Motley Fool Hidden Gems Investing - Motley Fool Money: 02.28.2014

Episode Date: February 28, 2014

Baidu reports big earnings.  Boston Beer serves up a surprise.  And J.C. Penney and Target investors see some green.   Our analysts discuss those stories and share three stocks on their radar.   Plus, corporate governance expert and film critic Nell Minow talks Carl Icahn, Netflix, and Academy Awards. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. I'm Chris Hill, and we are not at Fool Global Headquarters. We are not. We are not.

We are coming to you live from the Kogod School of Business at American University in Washington, D.C. Woo-hoo! With an audience to prove it. Thanks for being here. I'm Chris Hill. Joining me on stage, Ron Gross, Jason Moser, and Matt Koppenheffer. We've got the latest earnings from retail stocks, housing stocks, beverage stocks, and more. Just in time for the Academy Awards, film critic and corporate governance expert

Nell Minow is our guest this week. And later in the show, we've got three students who are going to come up on the stage and share the stocks that are on their radar. We will get to the company-specific news in a minute, but let's start with the market in general. Ron, we've got the market hitting new all-time highs this week, and I'm curious, what is the main thought that you have as you look at this market?

Because among other things, it has got to be harder to find value in a market like this. Yes, I agree, and I do want to point out that I'm actually the only one with real notes. This is the 21st century. All right. So here's what's going on this year. I think numbers look relatively good. Economic data looks good. Unfortunately, I think the emotions of investors aren't strong enough to weather the weather. And we see a lot of headlines lately, especially from retail stocks,

but others, that the weather, the bad winter we're having is responsible for some shaky data that's coming out of companies. And that caused the market to take a little bit of a breather about a month ago. But we all got together, put our heads together, and we decided it was just the weather and that we're going to be okay, and the stock market has continued higher. I don't think it's cheap or expensive at these levels. I think we're kind of in the middle. Matt, what about you? So there was this interesting report from Goldman Sachs that was going around for a little bit. It was about load dispersion of PE multiples that- Wow, sounds sexy. Yeah, this is the kind of stuff that really-

people just turn their radios so basically they're saying you know you look back to 1999 2000 and you had this big market multiple but what that was driven by was you had a few companies really expensive really high multiples and then you had all these other companies that were still relatively cheap today not so much everything sort of clustered around where the average is so people are saying well that probably means that there aren't cheap stocks out there today. Well, that might be by the easy metric of, well, this has a really low PE, so obviously it's cheap. But if you're clustering everything around the average, what happens to

companies that aren't average? So companies that are growing faster, companies that are better than the average, those could still be cheap. Jason? So, I mean, this has been a tide that's lifted a lot of boats. And I think that, you know, in a market like we've witnessed over the past year, it's not been difficult to make money. I mean, you could have probably thrown darts to the board and done pretty well. But with that said, I think that what that breeds over time is more overconfidence than anything else. And it's one thing as an investor that we focus on a lot. I think talking with each other is keeping our emotions in check and sort of trying to find that one voice of dissension in the room who might have a little bit of a different perspective.

And so when we look at a lot of these companies, we've seen a theme that's been really running throughout a lot of these companies lately has been cutting costs. Haven't seen a tremendous amount of top line growth or growth in sales. So they're focusing on profitability by cutting costs. I think that, you know, what we really want to do is make sure we take a step back, make sure you look through your portfolio and have the market leaders, companies with competitive advantages in there that can stand, you know, when the market does pull back so that when the market does pull back, you can view that as maybe an opportunity as opposed to sort of a gloomy time. And I also think what makes foolish investing with a capital F different than so many

other methods is that if you're going to be owning a good quality company run by an exceptional management team for years to come, it theoretically really shouldn't matter about where we are in February, late February, in terms of what the PE multiple of the market is or where we are in terms of undervalued or overvalued. Focus on companies, let the market, the economy take care themselves. All right, let's get to some of the earnings news this week. We'll start with retailers. Target's fourth quarter profits fell 46 percent. JCPenney's fourth quarter revenue was light. And Matt, despite that, shares of both stocks were up. And in the case of JCPenney, on Thursday, it was up 25 percent. Are expectations that low for these two companies?

Well, yeah. You know, for Target, I think the theme here is that the phrase consumers don't care is hard to bet against. It's really hard to bet against. And in the case of this data breach that everybody was worried about, consumers don't really care. And I think that you can kind of theoretically tell them this is why you should care about this. But at the end of the day, they don't have to pay for fraudulent charges. So they're not really going to care about it. So it's not going to change where they're spending their money. You're already seeing shoppers come back to Target. And then with JCPenney, I mean, talk about a stock that nobody wants to own. Nobody wants to be seen owning this, right?

It's gotten to that point. It's trading at, I think, a 25% discount to tangible book value. So basically, it's not about a turnaround. The coverage of the earnings they're talking about, this turnaround, doesn't have to happen. All they've got to do is stem the bleeding. Remember, we were here last year.

Ron, I think you actually posed the question, does the world even need JC Penney? And I think that the shares have fallen, certainly, since then. But I think that, still, the answer is no. I mean, the world definitely doesn't need a JC Penney. It doesn't, but can it exist? It can exist. Retail, though, in general, is a very, very tough business.

You either have to differentiate yourself or do something different, whether it's a price point or a brand name. I don't think JCPenney does that. And while the turnaround seems to be progressing, I think they've still got a long road ahead. They've got a lot of debt, not enough cash, and a very competitive environment. Shares of Baidu up this week.

Fourth quarter revenue for China's largest search engine rose 50%. This is a stock you've got in the million-dollar portfolio. Ron, what did you think of the quarter? They put up great, great numbers. Revenue is up 50%. We're seeing strength in mobile. We've seen so many of these companies, whether it's Google, Facebook, needing to make that transition to mobile.

20% of buyers' businesses now move to mobile. That's really great to see. There's kind of a battle going on between long-term investors and short-term investors, I think, here. They're not profitable because they're spending, or the profits aren't really growing because they're spending quite a bit on the future. And short-term investors don't like to see that.

They want to see profits now. But the stock, in the end, went up this week on the news because they're really taking steps that are necessary to continue to position themselves. They're building out searching and mapping and so many other things, making acquisitions, so they can be around for the next five or ten years and not just the next quarter.

six billion dollars in cash I think they have the balance sheet to continue to do what they do 77 percent market share pretty strong company but when you look at the performance of the stock over the last 12 months it's really been impressive is it now getting to be pricey or is there still value here we have it on hold we've had it on hold for a little bit until we could see these results so now we go back to the drawing board and we're gonna plug in these new numbers which are pretty darn impressive and we'll reevaluate fourth quarter profits for Boston Beer Company came in lower than expected, and they also lowered guidance,

Jason, and normally when we see that, shares really get hit. That wasn't the case with Boston Beer Company. Why is that? No, I mean, the bad news was that they missed their earnings estimates by a relatively significant amount, but the good news is the reason why they missed those estimates was because people wanted a lot of Boston beer. Ultimately, demand really hit them where they weren't expecting it, and so some supply chain issues are what contributed to the higher cost structure for the quarter but I mean you know that's a nice problem to have and it's a problem that's certainly fixable because they can pinpoint the problem and then address it you know I I really enjoy following this company there is a

founder and chairman Jim Cook who still has a tremendous interest in the company and has really done a great job of growing this from a just a little craft brewer and to really I think what has become you know the quintessential American success story you know they actually redefined what craft brew was I I mean, they, you know, have been able to redefine essentially an entire industry to a degree. You know, I mean, you look back to 2002, Boston Beer was responsible for delivering about 1.3 million barrels of beer. Today, that number is around 3.4 million. So they're obviously doing something right.

And when you have a situation where they're still growing their sales at a very healthy clip, you know, these earnings misses are easy problems to fix. And one fun fact for you, Chris, on the earnings call, the word weather was mentioned exactly zero times. Nice. That's a refreshing change of pace. You look at the beer industry, you've got Grupo Modelo, SAB Miller, Anheuser-Busch, Imbev, and all this consolidation over the last decade or so. When you look at Boston Beer Company, do you think at least one of those entities is eyeing it as a takeout candidate? I have to believe they would love to have the chance. Now, I'm not a shareholder yet. I'm still kind of deliberating buying into the company myself. I want to find a little bit of a better price. I'm sure Ron would respect that.

But I don't think, as long as Jim Cook is there, I don't think he will sell the company. And I think the one hurdle there is that if that company is acquired, if Boston Beer is acquired by one of the bigger players in the space, I think it loses some of that sort of mystery or that craft brew sort of appeal that I think a lot of us feel like we're doing something a little bit different by drinking Samuel Adams as opposed to Budweiser. So if I'm an investor in Samuel Adams, I'm hoping they don't get acquired

over the course of the next 10 or 20 years. Coming up, forget the Academy Award statues, what are those Academy Award gift bags worth? Details next. This is Motley Fool Money. Welcome back to Motley Fool Money, coming to you from the Kogod School of Business at American University in Washington, D.C. We're still here on stage with Jason Moser, Matt Koppenheffer, and Ron Gross, a couple of companies close to the housing industry reporting earnings this week.

Ron, Home Depot's fourth quarter profits rose 7%, Lowe's fourth quarter profits up about the same amount. Both stocks up as a result of their earnings, but Lowe's moving just a little bit higher. Yeah, but we don't always hear the same things out of both companies. This quarter, we kind of did. Real estate's been a little bit interesting, let's say, lately. New home sales were really strong, fastest-paced in more than five years. Existing home sales were weak. There was a bit of schizophrenia there.

But we're seeing similar things, similar same-store sales numbers come out of the company, similar profit levels, similar revenue growth. comments from management echoed kind of the same kind of theme that they think the housing market doesn't remain as strong as we've seen but that growth is still in the cards and their future guidance reflected that and so we're seeing kind of them move somewhat in lockstep also in lockstep we saw both of them returning cash to shareholders Home Depot raising their dividend 21% Lowe's authorizing a buyback to the tune of five billion I don't know we we talk

about stock buybacks and not every company has a great track record on that how is Lowe's in that regard they're okay you know it's a hard thing to get right management teams are notorious for buying stock back at the wrong time at 18 times earnings for both of these companies I'd prefer I think if I was a shareholder to get a dividend rather than see them put five billion extra back into the stock, but return of capital, at least it's a return of capital to shareholders. Middleby, the maker of commercial cooking equipment,

reported fourth quarter results this week. Profits rose 36% with revenue up nearly 40%. Jason, my question to you, do I have those numbers right? Their profits were up 36%? How many commercial ovens can they sell? It's a lot, Chris, it's a lot. Any restaurant where you eat, they're more than likely using Middleby equipment,

whether it's pizza or toasters or whatever, but, you know, they have done a terrific job. They have a CEO in Salim Basool who did the strategy that Middleby has taken is an acquisition strategy. Essentially, they get most of their growth from acquiring companies, little roll-up acquisitions to, you know, give the company a little bit more market share and become more things to more people. And the risk there typically with acquisitions is that they don't go so well and you can't integrate them into your model. I like to look at these acquisitive companies, essentially, the CEOs are investors, and you're

going to have some good investors, you're going to have some bad investors. So when you have a CEO like Salim Basool, who is so dead focused on making sure the customer is always taken care of, I mean, you can buy an oven for them and return it in a year and get all your money back. So they really believe in their product. So he has just done a great job over the course of time investing well. He's making good acquisitions and rolling out this strategy. A good example was the recent acquisition of Viking, which is getting them into the home with not only ranges and stoves, but they're growing the refrigeration segment there as well.

And so I think that for shareholders in Middleby today, while acquisition strategies can be risky, I think they have a great team there at Middleby and a great CEO in Salim Basool. And as long as they're there, I think that shareholders ought to feel good about hanging on and enjoying the ride. Existing shareholders probably feel great because the stock's hitting an all-time high this week. but if you're not a shareholder, what's your thesis if you're looking at this stock right now? Because you have to have some kind of extended time frame, don't you? Well, I think you do, and I think you have to look at the fact that, number one, going out to restaurants is not a trend that's really shrinking. I mean, that's something that continues to really grow,

and you have somewhere in the neighborhood of a million restaurants just here domestically. They're going to continue to cycle through all sorts of equipment and new upgrades in equipment. And so I think that's one of the ideas right there. But then also just look at Middleby today. It's a tiny company, really, in the grand scheme of things. Only about $5.5 billion market cap. And so they're pulling in these big deals with companies like Chili's and other big restaurant concepts where they're throwing in 10,000 new ovens

for these big chains. And, I mean, that could be a really profitable, lucrative business here over the course of the next 10 years, I think. One of the big stories over the past year has been the rise of Bitcoin, the digital currency. this week, a Bitcoin exchange called Mt. Gox collapsed due to a security breach resulting in the apparent theft of nearly 750,000 Bitcoins, which is, if I have this right, Matt, 6% of all Bitcoins in the world.

Where are you in this story? Because there are people out there saying, look, this is good for Bitcoin, this is akin to a bad bank failing, and just because a bank fails doesn't mean that the US dollar is weak. And you have other people saying, this is just a sign that it's a house of cards waiting to fall down. Well, let's start here. Mt. Gox, what that name stands for is Magic the Gathering Online Exchange. So this was originally a company set up to allow people to trade magic cards online. So who would have guessed they would have been bad at managing cryptocurrency? It's almost hard to believe. Certainly not the Winklevoss. Extremely hard to believe. So in terms of burying

Bitcoin after this. I'm not so keen to do that quite yet. One of the problems with Bitcoin is I think a lot of people think of this, and the name kind of throws it off, Bitcoin. You think of it as a currency. It's completely ridiculous. It's not going to replace the dollar. It's not going to be a true currency, I don't believe. But it's a great way to, a great secure way to exchange money between people, between people and businesses, potentially. The problem with Mt. Gox is that this was really bad technology around Bitcoin. There's some problems with Bitcoin. The Bitcoin Foundation, the people,

the big buyers into Bitcoin won't tell you that. Some problems with Bitcoin, but there's this technology around Bitcoin. Meanwhile, you've got really smart folks like the VCs at Anderson Horowitz who are putting a lot of money, not into Bitcoin, but into the companies that work with Bitcoin. Now maybe Bitcoin doesn't pan out, right?

But you get these technologies around it that can work with Bitcoin, but can potentially work with other types of digital currencies, and maybe that's what works out. But I think this something that makes it easier to transact digitally, we're gonna see a lot more commerce going that direction. Maybe it's Bitcoin, maybe it's not.

Do you think we go to regulation more? People like it because it's lightly regulated, but it's dangerous because it's lightly regulated. I think we're gonna hear a lot more about that now, now that you've got a heck of a lot of money that just basically disappeared. But on my way over here, I saw a headline from the Wall Street Journal.

It was Janet Janet Yellen saying we can't regulate Bitcoin. This isn't what we do. So maybe it's somebody else. But the Fed is already washing their hands of it. We got about a minute left with the Academy Awards this weekend. Most of the nominees go home without a gold statue, but they won't go home empty handed. They will all receive swag bags with a variety of gifts

totaling in excess of $80,000. This includes trips to Japan, Las Vegas, and also items like herbal tea lollipops, organic pet shampoo, and my personal favorite, his and her pepper spray guns. You got a favorite, Ron? Well, there is laser hair removal, but I'm going to go towards the Hawaii trip. That looked pretty interesting.

Jason? If I could, I'd just take the $80,000 and Middleby and Boston Bear stock, but I think I'd have to go with the organic pet shampoo for my two dogs. Nice. Matt? Going with the $15,000 trip to Japan, a closer runner-up would be the camo pepper spray gun.

After all, you're leaving the Oscars. you've got all the paparazzi out there, perfect. Why not make some news? Coming up, Fortune Magazine calls her the CEO killer. We call her one of our favorites. Nell Minow is next. This is Motley Fool Money. Come, you'll make a spade and I'll follow you until you love me.

Papa, paparazzi. Baby, there's no other superstar you know that loves me. Welcome back to Motley Fool Money, live at the Kogod School of Business at American University in Washington, D.C. I'm Chris Hill, and we've got fighting in corporate boardrooms, and we've got the Academy Awards this weekend, so there is only one guest we can turn to. Nell Minow is a corporate governance expert with Governance Metrics International. She is also the film critic known as the movie mom. Thanks for being here.

I'm happy to be here. Hello, everybody at Kogus. Thanks for finding the DC traffic to be here. We'll get to the Academy Awards, but let's start with the public fight of the week, which is between activist and investor Carl Icahn and eBay. It started with Icahn, who owns about 2% of the shares of eBay, making a very strong case for why eBay should spin off PayPal. He's not the first to make that case. That idea has been out there for a while ever since they bought it and it's really become a main economic driver for the company but now you have a letter back from the chairman at ebay saying that what icon some of the things icon has been saying are and i'm quoting here false and misleading it's really getting

heated this is stuff that you watch for a living what do you think of the fight that's unfolding Well, I feel two ways about it. On the one hand, I think that the issue of independence of board of directors is one that's very important to me. If you don't have independent directors, they can't exercise any kind of meaningful oversight. And certainly, the tech sector has been the worst offender in this category. What we, the rest of us, like to call conflicts of interest they call synergy, and they sort of cultivate this idea of sort of a VC mindset rather than a public company mindset when they pick their board members. On the other hand, there's really no such thing as an independent board member in any

company, any public company, as long as the CEO controls who's on the board, decides how they get compensated, decides how they get informed. And so I can't get too excited about the allegations that ICANN is making in this particular case. That's why at GMI, where we evaluate companies, we look at the decisions the board makes rather than their resumes. I think he understands that this is a sensitive point. The issue of independence of boards of directors is one that always gets everyone's attention. I'm not sure he's got a real case to make, though, here. Icon was in the news recently because of his, I don't want to say his fight with Apple,

but his really pressing Apple to buy back tens of billions of dollars worth of stock. and there are people who look at that and say, well, sure, it's in your best interest if they buy back stock because you're a major shareholder. How do you view stock buybacks? A major short-term shareholder. Short-term. Yeah.

But how should investors think about stock buybacks? Is there one way to think about them or does it depend on who's pushing for them? There can't possibly be one way to think about it if you've got, in the same year, Carl Icahn and Ralph Nader both asking companies to buy back stock. Obviously, when people, as we just heard in the previous segment, And when people have got a lot of cash, everybody's got their eye on it, as they should, as they should.

I'm not paying these executive compensation packages for somebody to sit on cash. So I believe that they should be doing something with it, whether it's a special dividend, an acquisition, or a buyback. You know, I'd like to hear their story about it. With regard to ICANN and Apple, I think the most interesting part of that story is that while he is declaring semi-victory because he did get them to buy back some fraction of what he was looking for. In reality, to me, the victory there was that the executives and the board found a really strong alliance with their long-term shareholders and were able to fend him off.

And I think you're going to see more of that in the future. You're listening to Motley Fool Money, talking with Nell Minow, expert in corporate governance and films. For those listening who may not know, President Kennedy tapped your dad to be the head of the FCC once upon a time. an incredible career that is still going on at the age of 88. He's still practicing law. I know you've learned a lot of things from your dad, but when it comes to business, what's one or two things in particular you've learned from your dad? Well, I suppose this is where I should mention that

when I was at Institutional Shareholder Services, I ended up recommending that shareholders vote against my dad on one board, but he forgave me for that. How was that Thanksgiving, by the way? He was actually a very good sport about it. I had no idea when I implemented a new policy at ISS that we should recommend a vote against any director who missed more than 25% of the meetings that the first name that would come up would be my dad, and so he never missed another meeting after that. I think the most important thing I learned from him is that very early on in my career in corporate governance, he was serving on the board of CBS, the television network,

when they fired the CEO, Tom Wyman, and I learned a lot about how the dynamics of boards work and what it takes to get a board to stand up to the CEO. Netflix was in the news this week. Netflix struck a deal with Comcast to pay an undisclosed sum of money for more dependable delivery of shows and movies. First and foremost, were you surprised when you saw that news? Not at all. I was expecting something like that as soon as the net neutrality decision came out, and

I think we'll be seeing a lot more of those sweetheart deals while the FCC figures out what to do next. Comcast is looking to acquire Time Warner, they're obviously looking for approval as quickly as possible, it's probably not coming in this calendar year, what is something like this due to their chances, because there are people saying, well look, if Comcast, as the number one cable provider in America, can get Netflix to pay up some amount of money like this, what is their power going to be when they acquire and subsume the second largest cable provider in America? I think that's a very serious concern. And to my mind, the best argument that Comcast has going for it is the increase of content generation from places like Netflix and Amazon and Hulu. Because if I were their lawyer, that's the argument that I would make, is that it doesn't really matter that they're going to own

all of the wires going to people's homes because they're not going to be in charge of all of the content and delivery systems are getting more varied. But the fact that so many people get their Internet via their cable provider I think is a concern, and I hope that the antitrust division looks at it very carefully. You and I have talked before about what we call the battle for the living room.

You've got cable providers, content providers, even companies like Microsoft with their Xbox One game system and really looking to be a key player in people's living rooms. When you look at the landscape right now, have the positions changed at all? Is someone in the driver's seat, or which industry do you think is best positioned right now to really control the living room over the next 10 years or so? I'm tremendously intrigued by what Netflix did. They put $100 million into House of Cards, and they guaranteed it without seeing a pilot,

and they guaranteed two years. That's a very, very attractive deal for the people, for the actors and the producers who put these programs together. So I think that that's one end of the spectrum. On the other end of the spectrum, and just as important and just as intriguing, is I was talking to a friend who's got three young children, and none of them ever, ever watch television or Netflix. They watch everything on YouTube. And I think the idea that just about anybody can make a movie and have it up on YouTube or Vimeo or Kickstarter and creates a lot of opportunities at the very, very lowest level.

So I think we are in the world's best environment for content, and it's anybody's game. You watch the movie industry very closely. When you talk about Netflix essentially handing over $100 million and saying, give us another season of House of Cards. We don't need to see anything. Is there any equivalent in the movie industry like that? Because it seems like, particularly with the major studios,

they want to control everything, certainly the marketing of it. They've got producers on the set. They're looking to tweak things. It's hard for me to imagine a major studio just handing a blank check to some director and saying, make me a movie, and I'll see it when it hits the theater. Certainly not a $100 million check. This is why people like Woody Allen and Tyler Perry make low-budget films, because they get total creative control.

But certainly at that level, you get a lot of notes, and a lot of notes, and a lot of notes, and series of notes, and then you have to go back and change everything. And that's why those movies are so watered down. And that's why we see so many sequels, prequels, and superheroes, because that's a reliable bet. You're hitting a lot of singles rather than home runs. So, no, I think that's why it is such an appealing opportunity for providers of content to go to someplace like Netflix. Before we get to the Oscars, we have some students in the audience.

Some of them are going to be graduating in a few months, others in 2015. It's not necessarily the greatest climate out there to be looking for a job. Any advice for students? I have to tell you that nothing beats being an entrepreneur. It's absolutely wonderful starting your own business, having your own ideas, and being your own boss. It's great. I've helped to start four companies now, and I really enjoy it. So I would say that.

All right. Let's get to the major Academy Awards. And as we do every year, tell me who should win. Tell me who's going to win. We'll start with Best Actress. It seems like Cate Blanchett is the betting favorite. She definitely is a lock, and I have to say that that is one where I depart from just about everybody else. I wasn't crazy about that performance or that movie, but she's won all the preliminary awards, and I don't think anything can stop her.

I would love to see it go to Amy Adams or Judi Dench, but it's going to be Cate Blanchett. The last time you were on the show, we talked about how incredibly tough the Best Actor category was going to be. You said it was the category to watch this year. Who do you think is going to win, and who should win? Matthew McConaughey, I think, is going to win. He's got two narratives that Hollywood loves. Nobody's more obsessed with their bodies than people in Hollywood, and anybody that gains a lot of weight or loses a lot of weight is ahead of the game when it comes to Oscars.

And then the second narrative is the second act narrative, and the guy who started out as the party guy and made a lot of stupid romantic comedies with Kate Hudson, etc. In his defense, I think that's the only kind of rom-com that Kate Hudson makes. That is correct. but we don't see her getting nominated for an Oscar not since Almost Famous so the idea

that he would come back from that and have just an incredible run of extraordinary performances you just can't beat that I personally would go with Chiwetel Ejiofor for 12 Years a Slave but I think it's Matthew McConaughey and I can't argue with that I would love to see Leonardo DiCaprio

we should have a whole separate show on Wolf of Wall Street we'll do that next time finally best picture I will remind you, as you probably already know, science fiction movies don't typically win Best Picture, so people who are banking on gravity should maybe study history. Well, first I just want to say that since we're talking in a business school context, I want to say that they should look at the Oscar bump that these movies get,

and that's why it is so important. I don't think it's an emblem of any kind of general objective quality, but it is very important for the business. So I think 12 Years a Slave is going to get it, but I think rarely, this doesn't happen very often, it will split with director, and Alfonso Cuaron of Gravity will get director. Finally, we will wrap up with a round of buy, sell, or hold.

Let's start with this guy's movies, which include Stripes, Caddyshack, Ghostbusters, and Groundhog Day. Buy, sell, or hold the career of the late Harold Ramis. That's a very, very sad one. He has a hold for the long run, and I've been really happy to see how not just his work, but his influence has been recognized. His stock is trading at a pretty rich valuation based on the last two weeks.

Buy, sell, or hold the new host of The Tonight Show, Jimmy Fallon. That is a long-term hold. I think he is going just by virtue of the virality of the segments that have been all over the Internet since he started. I think he's in for the long haul. He's just great. His image has taken a beating, and he recently said he is quitting public life. Buy, sell, or hold Alec Baldwin. If you're still holding Alec Baldwin, I feel very sorry for you.

Sell it right now. And finally, we have more and more ways we can watch movies from streaming to online, on demand, and on DVD. Buy, sell, or hold the future of movie theaters. There's nothing like seeing it in a theater. And especially with movies like The Lego Movie and Frozen and Gravity, which is out on DVD this week. Forget the DVD. go see it in a theater somewhere where you can see it the way that it was supposed to be seen. One of the best reasons to be on Twitter is so that you can follow Nell Minow.

Nell, thanks for being here. Thank you. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. Thank you. 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 i'm chris hill we're coming to you live from the kogod school of business at american

university in washington dc joining me on stage once again jason moser matt copenheffer and ron gross and guys normally we do the stocks that are on our radar but once again we're back at the Kogod School. So it's the stocks that are on their radar. So stepping up to the podium now, Nick Marone. Nick, what stock do you have on your radar this week? So I'm here today to talk about Hess Corporation. HES is the ticker. Used to be a fully integrated oil company, but last year, 2012, they announced they're going to move more and more to the upstream, the exploration and production side of the business. I think the stock's worth about 100 bucks a share. I think the market doesn't fully understand how they're going to move towards this E&P business, but

they're also starting to sell a lot of their less lucrative plays, a lot of the low-margin shale, the negative-margin refineries are getting sold off, and you're seeing more and more big, high-margin upstream plays come out of Hess. Jason, you had a question about Hess? Yeah, so given how scale is such an advantage in the energy industry, especially with oil developers. I like that move upstream. What would you consider to be Hess's primary competitive advantage?

I think Hess is in a nice market spot where they're not a small wildcatter, but they're not a massive company like Exxon. So they exist in this small market segment where they can sort of take on smaller plays that Exxon might have to look over, but they can afford some of the more

expensive plays that smaller wildcatters in exotic markets, to be frank, can't look at. Okay, good stuff. Let's bring up Jonathan Wallen. Jonathan, what do you got for us this week? Good evening. I'm introducing MYGN, Myriad Genetics. Myriad Genetics operates within the biotechnology and pharmaceutical industry. They're a market leader in genetic testing, in particular for cancer, and they're solidifying their position through the MyRisk comprehensive genetic testing for cancer. And what's so interesting about that company is

that there are two short-term catalysts that we've been seeing in the past few weeks. One is their success with Polaris, a test for prostate cancer recidivism, and two is their acquisition of Crescendo Bioscience. Some investment risks include competition from larger pharmaceutical companies, including Quest Diagnostics and patent litigation. Matt, what do you think? Question about MIGN? So I love this business.

I love the industry. I think genetic testing is my only way to becoming a superhuman. But like any other developing industry, there are a lot of companies going after this opportunity. What sets this particular company apart? What's going to defend them as other companies move in and develop? Yes, I think it's approximately their 500 or so patents that are definitely helping them out.

Their 12 years of expertise in genetic testing and their expertise in the BRAC test, particularly for women's breast cancer so they have a long history of that they recently expanded into men's prostate cancer and when you're looking at these genes it's so detailed and it's so high-tech that you see a lot of synergy synergies among these various genetic assessments and that's one of their strengths good stuff let's bring up finally Randy Nordby Randy what do you got for us this week thank you I actually want to kind of piggyback a

little bit on target what you talked about today I'm actually talking about checkpoint software their ticker symbol is CH KP they develop software and hardware for IT security some of these recent data breaches that we talked about with Target and Neiman Marcus it's have increased this public awareness of data security issues and now this is becoming a major focus for companies in 2014 recent research by the research firm Gartner estimates that spending on firewalls is expected to be the fastest growing segment in network security. We're looking at about a 10% growth rate through 2017.

In my opinion, Check Point is a conservative stock in a very competitive industry with cash of 3.6 billion on their balance sheet, a free cash flow of 780 million in 2013, improving margins, no debt, a 21-year track record, and a relationship with 98% of the Fortune 500 companies. Sounds like it has a lot going for it. Ron, what do you think? Well, first I'd like to thank all three gentlemen for wearing ties. It's very much appreciated.

None of us are wearing ties. Well, we had ties. Oh, okay. At the end of the third quarter when they announced their results, they came in way below expectations. They lowered guidance for the year. They said they had internal and external headwinds. I know their report next week.

What are you going to be looking to hear from management that gives you comfort that they're kind of back on track? Well, I think the biggest thing that I'm starting to see, we're starting to see some recent improvement in the quarterly margins. The biggest issue, which is sort of the checkpoint killer, is Palo Alto Networks. They're really giving them a good run right now, but we are seeing some large data center sales, so they might not be as strong as they thought. And also, Checkpoint is really starting to focus on the small and medium business market segment, which is a hot area right now. And for a big company known with high margins, it's interesting that they're able to turn so quick and innovate. Now they're one of the leaders in the small business market at this point.

So I think they have a lot going for them and a long history of meeting these challenges. Great. Thank you. All right. Thanks a lot, guys. That's going to do it for this week's edition of Motley Fool Money. The show is mixed by Rick Engdahl, our engineer is Steve Broido, our producer is Matt Crear. Thanks again to the folks at the Kogod School of Business here at American University in Washington, D.C. I'm Chris Hill. We'll see you next week. We'll be right back.