Motley Fool Hidden Gems Investing - Motley Fool Money: 03.05.2010

Episode Date: March 5, 2010

The government reports better than expected jobs numbers, Domino's and Urban Outfitters report big sales, Tivo records a big win, The SEC goes after false profits, And Apple goes after Google. On this week's Motley Fool Money Radio Show, we tackle those stories, reflect on some money quotes from film critic Roger Ebert, and share some stocks on our radar. Plus Warren Buffett biographer Alice Schroeder talks about why one company's trash is Berkshire Hathaway's treasure. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to the show. Thanks for being here. I'm your host, Chris Hill, and I'm joined by Motley Fool Senior Analyst, Seth Jason, James Early, and Shannon Zimmerman. guys. Good to see you, as always. Good to see you, Chris. Coming up, we'll talk trash with Warren Buffett biographer Alice Schroeder. We'll also tell you why you may want to think twice

before taking financial advice from someone who claims to be a prophet. And as always, we'll give you an inside look at the stocks that are on our radar. But we begin with the big macro. On Friday, the government reported that the unemployment rate in February held steady at 9.7%. Now, Seth, we also got reports of some strong retail numbers in February, better than expected news on both fronts. What do you think it means for investors? Well, I will hit retail because there are varying reports out there. Everyone seems to have their own version of what a retail report is. So you have people saying it's the best overall level of retail sales since sometime in 2007. Others saying it's the biggest gain for the month since

Then, actually, when I look through some of the chain stores that have reported here, you do see some numbers that might be a little bit surprising. You've got a lot of increases, some Aeropostale up 7%, American Eagle Outfitters up 6%, even Gap up 3%, Limited Brands 10%. But you also have, you know, your Hot Topics down there, minus 7%. So, as always, it is a mixed bag. Shannon, what did you think? Well, I'm confused. Why should I not take advice from somebody who can help me profit? What's the story there?

P-H-E-T, man. E-T, the other kind of profit. Oh, like out of the Bible. Oh, okay. All right, all right. That makes more sense. So it's a very interesting retail sales report. It's consistent with some information that we got earlier in the week about personal spending, which was up more than folks had expected, against flat income. Now, how does that work out?

Why are people spending money when they don't really have it to spend based on what they're not earning? Some of it does have to do with inflation. Gas prices have started to tick up, something you have to have, and so people are spending more on that. But if these retail sales numbers, although you can poke holes in them, if they're at all consistent with what's going on across not only the malls but the strip malls of America, it's an interesting development because the big question is, is the consumer coming back? If over time we find out that it is, that's going to be good news for the economy. James? I'm with Shannon. It might not be enough to move the number, but we still lost 36,000 jobs, if I recall.

And what do we do? We go spend more at the mall. Well, we can afford to do that because we kept our credit cards and stopped paying our mortgage, right? Exactly. You've got to have priorities. Retail therapy. Well, one of the things that gets me about the jobs report is that it gets revised. Oh, everything gets revised.

So let's all get excited about it so we can forget that it was revised then later. So what should people be looking at? What is the report that we should be looking at to gauge the health of the economy? Your paycheck. I hate to step all over our radio show, but honestly, you shouldn't pay too much attention to any of these single things. Shouldn't the government just save money by, like, instead of putting out this report, just put out the revised one a month later? They should just have, like, a smiley face on a board and point people toward that once in a while. Or like a Mr. Yuck if it's bad.

Yeah. All right, time to look at some of the earnings this week. Costco reported that same-store sales in the second quarter rose by 9%, helped by a 26% increase in the company's international locations. Shannon, earnings still fell below Wall Street expectations. Yeah, I mean, Costco is just a company that I absolutely love, and I think that there is a fundamental shift underway in the way people spend money. There's a whole private sale collection of websites, basically. You pay a membership fee, and you're able to buy bargains. Costco, of course, has been with that model for a while.

And the earnings story is an interesting one. So, earnings were up pretty dramatically, what, about 25%, I think, against the year-ago period, but revenue only rose 11%. Now, this is something that we had talked about earlier on the show when S&P analysts were expecting that the aggregate earnings would be dramatically high for the market as a whole, but revenue would increase at a much slower pace. Yeah, but let's also point out just really quickly that a lot of companies out there would kill for an 11% revenue increase for 2009. And this is why Costco is such an amazing story. I mean, so they're minting their own money through these membership fees. You pay for the privilege of being able to go to Costco to spend your money. Are you guys all Costco members?

Is that a curiosity? Actually, I'm not. I'm not. I used to be a BJ's member. I love the 100-count toilet paper, but it's hard to store it after a while. I had the same problem. You've got to have a closet just for toilet paper and paper towels. And the big gallon-sized jugs of toothpaste, that's kind of gross after a while.

Doesn't that raise questions, like if you have guests over to your house and they mistakenly open a closet and they see nothing but toilet paper? It comes tumbling out on them. Don't they wonder? It's always a party at my house. That's all I'm saying. Urban Outfitters reported that fourth quarter earnings rose 92%. 92%, Seth, that is a crazy big increase.

What gives? How do you do that? Well, the great way to do that is you go back and you say, I want really bad margins last year. This is all pretty much based on a very big increase in gross margins for fourth quarter of this year versus fourth quarter of last year. that sounds really great except last year was a really abnormally low gross margin quarter for them somewhere around 34 according to the numbers i've got in my spreadsheets here they usually do

about 39 about 40 this year so yeah if you increase your gross margin by about eight percentage points over the prior year quarter i mean you are going to have a huge increase last year's fourth quarter margin for them really was abysmal i haven't seen anything that bad since you know like my final quarter of college fueled by Mike Will. Well, credit where it's due. So last week, we sort of slapped around Wall Street analysts for missing by 1,500% the earnings that AIG was able to deliver. They were actually quite close in this. It was about a nickel above what analysts expected. So 90% might surprise us. And that's just for the quarter, but it didn't surprise Wall Street. And you're looking for a full year, you're looking at a 10% increase. That's nice,

but let's not get crazy. Urban Outfitters is not going to increase its margins by eight percentage points going forward from here. Now, in other retail news, same-store sales at Abercrombie grew 5% in February. We've had some fun recently at Abercrombie. Do we owe them an apology now? No, I don't think we owe them an apology. After all, they are, again, comparing to really bad levels last year. But we can give them a golf clap for this. Let's just take a quick look at the details, which is that the comparable store sales at Abercrombie & Fitch, the main store, 8%. At the kid's store, up 11%. And Hollister, for some reason, still the drag. That's the faux, like, surf California, surf shop concept, up only 1%.

It would have been another 1% if they'd sold stuff off the mannequin. Exactly. Domino's Pizza reported stronger than expected earnings after changing its recipe. James, this was a pretty bold move. Domino's came out with a whole advertising campaign where they basically admitted that their pizza wasn't that good. They changed the recipe. It seems to be working. It's really interesting, Chris. And it's kind of a life lesson. I mean, when you suck at something, you're not fooling anybody. I think that's, you know, maybe unless you're a winemaker. And that's the bottom line with Domino's. And they came out and admitted it.

And EPS went up 58% on a sort of a core basis. Overall sales were 8%. We had a guy named Robert Cialdini in here maybe a couple of months ago. He pointed out that, if I recall correctly, that four out of the five best ad campaigns ever started with admitting a fault and then later plugged the product. But that apparently builds credibility, and I think that's what Domino's did. This is the miracle on 34th Street approach, right, where the Santa Claus at Macy's says, oh, by the way, it's cheaper down the way, and at first all the executives are aghast, and then, oh, it's working out well for us

because it builds goodwill. It works. Does it stick, though? I mean, my question is, is Domino's pizza not suck now, Or is it just that everyone pays attention because, hey, it did suck. Let's give it another try. Does it hold? That's the question.

I think they certainly benefit from being a very pervasive brand, huge brand recognition. And I think that if you're someone who likes pizza, you're looking at that and you're saying, okay, you know what? I haven't ordered in a while. I'll give them a shot. Yeah. That's sort of my point. So I think your point, is it sustainable?

Is the novelty going to wear off? I think people who really like pizza probably aren't actually ordering from Domino's ever. Well, this is an ad campaign that clearly they can't do over and over and over. You thought that last piece was bad. This is worse. Now we're back with another one. Although detergents do that all the time. That's right.

New and improved. It was old and lousy. That's the big joke. Tide. Tide just keeps getting better and better and better. Six blades. All right. Seth, TiVo didn't report earnings this week, but shares were up more than 60% on Thursday

after a federal appeals court sided with TiVo in its lawsuit against the Dish Network. 60% in one day. Yeah, somebody tell me if my math is wrong. But when I do this, the market value of TiVo looks like it went up about $700 million. And the award that may come their way because of the ruling is $300 million. So that doesn't make sense to me. Well, and there's something else. There's a product story here.

They're rolling out something called Premiere. And it's going to be a media aggregator. So web media, music, streaming music, and then also the cable shows that you're able to program through TiVo. It's an upgrade. Seth and I were talking about this before. My point is, though, I think that everybody is their competition. So even if you say, all right, $300 million is a nice addition to the balance sheet, and we should add that to the value of the stock on the market,

I think in the long run TiVo goes away or is folded in to some other enterprise and maybe not at this valuation level. Not at this valuation. They're not an acquisition candidate. But let me push back on that a little bit. Do you feel the same way about Netflix? I mean, so what's to prevent somebody from stepping into that space and doing exactly what they do? Netflix has no competition in that space.

TiVo has a ton, and it's all very well-funded. Netflix does have competition. It's just, well, Blockbuster would love to be in that. They've already put Amazon now. They've already put a little bit. They've done it badly. Amazon's not in that space. There's nothing in the same, but I'm just trying to,

I'm pointing out the flaw at the center of your argument. It seems like it is, but it's not. Because TiVo actually has a product that makes something that is complicated for people quite easy, whereas Netflix, what are they doing? But the problem is that every single cable and satellite operator out there is going to be offering a TiVo-like box. There's nobody out there who offers a Netflix-like experience

that really has compared, and everybody has tried to sort of fall by the wayside. Why would those companies want to be manufacturing that equipment when they could partner with a company like TiVo that already has it down? Because, well, first of all, none of them manufacture it. It's all manufactured elsewhere, but they can get it cheaper without having to pay TiVo. The question, the real question, and I think the reason this rose, is that people expect that somehow this is going to inhibit the cable companies and the others from distributing a TiVo-like box

or mean that they get a licensing fee coming from now until forever. And that is what people must be assuming to add this amount of value. All right, let me beat this dead horse one more time. Is it kind of winning? The reason why Netflix is a great company, I think, is going to be dominant in the future is similar to what TiVo has done. They have perfected a relationship with customers, and they've perfected an interface.

So maybe somebody can step into that space, and it turns out to be a commodity product. But if that's true for TiVo, that's also going to be true for Netflix. I don't think you believe that is. It hasn't played out that way, though. That's the problem. But into the future, it could. I'm going to take a long, hard look at TiVo just as soon as I get rid of my VCR.

How did this happen? Where did it go? It should have been there last week's episode. How did my TiVo forget? How did my T-Bone forget With the season pass, I thought I was all set All right, coming up, should Ulysses S. Grant be replaced on the $50 bill? We'll consider a few new faces for your currency.

You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in the studio with Seth Jason, James Early, and Shannon Zimmerman. Guys, time for some quick takes. Let's start with Apple. Apple is suing HTC, the maker of Google's Nexus One smartphone. Apple accuses HTC of violating 20 patents related to the iPhone's interface, architecture, and hardware. Shannon, is this a sign that Apple is scared, or is this a power move by them? Well, it's a proxy battle for Apple's battle with Google, of course, right? So, they're worried about the Android.

And it's also interesting because the evolution of the market for smartphones, the growth has been exponential. It will continue to be exponential in the near term. At some point, that's going to ebb, and then the folks who are going to be the big players are going to start getting scrappy. And I think that Apple is, as ever, the bleeding edge, getting scrappy early on. Have you seen some of the actual patents, though? I mean, I'm looking at this list, and number three says, unlocking a device by performing gestures on an unlock image. I mean, that sounds mildly impure to me. It all depends on the gesture you're performing.

I think that's right. They patented the color black as well. And by the way, Apple Palm called, and they want their OS interface back here because all it is is a bunch of pictures on a screen. Come on. The chairman of the Commodities Futures Trading Commission testified before Congress this week and called for, quote, an Eddie Murphy rule to be put in place. The proposed rule would ban insider trading using non-public information misappropriated from a government source, the rule inspired by the movie Trading Places. Is this what we've come to, James, that we're turning to Eddie Murphy movies for regulations? Whatever works, baby.

I mean, what's interesting is that, yeah, I mean, it seems to make sense. Apparently, we just hadn't banned trading off of misappropriated government information. I don't know that people are really doing that these days. But the problem here is that defining inside information in the commodities market is tricky because a lot of the big players have their own data, their own forecast, and they are the insiders. So, you know, the government thing might be a little more explicit, but it'll be interesting to see what the rule actually looks like. All right, exit question. In the pantheon of investing movies, where do we put Trading Places?

Is it above Wall Street? Is it below it? It's high up the list. I think it's just a couple of ticks above 48 Hours, which is the vastly superior Eddie Murphy film. Yeah, no, it's somewhere near Shrek. Investing movies. Below Shrek 2. You're watching too many movies with your kid.

All right. The SEC is charging Sean David Morton with bilking $6 million from more than 100 investors. Morton claims to have psychic powers and calls himself America's prophet. And if you check out his website, you'll see photos of Morton with Robin Williams, Adam West, Gabe Kaplan, real icons of the 70s. And he writes that he learned time travel and the ability to view events in the past and the future. I mean, did the SEC just lose their sense of humor? He's the psychic Bernie Madoff. I mean, come on. Seth? You know, geez, there's so many jokes. Where to go? I'm actually more afraid of this guy. I watch

the SEC website every day, and I have to point out that the SEC has done a pretty good job of bringing the hammer down on a lot of scammers lately. They're busting them at a rate of one or two a week, and this is an alleged scam still, but it's really scary. The newsletter that is on the SEC website, the front page of this Delphi Associates newsletter says at the bottom Happy Anniversary Melissa I would conquer the world for you

Is he in a hot tub on that? He looks like meatloaf but the picture is so blurry, really this guy, if you believe he could make the kind of returns he claims to have made, then maybe he ought to be able to hire somebody who could do a little page design work I just want to point out that there are a lot

of scams like this, they've been going on a lot over the past few years And I notice an increasing tendency of scammers out there to try and feed off a certain sort of mindset in America. And so you will see people claiming that, you know, God is on their side and it's the sort of anti-government thing. In fact, our friend here today, Mr. Morton, falsely assured his investors that, quote, the feds can't look over our shoulder, interfere or regulate any of it. And so I want to make sure that people realize that whatever anyone is pitching sort of anti-government populist investment scheme like that, you probably ought to be grabbing for your wallet. I don't know. I mean, again, there's a photo of him and Robin Williams together.

That's good enough for me. I want that guy managing my money. I claim those are all photos of meatloaf. And if the photo were of him and the amazing Kreskin, then I might consider investing with him. Guys, I predict he's headed for jail. No. And finally, a North Carolina congressman wants to put former President Ronald Reagan on the $50 bill, which, of course, is bad news for former President Ulysses S. Grant, who is currently on the $50 bill.

But, guys, let's go higher. I want to test your knowledge of the $10,000 bill. And, yes, there is a $10,000 bill. Just quickly, go around the table. Clearly, none of us have ever seen one. Just take a shot. Shannon, who do you think is on the $10,000 bill? Whoever it is, it should be Kurt Vonnegut.

Kurt Vonnegut. Tell me it's not Grover Cleveland. Seth? Man. Just take a shot. It would be great if it were Hoover. It would be great. Steve Broido, our man on the other side of the glass there, what do you think?

Just take a shot, man. $10,000 bill. Chris, if memory serves, I think that would be Solomon Chase, U.S. Senator from Ohio, 23rd Governor of Ohio. I believe he was the U.S. Treasury Secretary under President Abraham Lincoln and Chief Justice of the United States. I think he was also born in Cornish, New Hampshire, to Ithmar Chase and his wife, Janet Ralston. Just throwing that out there.

That's a phenomenal guess. Do you ever get the sense that maybe Steve's on the wrong side of the glass, and so are we? Salmon Chase. Man, that is strong, Steve. How'd you pull that one out? That's how I roll. All right. Drop us an email at motleyfoolmoneyatfool.com.

Give us your nominations for who should be on the $50 bill or, you know, the $10,000 bill, for that matter. Drop us a note. motleyfoolmoneyatfool.com. And if you missed any part of the show, you can always visit us online at motleyfoolmoney.com. The guys will be back later to talk about the stocks that are on their radar. But coming up after the break, bestselling author Alice Schroeder joins us to talk about Warren Buffett's annual letter to shareholders and which industries he's investing in. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill coming to you from Fool Global Headquarters in Alexandria, Virginia. Warren Buffett recently

released his annual letter to shareholders. And in the past year, the Oracle of Omaha has made some big bets on trains and trash. Joining us to share some perspective is someone who spent a lot of time with Buffett while working on his biography. Alice Schroeder is the author of the bestseller, The Snowball, Warren Buffett and the Business of Life. Alice, welcome to Motley full money. Hi, Chris. Thank you for having me on. So Warren Buffett just released his annual letter to shareholders. You just wrote a cover story for Businessweek magazine about Buffett's influence on CEOs. One of the things that really stood out for me in that cover story was you wrote that Buffett may now command as much information about the state of the U.S. economy as anyone,

including the Federal Reserve, and that he probably gets his information faster. How is that? Well, you know, he owns a piece of just about everything. And I was, to some extent, being facetious because, of course, he doesn't invest in technology and in a lot of businesses. But he's got daily information from a lot of the Berkshire companies about sales in city-specific levels. So he looks at California, for example, city by city for See's Candy, and he's got extremely granular information about real estate,

city by city from Home Services of America. and his ability to understand that information instead of in big aggregate chunks the way the Fed would look at it has enabled him to see things that I think other people don't see. All right. Well, I want to dig into some of the companies in Berkshire Hathaway in just a couple of minutes. But first, let's dig into the annual letter, which is always eagerly anticipated by the investment community. I want to have you elaborate on a couple of the investing principles that Buffett addresses in the letter. And the first one is, we won't be dependent on the kindness of strangers. Too big to fail is not a fallback position.

If only the banking industry operated that way. Yes, and Berkshire, of course, performed magnificently through the financial crisis. It managed to invest more than $15 billion during that period, rather than requiring a government bailout. It did lose its AAA rating, but that was a very small price to pay for the opportunity to invest on incredibly lucrative terms in companies like GE and Goldman Sachs. Now, one thing I did think was interesting is that he scolded the CEOs of companies that had failed for being paid and for taking high compensation and not suffering the same pain as their shareholders. But he didn't mention companies that had been bailed out. Why do you think that was? Could it be because Berkshire invested in Goldman Sachs?

Yeah, let's talk about that. I mean, you've written that Buffett has typically viewed investment bankers as, and I'm quoting here, useless, self-serving windbags. That didn't keep him from investing $5 billion of Berkshire's money into Goldman Sachs. That's right. And I think when you look at Warren's behavior, you have to remember that ultimately he's a pragmatic guy and that he doesn't let his personal feelings about things generally get in the way of making money. Also, when it comes to Goldman, he's had a longstanding relationship with the firm through Byron Todd, his banker,

and going all the way back to trading with Gus Levy, who was the head of Goldman for many years, he's got a comfort with Goldman that he doesn't have with the other banks. so I'm sure that that played into it. It certainly made headlines when Warren Buffett put $5 billion into Goldman Sachs, but I think the biggest headline in terms of Berkshire's business last year was the purchase of Burlington Northern Santa Fe Railroad. Well, and in a piece that you wrote for The Motley Fool, you said that the Burlington investment, like a lot of his investments, was rooted in a lifelong interest. Yes. Well, you know, Warren, I would never say this is why he did it. But it's really fascinating that there are always these little connections in

his life. And of course, that's true with the chocolate, but it's very true with the railroads. He calls it his choo-choo that he's always wanted to own. He grew up in a railroading town. And as a little boy, he wanted an elaborate model train set very badly, and he never got it. So now he's got the big one. Well, and, you know, back to what it means strategically from an economic sense, Our writer, Morgan Housel, thought that he overpaid for Burlington, but Morgan also thought that, hey, this makes sense because it gives him the opportunity to deploy tens of billions of cash at reasonable returns. And it also gets back to something that you wrote in the Businessweek magazine cover story, which is about getting information. Is that part of it for Buffett, that Burlington Northern enables him to get yet another toehold on the state of the U.S. economy? i think that he would not add you know be willing to pay more for it because of that but when i

look at his other investments it's really interesting how many times you see a note in one file referring to information he got about another company that he's used to think about one investment versus another and it's clearly added a great deal to his ability to make money for berkshire so it's it's got to be because matt rose who runs burlington has called it the kaleidoscope of the economy. Who wouldn't want that? One last company I want to hit on. At the end of 2009, Coca-Cola was Berkshire's largest holding. Buffett seems to approve of Coke's recent decision to buy its largest bottler. The quote he gave was, I think on balance, I like it. Is that damning with faint praise? Because that's a little bit how it sounds.

I would say that that is conditional approval or faint praise. It leaves the door open for him to come back later and change his mind or have qualifiers or criticisms. You know, there's a really long history of bottler-producer relationships in the cola industry. And, you know, Indra Nooyi made a very compelling argument of Pepsi's strategy. Coca-Cola's own history has been poor in this area. They have had problems in this area. So, you know, he may have reservations about Coke's ability to execute it. He may have reservations about Coca-Cola's strategy or a price they're paying, you know,

but he seems to have left the door open to come back later and distance himself from it. One of the things that came out in the annual letter was obviously the positions that Berkshire holds, where they reduce their positions with companies like ExxonMobil and WellPoint, Johnson & Johnson, but also where they increase positions. And right at the top of the list, a company probably a lot of people haven't heard of, Republic Services, a waste management company. Berkshire more than doubled their position in this. What does Warren Buffett know about the waste management business that the rest of us probably should know?

Well, I can't tell you what's in his mind, but I can tell you what your listeners should know about the waste management business, and that is that it's going to be a big player in alternative energy because garbage is a gold mine. Recycled energy garbage is going to be a big player in producing sources of alternative energy. And if you look at what's happening, it's part of a supply chain where you can pull all kinds of metals and reclaim all kinds of things. And, you know, recycling, which we think of as not really that economic, is going to become a lot more economic in the years to come. So the garbage is actually worth something. Alice Schroeder is the author of The Snowball, Warren Buffett and the Business of Life. It is a New York Times bestseller.

It's out in paperback, available pretty much everywhere. Alice, thanks so much for being here. Thanks, Chris. All right, let's switch gears now from the Oracle of Omaha to the international scene. And here to help us do that is Tim Hanson. He's a senior analyst and co-advisor of Motley Fool Global Gains, a service focused exclusively on investing outside the U.S. And he joins me in studio now.

Tim, welcome. Hey, Chris. So we've talked on this show before about the state of the euro and particularly the problems that are happening in Greece. What's your latest take on what's going on over there and what do you think it means for investors? Well, the problems are all stemming from one issue, which is that economic growth in Europe is horrible.

Unemployment is very high, and that has driven deficits and debts extremely high, which is now undermining all of the standards that were governing the setup of this currency. So for investors, be very aware of any company that's relying on European consumers, any company that has a lot of euro exposure, because if that goes down, it's worth less to you

if you're buying those shares in dollars. So I'd think specifically about something like Inditex, which is a Spanish retailer, Luxottica, which makes sunglasses over there and has big European exposure. Those are things you really want to be worried about right now. Now, I was digging through your writings. Back in May of 2009, you actually made the prediction that the euro is going to disappear in the next five years. I look pretty smart. Tell me why you made that prediction.

Well, it's not that hard. It wasn't that hard of a prediction to make. The whole European Union, the monetary union anyway, was sort of founded on a lie. And that was that all these countries could get together and hold themselves to certain fiscal standards to keep debt down and keep spending down, and they just haven't done it. They haven't had any sort of fiscal discipline, and then they lied about their numbers. And Greece was foremost among that group, and then the rest of the union had no enforcement mechanism by which to figure that out, to crack that code, so to speak. So now what you have is small countries like Greece and even larger countries like Spain really struggling under massive debt loads, and they don't have the flexibility in their currency to deal with them. So you're looking at stocks in Europe, in Asia, all over the world.

Give me one stock that you like right now. Well, you know, unlike Europe, China is still growing, putting up positive growth. And while it has some issues in its real estate sector in the big cities like Beijing and Shanghai, rural China is doing fabulously well because the government is really supporting agricultural production out there. And so the rural Chinese consumer is doing well. So I've actually brought you a sample today from a company called China Marine Food that makes snack foods. I've got a bag of roasted shrimp here. Roasted shrimp from Fujian province, and it's a fast-growing little company,

generates a ton of cash, and these are basically like potato chips over in China. They've been growing very quickly. They're signing deals farther and farther inland. And, for example, they just released a new product called Chili Squid, which is really spicy. Chili Squid. Chili Squid, and the reason they did that is because people in Sichuan province love spicy food, and so to crack that market,

they wanted a product that was a little zestier, and it is quite zesty. I don't know if you're going to try them, but you should. And what's the ticker symbol? CMFO on the NASDAQ, China Marine Food. It's a fascinating little company. You had me at Chili Squid. Tim Hanson, senior analyst and co-advisor of Motley Fool Global Games. Thanks for being here.

Thanks, Chris. Happy squid lives beneath the sea Dreaming fancy dreams for you and me Far below the waves in his secret cave Playing in the brine, drinking peppermint tea Coming up, we'll dip into the Fool Audio Archives to hear from Roger Ebert, and we'll give you an inside look at the stocks that are on our radar. This is Motley Fool Money.

Do you go to the movies? Find a friend in a building? Welcome back to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about. Don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and the guys will be up shortly to talk about the stocks that are on their radar. On last week's show, we talked with film critic Nell Minow about the Academy Awards, but also about Roger Ebert. Ebert was a guest of The Motley Fool back in 2002, and our radio producer, Matt Greer, is here to share a couple of highlights.

Matt, good to see you. Chris, good to see you. So, we have a couple of clips to share. What are we going to hear first? Well, Chris, when we had Roger Ebert back on the show, that was back in March of 2002, at one point in the interview, we asked him about his favorite movie, his favorite film about business and investing, and he took it in a slightly different direction. He instead talked about his favorite line about money, and that's a line, as you will soon see, that should be recognizable for a lot of our listeners. Well, you know, I think the funniest line of dialogue that David Mamet has ever written was about money. And it came in his movie of 2001 called Heist, The Heist. Danny DeVito was trying to convince Gene Hackman to pull one more job.

And Gene Hackman says he doesn't want to do it. He'd rather go sailing. And Danny DeVito says, you've got to do it. And Hackman says, why do I have to do it? And DeVito says, for the money. And Hackman says, I don't like money. And then DeVito comes up with this classic Mamet line. which ought to be the motto of The Motley Fool.

Everybody likes money. That's why they call it money. I love it. I love it. I loved it the first time I saw that movie, and I'm so glad we have it as part of our opening. It is a great, great line. And as I was listening to it for this segment this week,

I thought, you know what? That sounds really, really good. Yeah, it's high quality. It's high quality, and I realized, wait a minute. We had Ebert join us from a studio in Chicago, And the light bulb went on because, as Nell Minow mentioned, as a lot of people may know now, there is a Scottish technology company called Seraproc that's essentially reconstructing his voice, giving him a new voice. And they do it from audio like that.

So I emailed the company. They shot me an email back. I sent them a clip. They said, hey, this is very good quality. And so there you have it. So the Motley Fool, in a very, very small way, will be doing our part. Will be part of the library. Exactly.

I love that. All right. Do you have another clip? I do have another clip. This is how we ended the interview with him back in 2002. We have this buy, sell, or hold question. Instead of stocks, of course, we say, hey, if these were stocks, would you be buying, selling, or holding? And we asked him, buy, sell, or hold Ingrid Bergman.

Buy. Buy big. Get heavy into Bergman. She's the most beautiful woman in the history of the movies from certain angles. I love the from certain angles. It's wonderful. It just makes it so good. Yeah. I think if I could buy shares of Ingrid Bergman and Grace Kelly, I think that would

represent the bulk of my portfolio. You've always got to buy shares of Ingrid Bergman. And I've got to say, you've always got to buy shares of Roger Ebert. I had the opportunity to hear him at the University of Colorado back in the early 90s when I was in graduate school. He'd come out once a year. He would show a movie on Monday and then he'd start the movie over on Tuesday. And for the rest of the week, anyone in this auditorium could raise their hand and say, stop and ask him a question. So just stop the movie and he'll take questions on the spot. Absolutely. And the year I saw him do it, he did it with Silence of the Lambs. And I realized that Roger Ebert is a lot smarter than I am. He is a brilliant guy. He's seeing things in one shot that I never

thought twice about, talking about where Jodie Foster is in the frame, what's going on with the music. And most of all, he's just a guy who's incredibly passionate. And you know what? There's a lot to be said for that. All right, Matt Greer, thanks for sharing that. Hey, drop us an email at motleyfoolmoneyatfool.com. We want to know your thoughts on Roger Ebert, the Academy Awards. And And hey, even Ingrid Bergman. Ingrid Bergman, Ingrid Bergman Let's go make a picture On the island of Stromboli

Ingrid Bergman Ingrid Bergman, you're so pretty You'd make any mountain quiver You'd make fire fly from the crater Join me in the studio once again, our trio of senior analysts, Seth Jason, James Early, and Shannon Zimmerman. All right, guys, time to talk about the stocks that are on our radar. Shannon Zimmerman, let's start with you. I'm tempted to make Costco my radar stock this week.

Just as we were saying before, a fantastic company, going to gain greater relevance into the future. But the thing doesn't look cheap. It's about 25 times earnings, about 10 times cash flow. That's not cheap enough for me. So rather than recommend a good company or focus on a good company, I'm going to focus on a craptacular one, which is Sprint. A distant third in a field of three, and it has a lot going against it. But even companies that are on the decline can be valued. And I think that right now where Sprint is, it's dramatically undervalued.

So if you're looking for an interesting stock that is kind of distressed but may be on the comeback trail, although it's one of those better-than-expected comeback trails, Sprint bears looking into now. So you like it or you don't? I like it at this valuation. I think it's an intriguing, it's a crappy company with a really good price tag. You're not a long-term holder. No. Wow.

So, like, things are so bad with Sprint, if they get even slightly better, it's party time. Right. And so the expectation should be for a slight improvement. I mean, they've done a lot of things wrong. I think they'll do fewer things wrong into the future. James Early, one stock on your radar. Chris, you know, obviously Chile is on everybody's radar because of a very devastating earthquake. And that's obviously very sad for the country, but the country is actually the strongest economy in South America.

I mean, this is a business show, and there are a lot of good businesses in Chile. And I've actually gone to some of them for my income investor newsletter, and one of those is United Breweries. The ticker is CCU. This basically has the dominant market share in beer in Chile with an 85% share. I mean, that is humongous. Nobody else can come close. They have a 22% share in Argentina even. This company yields 4%, and actually since the earthquake, the stock hasn't really been hit that hard,

which I take as a sign of strength. CCU is a ticker. Again, United Brewery is the name. Okay. Seth Jason. Well, as part of that whole retail frenzy we had this week, one of the stocks in our hidden gem service, a company called Zoomies, the ticker is Z-U-M-Z, announced a just above, just better than 10% comparable store, same store sales increase.

And the stock went crazy. It really went crazy. Like 25% had jumped right after the news, came back a little from then. And I just want to caution people out there, even though it is in my service, it's sort of on team three, which means that we have our suspicions about the current valuation and we're not so sure about the business. And I believe that this is a parable for all of the rest of the so-called great retail news, which is that if you read between the lines and the actual sales release, you start

to suspect that there's a lot of merchandise maybe being sold a little bit cheaper and that that's why they're bringing people into the stores. And so I encourage everybody to not just read the headlines on these retail sales, but to dig in a little deeper and find out what the profits are going to be on those sales. Are you wearing any Zoomies clothing right now? This is like skateboards and you know. The question stands. You should ask Tim Hanson that question. Yeah, exactly. All right. Seth Jason, James Early, Shannon Zimmerman. Guys, thanks for being here. You're welcome.

Thank you, Chris. I want to thank our special guests this week, Alice Schroeder and Tim Hanson. And if you missed any part of the show, you can find it at our website, motleyfoolmoney.com. You can also get a copy of our free Motley Fool Special Ops Advisory. All that and more at motleyfoolmoney.com. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill.

Thanks for listening. We'll see you next week. Thank you.