet but but once we we had that did you say you had a chef i did it's it's it's not like a highfalutin thing eventually we got it so basically i ate the same kind of fish every day and a fish in it like a

humongous salad and it was it was unusual but but it was very healthy so you have a cardiologist like i mean not like a personal cardiologist checked out right gotta figure we're about the same age around there. I mean, I'm kind of feeling bad now. I don't have a heart doctor. Yeah, you probably go get this thing checked out. Listen to James. Get healthy, man. All right, let's put James back to work. Intel made a fourth quarter profit of $2.6 billion, but shares were down on Friday. Was it just not enough? Did they lower guidance? What's going on? It's funny, Chris, because just the day before, the shares were way up, and then they're right

back down again, like a balloon. Basically, their server, their data center revenue was lower than people expected. The PC being dead motif has kind of like maybe hit a bottom. So shares were actually going up on that and on possible tablet sales increases, that kind of stuff. But the server business was not to expectations, and guidance looked like it's going to be flat. So those things just brought it back down. Yeah, I think this is just a blip. Our thesis is that Intel was late to the mobile game, but they're not out. And they've got some great processors coming out, and that will drive growth in the future.

So we like Intel here very much. Shares of Beam up 25% this week. That is because Beam is being acquired by Suntory Holdings in a deal worth $16 billion. Jason, you've obviously got Jim Beam, but also Knob Creek, Maker's Mark, the Skinny Girl line of beverages. This is a pretty robust portfolio. And as a result, Suntory Holdings is now going to be the third largest spirits company in the world. We've been talking about this for a while. Every time you say Suntory, I just cannot get Lost in Translation out of my mind.

Bill Murray, the classic scene. I laugh a little bit in my mind. And it's, no, I mean, I think this was a great deal. You know, when Beam spun off from Fortune Brands, which it was a part of a couple of years back, many of us thought that it was going to be an acquisition target at some point for something like a Diageo to be able to incorporate more into that portfolio. And Beam has a, what's traditionally been a very bourbon-heavy portfolio. They've done a good job of making these little bolt-on acquisitions to broaden that portfolio out

with different vodkas and gins and whatnot. So they've done a good job with that. It was not a cheap deal. I mean, Beam, Suntory paid around 21 times EBITDA, EBITDA, or bid the stock up to about 36 times earnings. And I think there are a couple of reasons why they could get away with that. You know, number one, when you have a market leader, they're never cheap. And Beam is the market leader in bourbon. And then number two, you look just at this long sort of runway that Spirits possesses.

I mean, it's just, it's not a very disruptible market. I mean, their new products will come to market, but the market will generally stay the same. So there are going to be a lot of high times, so to speak, for these spirits makers to come. And so they could pay a little bit of a premium because it's going to last for a while. Do you think we're going to see more consolidation? Some people are looking at Brown Foreman, which is the parent company of Jack Daniels Southern Comfort, and thinking, well, they could be next. I think that's possible. I think that I'm looking a little bit more towards consolidation in the beer sector, actually, because we've seen just this real – this peak of this craft brew movement.

And it's been great for beer lovers. I mean, I can't say how much fun it's been, but... Why can't you say how much fun? For the perspective of the family show. Because it's such a fragmented industry at this point, I think you're going to see some more consolidation in the craft beer market here in the next couple of years. So I'd be keeping an eye out on that. Hershey is America's biggest chocolate maker with 42% of the entire market

and shares up this week on two bits of news, Ron. First, Hershey is introducing a new line of chocolate spreads, including a hazelnut-flavored one resembling Nutella. And second is the news that Hershey and 3D Systems have reached an agreement to develop ways to use 3D printing technology to produce edible foods, including, yes, candy. Is this – what am I to think of this? Well, the first – the spreads, the first thing I say was, what took them so long? That seems to make perfect sense. Right. Then I say they kind of have a battle here because somehow Nutella has convinced the world that it's not candy, that it's a hazelnut spray.

What is Nutella? It's a hazelnut chocolate spray. I have never had Nutella. It looks like peanut butter, but it's hazelnut chocolate. And what is hazelnut? It's just like a nut. That's a nut. So it's not candy.

Nutella. So it's the name. Parents think that they can give it for breakfast and it's okay. Hershey's, the word is right there big on the bottle. You think candy. You think chocolate. I think that's an uphill battle there. And yet sales of Nutella have tripled in the last five years.

Because they've done a great job. Does Nutella have sugar, though? Is it really candy? Pull the wool over. So it's really, okay, I got it. Yeah, there's protein, like you would get in a peanut butter, too, because there is a nut, but there's definitely sugar. Jason, we've got about 10 seconds.

3D printing, is that the future of Hershey's? I can't fathom that it is, but it's really interesting to see. They are such a nationally well-known brand. I mean, for the longest time, it's just been candy, but to see them- Is your thumb printed like candy? I don't know. Maybe there's a market for 3D-printed gobstoppers or something. I just don't know.

All right. Up next, we're heading to the Motor City for a report on the North American International Auto Show. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. The North American International Auto Show kicked off this week in Detroit. With the expected number of attendees, maybe more than 700,000 people. Paul Leinert has spent his career covering the automotive industry

and is the Detroit Bureau Chief for Reuters, and he joins me now. Paul, thanks for coming back on the show. I always have fun doing the show, Chris. Thanks. What is your headline at this moment for the Detroit Auto Show? It's ongoing, but the press got to get in first. You've had a couple of days to see what all the automakers have. What's your headline so far? I'm wrestling with the cliche, back to the future, or perhaps I head to the past.

The big news, of all things, is not green cars this year. It ain't electric vehicles or hybrids. It's a big pickup truck in a new crop of performance cars. I think I could have written that headline about 40 years ago. Let's talk about the pickup truck first, because as some of our listeners may have seen, And Ford unveiled a new F-150, and it's already one of the most popular trucks in the world. And this new model weighs about 700 pounds less because they've replaced most of the steel body with aluminum. What do you make of this move?

And not just any old aluminum, but they tell us military-grade aluminum. Now, I don't know if that means it's got bullet-piercing armor, but it's supposed to be like a Humvee, I guess, that great. Nobody's driven the trucks yet. They look fabulous. They really do. And they're able to put a much smaller engine in that pickup truck now and get the same performance they could with a big V8 in the current truck. They come out this fall. I think it's a risk, something of a gamble for Ford because those traditional truck buyers

don't want to sacrifice towing capacity. Ford says they've been able to maintain that. With the lighter truck, it's still durable, it's still flexible, it's still practical, and it has all sorts of cool little gadgets on it. So I guess we'll see when that truck hits the market if they can pull it off. But it's definitely a financial gamble. Ford's CFO said, yes, working with aluminum is more expensive than working with steel. I can see this going one of two ways. If it pays off for Ford and it gets a lot of acceptance, then they are far and away the market leader in this and everyone else is playing catch up. If this doesn't work out though, Paul, this could really hamper the company because the

trucks are generally more profitable. They bring in more money for the company than the cars do. And again, since this is a show for investors, that won't mean good things for Ford stock. These big trucks are the single most profitable vehicles in either Ford's or GM's lineup, for that matter. I believe they account for something like two-thirds of Ford's global profit. So in the margins on these things can run anywhere from $5,000 to $10,000. And if you're even talking about a high-end vehicle, a King Ranch F-150, the margins are probably like $12,000 to $15,000 or more. So it's a gamble in that sense. It's a gamble in the sense that they're much more expensive to make than the current pickup truck.

And it's a gamble in the sense that they run the risk of losing the title of America's best-selling truck, which I believe they've had for 37 years. what is the mood that you've found talking to people obviously there's always going to be at any convention whatever it is there's always going to be some level of optimism but considering that we just came out of a year that all things being equal was a pretty darn good year for the auto industry oh yeah yeah is there that level of optimism are people trying to recalibrate their expectations for 2014 that's that's a good word and i think that's been building for a little while as people as people around the industry realize that the growth has started to slow down a little bit so recalibrating expectations is probably the right way to phrase it cautious

optimism if we want to fall back on another old cliche we're watching more incentives or incentives creep up anyway. I believe the numbers in December were Ford was spending an average of $3,900 in incentives on vehicles. And a lot of those were on the big F-150 pickup truck. GM spending $3,500 on average in incentives. So that's a lot of money laid on the hood of a vehicle to get people to walk out of the showroom with a new car or truck. That's going to put pressure on pricing and, by extension, pressure on profits that's coming this year with for the next 12 months. Now, I get that your headline for the auto show is bigger is better, the move towards trucks, horsepower, all of that. And yet, last week at the Consumer Electronics

Show in Las Vegas, one of the big storylines out of that show was the presence of the auto industry. Nine of the top 10 automakers were there. And there were a lot of stories about the connected car, the internet-enabled car. And I'm wondering, how much of that are you seeing at the auto show in Detroit this week? It's funny. You said it well, Chris. This was probably the biggest presence the auto industry has ever had at CES in Las Vegas. And I think that trend is going to continue as we're watching kind of this convergence of autos and electronics. And it's all driven by consumers and especially by younger consumers with mobile devices who want to stay connected no matter where they are but especially connected when they're outside the house and in the car

we're not hearing too much about it this year the auto show there are different focuses there but there are plenty of displays with lots and lots of features on infotainment and connectivity so the auto industry is very mindful of that the other pitch from ces last week in las vegas that we heard, and we're beginning to hear more of it in Detroit, is on self-driving cars, autonomous driving, which two years ago, you really only heard Google talk about. Now you're hearing companies from BMW and Audi to Ford and GM talking about it. When do you think that becomes mainstream? And mainstream in my book is we're talking tens of thousands of vehicles on the road? We're talking 2020 or later, it's my guess. But companies already such as Nissan

have said, we're going to have a number of autonomous vehicles on the road by 2020. You can understand there are many, many issues that are going to need to be resolved, notably safety, including at the regulatory level from the federal government, as well as liability just at the manufacturer's level and the personal level. So I think it's going to take a while to sort out those issues. But technology, believe it or not, is pretty much already there. You're starting to see much of that trickle into especially luxury cars, the German brands, the Japanese brands, and the American brands.

You mentioned safety, and I am curious, when we were talking earlier about gadgets in the car, Internet-enabled cars, and more and more screens in cars, what are people saying about those devices that are now being built into cars and the trend that we've seen over the last decade banning texting while driving and that sort of thing it seems like those two trends are going to come to a head pretty soon well you know NHTSA the National Highway Traffic Safety Administration is already deep into the issue of driver distraction okay and texting would fall under that. Talking on a cell phone would fall under that as well.

So I think you're going to see some fairly stiff rules pretty soon at the federal level. The industry seems to believe that one way around that is voice recognition. That is, if you want to text somebody from your car, from the mobile device in your car, you're going to push a button perhaps on the steering wheel or the console and speak your message and it will automatically get sent out as a text. You're listening to Motley Fool Money, talking with Paul Leinart. He covers the auto industry for Reuters. I want to talk a little bit about some of the CEOs involved here. And let's start with Mary Barra, the new CEO at General Motors. She's already having quite a week. She officially

took over as CEO this week. And General Motors also won North American Car of the Year and Truck of the year with the Corvette Stingray and the Chevy Silverado. The pessimist in me says, well, it's all downhill in 2014 for Mary Barra. But it seems like, to the extent that a single person is the star of the auto show in Detroit this week, it really does seem like it's Mary Barra. You know what? It's fascinating to watch, Chris. And by the way, just as a side comment, And that's not a bad way to start your new tenure as CEO with car and truck of the year, right? No, no, no. It's definitely a good way to start. Obviously, GM and the new executive management team there have a lot of issues we're going to have to tackle with this year.

But watching Mary in action at a press conference, watching her walk through the show, I think she walked yesterday through with Michigan Governor Rick Snyder, she is a bit like a rock star. Yeah, she's a novelty because she's the first woman ever to run a major automaker. But you know what? This is one competent woman. We did a fairly lengthy story in Reuters early this week, talked to a lot of current and former GM executives and people who've known her and worked with her for 30 years at General Motors. This woman is competent, but the flip side of that is she's incredibly humble. I think one executive told me she is one of those rare people who will tell you if she doesn't know something.

But she also seems to have a pretty good way with people. She's a great morale builder and team leader, and I think that's going to work wonders for General Motors internally. I think it remains to be seen how she's going to present to investors and what sort of rapport she can build within the financial community. It's interesting, though, when you look at her resume, and she has spent all 33 of her professional years at General Motors, her most recent position was VP of Global Product Development. And when you look at GM's business and how much of it is outside the United States, in hindsight, she seemed like the obvious choice for CEO. Is that only in hindsight, or were there people putting her on the short list from the get-go? I think it was Dan Ackerson himself, the outgoing CEO, who put Mary on the short list. I think he has probably considered himself a bit of her mentor, but she also has had a few other mentors in the GM system, former executive VPs, presidents, CEOs.

She was one of a handful of people, I think, who were considered by the board of directors. But she has an interesting background. She's never run an operating unit, per se. that is. She never ran GM Brazil or GM Europe. And yet she's had these global jobs, including most recently, as you mentioned, global product development. Before that, she ran human resources during the GM bankruptcy and immediately after that. And right before that, she ran global manufacturing. So here's a person with a deep technical background. She's got an MBA from Stanford. So she really knows many facets of the business. She is uber competent.

Alan Mulally, the CEO at Ford Motor, was in the news recently by saying he was not going to replace Steve Ballmer as CEO at Microsoft. He was on pretty much everyone's short list to replace Ballmer at Microsoft. First and foremost, were you surprised that he came out and said that? Surprised only in this sense that Alan almost never says exactly what he means. There is almost a lot of nuance in a lot of the stuff that Alan says, and you almost always have to read between the lines. Reuters had done a number of stories talking to Ford insiders and Microsoft insiders about this very delicate dance that Alan had done for a few months with Microsoft's board of directors. At some point before Christmas, we began hearing that that dance was beginning to slow down a bit. we didn't totally understand

all the reasons why and it's never really clear if one side or the other cut off communication but I think at some point Allen either took himself out of the running or was made clear that he probably was no longer the number one candidate. He did the smartest thing he possibly could have done

and just came right out and said look I'm not going to Microsoft I'm staying at Ford. That was probably the most blunt specific forward statement he's made in the last six months regarding that whole dance. He's staying at Ford, but he's not saying for long. He has said that he will step down in the next year or so. Do you expect Ford to go outside the company to find someone to replace Alan Mulally, or do you expect they will

do what General Motors did and look for someone internal? I think Mark Fields, for at least the past year, has been clearly anointed as the heir apparent there. Mark, in fact, runs the Wednesday morning business planning reviews at Ford with Alan Mullally sitting right next to him. But Mark Scott has had a long career at Ford. He knows the system. I think he's liked by the Ford family and trusted by the board of directors. So he has positioned himself to slide into that role when it's time to turn the reins over. And finally, in terms of auto production, Tesla Motors is much, much smaller than both General Motors and Ford. And yet, Elon Musk, the CEO at Tesla Motors, has really captivated not just the business world, but

certainly the investing world over the last year or so, particularly when you look at the performance of Tesla's stock. I am curious, though, how is he regarded within the automotive industry? Let's just talk about General Motors, okay, because I have more direct knowledge of that. I think Elon is very well regarded by a number of top executives at GM. GM, as you may know, actually started Team Tesla to take a much deeper look at that company some months back. So I think GM probably rather than maybe 40 years ago they would have dismissed a startup like Tesla out of hand, now is taking a completely different approach and saying, what can we learn from these guys? What are they doing differently that we might apply in one form or another to our own business

model to make the business more efficient, more productive, and maybe more profitable? All right. Final question, and I'll get you out of here on this. You have so much experience in the auto industry, and therefore, I am guessing you are not easily impressed. But going back to the north american international auto show was there anything you've seen so far this year at the show that made you say wow you know it was something that i totally did not expect i knew it was going to be there my expectations were low and when i finally saw it in the flesh it was like oh my goodness this is so much better than i thought it was the redesigned chrysler 200 sedan Really?

Midsize family sedan going head-to-head with the Accord and Camry. I'm sure you're aware Chrysler has never, in my memory, had a competitive car in that segment. This one might actually do the trick. Paul Leiner covers the auto industry for Reuters. You can read his stuff. You can follow him on Twitter. Paul, thanks so much for being here. Always a pleasure, Chris.

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 interests 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. I'm Chris Hill. Joining me in studio once again, Ron Gross, James Early, and Jason Moser. Guys, that time once again for the stocks on our radar. Ron Gross, you're up first. What are you looking at this week? Going back to Coach, C-O-H. Company reports next week they've been struggling in the U.S. I think that actually is what's creating our opportunity. We

like what's going on in Europe, China, moving into men's accessories. We think the stock is very cheap right here, but I do want to see what they have to say. Do they have a new CEO lined up? Because Lou Frankfurt is walking out the door this year, isn't he? Yes, they do. Victor Lewis, I believe is his name, an employee that they elevated. But more importantly, perhaps, is a new creative director who replaced a longtime employee of Coach there, who we think is actually going to do great things. All right, James, what are you looking at? Female health company.

This is an income investor recommendation. The ticker is FHCO. They make the only FDA and World Health approved women's condom. The primary buyers are USAID and various United Nations charitable groups. But when I was in Bangkok, I ate at a restaurant called Cabbages and Condoms. This is a famous restaurant. This guy is a big philanthropist, and the whole thing has, like, condom decor everywhere. At the end, they give you, like, a condom.

It was a family went, like a bag of condom goodies. I saw some of these things, just looked at them. But it's a company, I think, that pays a 3.5% yield, and they have sort of a monopoly because they're the only one approved by those two organizations, so they get all the nonprofit business. So when you get the bill at the end of dinner, instead of coming with a little mint, it comes with condoms? It does. It does. About five or six, seven of them.

I don't remember how many. I have nothing to add to that. Jason Moser, what do you got? Best stock to watch ever. That was great. I'm going to stick with the smart home theme here. I've mentioned Control 4 before, but with the Nest Google deal, Control 4 has certainly shot back onto a lot of folks' radars. It was up about 40% the day after that announcement and another 25% the following day.

But Control 4 plays into that long-term turn of the smart home and the Internet of Things, and they make the products that are connected in the home, like your lights and your entertainment systems and smoke alarms, and they also make the brains of the connectors. Really, this is an interesting market opportunity. They have a simple device discovery protocol software that's proprietary. It would bring a lot of partners under their umbrella there to work with their technology, and just a tremendous market opportunity out there. And the ticker?

CTRL. All right, that's going to do it for this week's edition of Motley Fool Money. We'll see you next week.