Motley Fool Hidden Gems Investing - Motley Fool Money: 03.15.2013

Episode Date: March 15, 2013

The Dow hits an all-time high.  Samsung unveils its latest rival to the iPhone.  And Mayor Bloomberg suffers a sweet defeat. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and joining me in studio this week from Motley Fool One, Jason Moser, from Motley Fool Income Investor, James Early, and for Million Dollar Portfolio, Mr. Charlie Travers. Good to see you guys. Good to see you, Chris. Insert crowd noise. What's that? Insert crowd noise, right?

Exactly. Exactly. Last week at American University, we had in front of a live audience. Yeah, we're back in the studio. We don't have the live audience. We do have the latest numbers in retail. We've got the latest phone from Samsung and the latest payout from one big dividend stock. We're going to talk about the financial benefits of skipping work with retirement expert Robert

Brokamp. And as always, we've got a few stocks on our radar. But just as last week, guys, we're going to begin with the market in general. This week, the Dow Index hit a record new high, had its longest winning streak since 1996. And Jason, despite the great run, you've still got people out there who are saying either this is all about to end, it's a bubble, it's the dot-com bubble all over again. Or you've got some people, and maybe the most prominent, Jim Cramer on CNBC saying now he

is not the time to get into the market. If you're not in right now, stay out until the market drops. What do you think? Yeah, given the last five years, I can understand the trepidation there. I mean, it's not like we have seen just sort of a normal market behavior here. And the rising tide has lifted a lot of boats here. The stock market is really where it's at. If you're looking for returns, that's the best place to go. I do think that there's still plenty of buying opportunities out there. I just think that we as investors have to be a bit more discriminating than before. But When you have reputable investors out there like Warren Buffett or Marks from Oak Tree Capital, they're still buying stocks. They're still calling stocks the best investments out there.

I mean, they're not just paying us lip service. They're not just saying that. I mean, they mean it, and they're pretty smart guys as well. Again, I think we just have to be – we have to look a little bit more closely, but still plenty of opportunities out there. James, do you agree with that? Yeah, the fascinating thing about economics, about society, about investing is that we create our own reality. So if we have enough people on board with the idea that we're in a bull market, with the idea that the economy is going to uplift, it will. It will.

It's sort of like everybody in a traffic jam stepping on the gas at the same time, sort of. I would not be surprised, though, if the stock market went sideways a little bit from here. That's why I'm a fan of dividend stocks. I mean, I say that because I write a dividend newsletter, but also because I believe dividend stocks will help in that kind of scenario, too. Market timing with James Early. Yeah, exactly. No, but I think we all agree that making these short-term predictions about the market is futile. It doesn't matter that the Dow is at an all-time high.

It gives you no particular insight as to what it's going to do over the next few months. And I think all of us at the table here are business-focused investors. There's always stocks to buy no matter what day or month you're in. And we all have stuff we like right now. And maybe stocks on our radar will tell you about a few of them. We will get to that shortly. But I want to read an email we got from Brian Kan in Atlanta, Georgia. He writes, I've been hearing some pushback from some media outlets that the Dow index is not the greatest or even a good indicator of financial health.

Just wanted to get your guys' take on this. Jason? I mean, I agree with that totally. It's why we tend to look at the S&P 500 first and foremost. But if you look at the Dow today, the only original component remaining there is GE. But, I mean, companies, you know, whether it's Citigroup or Bank of America, traveler's insurance is in there, that's fine. But it's not a very wide swath.

It's not very representative of our overall economy. When you look at something like the S&P 500, it is much more so, and that's why we tend to look at it from that perspective. And mathematically, the Dow is what's called a price-weighted index, which I'll save you 45 minutes and just say Google that. The S&P is a market cap-weighted index, which is a little bit more representative of the reality of the market in terms of size. So, Jason, just to wrap up, you talked about the need for investors at this time to be a little bit more selective.

Where are some of the areas you're looking at as an investor? And it doesn't have to be specific companies. If there are industries that you're looking at to find value, because not everything is as cheap as it once was in the stock market, certainly in the last couple of years. No, it's not. But I still think there are plenty of opportunities out there in energy in particular. I mean, I think that given our situation, the glut of supply of natural gas that we have and the thoughts that we may become a natural gas exporter here over the coming years, I think there are plenty of opportunities out there in energy. And I also do believe there are opportunities in retail. You just have to be very, very picky.

And I think look towards the greater trends in retail, for example, e-commerce. Look for those companies that are investing in their e-commerce operations. Nordstrom comes to mind. They're going to invest about a billion over the next five years. You know, look for the bigger trends. But all in all, that's how we mitigate that risk as investors is keep on investing in the good times and the bad. E-commerce. Internet may be big one day, you're saying.

Internet? Oh, yeah, yeah, yeah. Thursday night in New York City, Samsung unveiled its new Galaxy S4 smartphone. Charlie, there were some new features, including the ability to translate nine languages, smart scrolling, and eye-tracking software, which seems kind of cool and also, for me anyway, mildly creepy. But what did you think? Some of the new features are a little dubious. They sound cool on paper, and then when you actually use the phone, they might not work that great. So we'll have to see when this actually goes live in the world how well some of these things like the air gesture swiping actually work.

But I think, you know, Samsung is the global leader in phone sales. Their Galaxy S3 is the best-selling Android phone. And I think launching it at this particular time, the successor device, is perfect because they have no high-profile competition fighting with them right now. And I think they're just going to sell tens of millions of units like they did with the S3 because of that. It might not sway any of the diehard iPhone users, but that's not necessarily what they need to do. They just need to keep growing the Android ecosystem, and they're going to be just fine in that consumer base. Well, and as we were talking about before the show, the timing really is, whether they meant to or not, the timing of this event was brilliant because Apple's not going to have a new device launch anytime soon. We may be six months at the earliest from something like that.

Yeah, that's completely right. And same on the Windows end. You're not going to see anything until later this year either, not that that's a huge threat. So they've really got the new phone world all to themselves for at least a few months, and that's a great spot to be in. Where do you put Apple in all of this at the moment? Because from a stock perspective, it's down more than 35% since last fall. And there are people who are just – I guess when I look at Apple, and I'm not a shareholder, on the one hand, I see an innovative company, a great track record, and piles and piles of cash on hand. But at the other end of the spectrum, you've got a lot of people with good reason saying, yeah, the cool kid on the block now is Samsung.

Samsung really pushes the envelope on the hardware capabilities, and I think it's important for Apple to not fall too far behind and be viewed as a second-tier caliber phone. I think when the new phone comes out later this year, they're just going to have to at least match. They don't have to. They're never the latest and greatest hardware. They combine that with the best user experience and ecosystem,

but they can't be viewed as falling behind Samsung. This week, the Federal Reserve conducted its annual stress tests of the major banks. 17 out of 18 passed. Ally Financial was the loan bank not to pass. James, a couple of things that stood out to me anyway. Citi had the top score. Pretty good when you consider that last year Citi barely passed. But now you have banks like Bank of America, Wells Fargo, JPMorgan Chase saying that, hey, now that they've passed, they're going to put their capital to work. They're going to be buying back shares. They're going to be raising dividends. This seems across the board like a genuinely good thing. Yeah, Chris, in a way, it was a triumph of the week. I mean,

the banks that had formerly had some of the most problems seem to look the best here. Citigroup, excuse me, Citigroup Bank of America did pretty well. The Fed used the phrase conditional non-objection when it described Goldman and JP Morgan. What does that mean? Sounds like the kind of phrase a dad would use describing someone his daughter is dating, right? I mean, it's like a semi-rejection. I can't kill him, but... Yeah, yeah. Conditionally non-object. And BB&T and Ally obviously got rejected more directly. I think, though, the Fed seems to be less concerned with loans, more concerned with derivatives in this overall scheme. It's still not enough to get me off the couch

and make me want to invest in American banks, though. I was just going to say, that's where I was going to go with this, because it seems like, I know that you more so than the other two guys at the table, dividends have a sway over you. but it seems like even with that, there's still the whole black box thing going on with most of these banks. I know we talk about Wells Fargo being a little bit more transparent in their dealings, but it just seems like for the other major investment banks, it's really hard to know what's going on. And for dividends, Chris, for comparison, I think Bank of America and Citigroup are paying, what, like a penny per quarter, something small like that. So we're still not

anywhere near real dividend territory. We're not in James Early territory. We are nowhere near James Early territory. Coming up, GE gives shareholders 18 billion reasons to smile. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, James Early, and Charlie Travers. Some good news this week for the retail industry. February sales up 1.1%. That was nearly double what analysts were expecting. And January's sales were revised upwards. And Jason, one of the biggest retailers, Costco, reported their second quarter earnings, some pretty strong results, earnings up 39%,

same-store sales up 5%. When you step back and look at the retail industry, what do you see? Yeah. I mean, there's the obvious loser, sort of the perpetual loser here that's in question, JCPenney and the like. So, you look at some of these retail operations and kind of wonder which ones are being phased out and more or less mitigated. And I think that the big box JCPennies of the world are doing that because of that greater trend towards e-commerce. So, your obvious winners out there like an Amazon. Costco, yeah, just another phenomenal, phenomenal result there. And that led to a discussion we had earlier on in the week about these membership models and how really just tremendous they are in just generating not only really loyal customers,

but really excellent cash flows for the companies. Another one that I just really thought killed it was Home Depot. I mean, that is one where if you're looking to play into housing, I would certainly never really look into the home builders, but I would look at something like a Home Depot or even at Sherwin-Williams. But Home Depot in particular, I mean, that was a 35% dividend boost to go along with an authorization to buy back $17 billion in stock. Now, while I would prefer to see more of that money returned to shareholders and dividends personally, I still think it's a testament, at least I think, to management's perception of how the business is running and probably should look for some good years ahead. James? I got a Costco membership

card recently. I'm on the bandwagon. Really? I know our producer, Mac Greer, is a huge fan. But you're not Amazon yet, are you? I got some clothes from Costco even. The bathrooms are immaculate. I will give them credit for that, too. It's a good business. Charlie, to one of the points Jason made about the membership model, we also saw a report this week from Morningstar where one of Morningstar's analysts essentially did his best to break down Amazon Prime and the membership there. Because Amazon doesn't really disclose a whole lot about what's inside the basic numbers of their business.

But according to this Morningstar report, Amazon Prime may have more than 10 million members. Amazon Prime members end up spending more than twice as much as the average customer there. It just seems like that is such a huge win that can only go up. And I say it can only go up. I'm a shareholder and a happy one. I'm not immune to the challenges that Amazon faces. But that just seems like one of those things, kind of like Costco's model, where it's like, if you have a membership model and it's working, you probably have to work hard

to screw it up. I spend a ton of money at Amazon ever since I got my Prime subscription, and I've heard even higher estimates that sales go up three, fourfold once somebody gets a Prime membership. And it's a great business model for Amazon because they get that cash up front and whether or not somebody uses it. I, on the other hand, use it very well, and even delivering like 40-pound bags of dog food, so I don't see how Amazon makes any money off of me. My wife has Prime, and I've been using it to buy these huge metal shelving units, which they're ugly, but you can put everything on them. But I just don't understand why you pay $80 for two-day shipping when I could easily wait

a week for that. It's just so popular. Well, and that's just it. I think it's the perception is some people can wait a week and others prefer not to. But I tell you, one way you can assess how successful Amazon's model is working or beyond just Prime is we pay attention to the shipping cost as a percentage of revenue. because if you look at it, a lot of people think they're really giving up a lot by paying all of this money towards shipping costs.

But over time, really, the shipping cost as a percentage of revenue is actually coming down, which means they're making more money and having to pay out less money on shipping. So I think that's just another testament to the momentum that this prime model is generating, and I would look for that to continue. In a letter to GE shareholders this week, CEO Jeff Immelt said his top priority is growing the dividend, which must have been music to your ears, James. They're going to be returning $18 billion to investors this year through dividends and share buybacks.

What do you think of this? Well, Chris, just to step back, the question with GE has been, and still is, is this a real company, or is it just some amorphous blob that just kind of floats along with the economy writ large, right? I mean, shares are at about a four, four and a half year high, still half of what they were in 2008. But GE is doing great. They're making a lot of money.

They're differentiating by getting a little bit more into energy infrastructure, which I like. So, yeah, I love the dividend now. 3.2% yield definitely gets my attention. They're making a lot of cash, and they're channeling it in the right direction. Well, and it seems like Immelt is doing sort of a methodical job of executing against this plan of reducing their dependence on GE Capital Finance and really streamlining the business to the extent that you can streamline a behemoth like that. But, yeah, to your point, the stock isn't what it was maybe five years ago, but over the last couple of years, it's really done a pretty good job. Oh, yeah, it's great.

This week, Mayor Bloomberg's ban on large sodas was set to go into effect in New York City, but literally hours before the effect was set to go into effect, State Supreme Court Justice Milton Tingling Jr., which, I mean, how great is that name, Halted the ban, calling it arbitrary and capricious because it applies to some drinks, not all of them, some food establishments, not all of them. Charlie Travers, big win for, well, people who love really large sodas. And Coke and Pepsi. And Coke and Pepsi and Starbucks. It's a little weird because drinks over 16 ounces, you couldn't get them at restaurants or movie theaters,

but you could buy them at grocery stores and convenience stores like 7-Eleven, and it also didn't apply to certain drinks like your lattes at Starbucks or your shakes at McDonald's. So I think it was good reasons for striking this down because it was really selective in its nature as to what it applied to. And it just didn't really make a whole lot of common sense to me. But that's not really why it was struck down is because he didn't go through the proper legislative channels. This is almost like handed down through diktat instead of a democratic process. Yeah, that's my dictionary word of the day. I like that.

Can't you just buy two eight ounce bottles and have your 16 ounces? Yeah, and there was no restrictions on unlimited refills. I think it was maybe in the right place. It was just the execution was a little flawed. The Dunkin' Donuts flowchart really was just the perfect, I think. It encapsulated really the problems with this. Yeah, Dunkin' Donuts put together these flowcharts for customers in preparation for the ban of what was going to change and how they would have to put their own sugar in drinks now and all this sort of thing.

Yeah, to your point, James, just Google it. But I agree that it's a victory for Coke and Pepsi and Starbucks, but it seems like a pretty small symbolic victory because it wasn't like the stocks popped on the news. And the long-term challenge of obesity in America still exists. It seems like a reckoning is coming at some point, but I guess just not immediately in New York City. Well, I think the long 10- to 20-year trend is more in favor of healthier foods, and a place like Whole Foods would benefit from that. And finally, guys, here's a restaurant stock we don't talk about often, maybe even ever on this show, and that's Cozy. With good reason we haven't talked about it, because we avoid penny stocks and shares haven't been above $2 in more than four years. But fourth quarter earnings came in worse

than expected. Cozy lost even more money in the fourth quarter than Wall Street analysts thought they would. And I want to bring in our man from the other side of the glass, Steve Broido, because Steve, I don't think it's an overstatement to say you're an expert on Cozy and the Cozy experience. You probably were not surprised by these quarterly results. Not necessarily, no. Cozy is a, for those unfamiliar, it's a restaurant where basically the rules change based on when you're attending Cozy. So if you get there before 5, you go to the counter to order your sandwich. If you get there after 5 or after 7, it turns into a sit-down place where a waiter needs to serve you.

There's different lines for different types of food items. It's incredibly confusing. There's a bar in the one that's closest to the Motley Fool headquarters. There's a bar that opens up at night. They all seem different, and it doesn't make any sense to me. I don't like restaurants where the rules change on me, depending on which restaurant I'm at and when I'm there. You know what Judge Tingling would say about that? He would say that restaurant sounds arbitrary and capricious.

That's exactly how I feel. Did you enjoy the food, at least? I do like the food. I think the food is great. There's a local one by us. will go in the afternoon sometimes, and it's probably going to go out of business soon because there's no one ever there.

The food is delicious, and it's great in the afternoon, but you go to a different one and it's like, no, no, you're in the sandwich line. But I want a salad. No, you're in the salad line. There's no one in the salad line. Can you help me? No, I can't because I'm in the salad line. It doesn't make any sense.

Makes you wonder what they do with their financial statements. All right. Jason Moser, James Early, Charlie Travers. Guys, we'll see you later in the show. Up next, our guest this week, says that playing hooky from work is not just a good idea, it's a profitable one. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. For many investors, one of the big financial goals is having enough money to retire on. So with tax day just a month away, we figure it's a good time to check in, talk with our man Robert Brokamp, the Motley Fool's

resident retirement expert about a few of the key topics in the world of retirement planning. How are you, my friend? Good to see you. Just groovy. Good to see you, too. Let's start with tax day, and I'll just say right now, I haven't done my taxes yet. So this doesn't have to be personalized advice from me, but for the average investor, sort of what should be on our radar in terms of our to-do list for taxes? Well, of course, get them done. And really, the main thing you need to know is whatever you paid for last year, you're going to pay more for this year. The biggest reason is payroll taxes are going back to normal levels. They were cut down to 4.2% for last year as a stimulus, going back to 6.2% this year. For a family that makes around $50,000, that means

they'll pay an extra thousand in taxes this year as compared to last year. So if you got a big refund this year, don't plan on getting it next year. Wow. Just like that. Just like that. And if you make over $400,000, your tax bracket is going up as well as your capital gains. So someone like you, Chris, you'll have to watch out for that. I'm not nearly in that tax bracket. Right. And so someone who's making over $200 or $250, if they're married, they might pay a little extra due to a Medicare tax that will be applied to something like net investment income, capital gains, dividends outside of retirement accounts. It's complicated. But if you make that much, be prepared for it. One of the stories that caught my eye a few weeks ago, and it was good

news because we hear all the time that a lot of people are not saving enough for retirement. But there was a story last month about how 401k balances hit record levels in 2012. As someone who makes his living in the world of retirement planning, you got to be thrilled when you see something like that. That is good news. It came out from Fidelity, which is, they are the largest provider of 401ks. The balances at the end of the year, last year, were up to about $77,000, up from $46,000 at the bottom of the bear market in 2009. So that's good news. The balances are up 12% over the previous year. And it turns out that people are contributing about 8% to their 401ks with another 4% match if you get it. So it's all good news.

However, $77,000 is not a lot of money for retirement. So people still need to be saving. And related to taxes, when it comes to retirement accounts, the good news is, first of all, you still have time to contribute to your IRA for last year, not for your 401k. That door closes on December 31st. And how much you can contribute to IRAs and 401ks are going up $500 each for this year. So you can save more. So you can max out to an even higher level. Absolutely. Fantastic.

You're listening to Motley Fool Money, talking with Robert Brokamp, our resident retirement expert. It was a couple of weeks ago. We had something, and I think you were the person at The Motley Fool who really pushed for this. We had Financial Health Day. And we've got about 275 employees at The Motley Fool. And this was a day where all of these options were available to everyone in the office. And you really, along with the leadership of the company, encouraged everyone to take a break from what they were doing, set some time aside, really get your financial house in order. And I thought you brilliantly captured this in an article you wrote entitled,

Play Hooky for Money. Absolutely. Where it's basically like, look, we have a kind of a different company at The Motley Fool, and not everyone is going to have this opportunity. So you know what? Make it for yourself. Take a day off from work. And just get to work on your finances.

Right. And I've done this even before the Financial Health Day for The Motley Fool. Don't tell my boss. And I actually went to a hotel to get away from distractions. Where you paid money to stay at a hotel? That's right. Because it was worth it to get away from the distractions. Kids, wife, video games, those types of things.

Brought whole bags of paperwork and went through them. So if you were doing this, what would you do? Well, like I just said, you can contribute more to your IRA and 401k. Sign up for it. Go ahead and do that. So let's go through a couple of sort of the big bucket areas of financial health for any person out there. let's start with investing besides sort of the 401k, which for a plan that's available to anyone out there, absolutely, they should be contributing to that. But what's something else in the area of

investing? If someone is thinking to themselves, you know what, I am going to do that. I'm going to take a half day from work. I'm going to set aside time on a weekend to be away from my friends and family. I'm going to do this. What's one other thing in the world of investing? We know that a lot of investors really work on autopilot and inertia, which means they bought some investments years ago and they haven't looked at them. So they might have bought some mutual funds that they thought were good, but they have since turned out to be not so great and they should sell those and get something else. Perhaps they bought some stocks for some reasons that are no longer valid. So do something like that or just rebalance. 401k balances are up, as we said,

12%. The market was actually up 15%. So what that says is a lot of people are being very conservative. A lot of people went into bond funds after the Great Recession. They're still in bond funds. They've missed out on a lot of this run-up. You should look at your portfolio and say, you know what? Do I have the right allocation for me? I'm going to get back to the financial health day in a second. But speaking of that topic, I'm curious your take on this. Earlier in the show, we talked about the Dow hitting an all-time high. And how do you view something like that? Because you're not really a stock analyst. You're not someone who focuses on individual companies in the way that a lot of people at The Motley Fool do. What goes through

your mind when you see the Dow hitting a new record? Does that get you excited? Does it not change anything you're doing? To what extent does that affect you? Well, the first thing is, I think it validates the advice that all of us gave back in 2008 and 2009 when the market was tanking, and that is, hold on. If you have cash or bonds, you might actually want to buy more stocks because the market will come back at some point. So, it's good to have that validation and that example. Now, as it's hitting all-time highs now, does it bother me or concern me? Not particularly for anyone like us that will be investing for decades. What happens this month or the last few months, not that important. But it's still, let's face it,

it feels good. It definitely feels good. All right, back to Financial Health Day for people who want to take a day off from work and really get to work on their finances, obviously another area that is crucial and yet daunting, if not outright boring, insurance and estate planning. What's something that people should really tackle there? Well, for the insurance, you got to make sure you have enough. If you got your insurance five years ago and you now have more assets, maybe you have more kids, your income has gone up, maybe your life insurance, your homeowner's insurance, your property insurance hasn't kept up with your life. And for estate planning, you just got to get it. And the vast majority of people don't. And by state planning, we mean like

wills, healthcare proxies, living wills, those types of things. The vast majority of people don't have a will. In fact, less than half of people who are considered wealthy don't have a will. So what happens? You die and the state will basically decide who gets your assets and it may not be what you would have wanted. I was going to say, you and I were talking during the break And I mentioned to you that the way my wife got me to do our will is we had planned a trip to the southwest United States, and she'd been saying for a while we needed to do this because we had our first child. And finally, she just said, yeah, that trip we're going on, I'm not going to get on the plane unless we do this. But what blew my mind going through that process was something you just hit on, the whole notion of – I just assumed, well, if you don't have a will, I'm married. my spouse will get it. And just learning about how much control states have and how it varies

from state to state in terms of your property, your assets, your rights to children, all that sort of thing, it blew my mind. Right. And a lot of things actually are controlled by something outside your will, like when you name a beneficiary on your accounts, checking account, 401k, life insurance accounts. That is all different from the will. And sometimes they're in conflict. You signed up for life insurance when you were married to one person and you got divorced and now have someone else. But you didn't change the beneficiary. Guess what? Yeah, exactly.

Different states have different rules about that. But if anything, it's at least a needless complication that you could have done something about. All right. Last area for playing hooky and getting the fiscal house in order. And that's financial housekeeping. What's, you know, in terms of bill paying, the day-to-day, week-to-week stuff, what's something people can tackle? I think they can negotiate their rates. In fact, one of the things a lot of the fools did here,

well, actually, we had a class on negotiating, and then many fools went out and tried to negotiate. People got $50 knocked off their cable bill, things like a better cell phone deal, and a lot of people had these receipts lying around for flexible spending or business expenditures, and they've been in the to-do box for a long time. Finally got that in, especially since, for a lot of companies, the deadline for flexible spending receipts is in a couple of weeks.

so they finally got those in. Yeah, I got to make a note to myself to get that stuff in. Before I let you go, I think the last time you were on the show, one of the things we talked about was you had taken advantage of another benefit here at The Motley Fool, and that's we have an in-house wellness expert. You were really working on losing weight, getting in better shape, even though at the time when you told me, I just sort of— I was a handsome man.

Still are handsome. Thank you very much. No, but I looked at you and I was like, you don't look overweight at all. And yet you felt like you wanted to lose some extra pounds. And I know you've been successful in doing that. So give me a tip, whether it's a diet tip, an exercise tip, just like one sort of simple thing. Because I'll be honest, I'm incredibly lazy. But I'm also, back to what you were saying about habits and inertia, that kind of thing.

I find that I tend to get into habits. And sometimes if the habits are good habits, I'll just stick with them. So give me something in the health area that I can maybe habituate. You have to put something on the line that matters to you, sort of like what your wife did about getting a will. And for me, it was money. And our in-house fitness trainer, we worked out a deal. If I didn't work out three times a week, I owed him $10. And if I didn't lose a certain amount—

What, has he got a racket on the side when I've paid him enough? How many people is he shaking down like this? He said he used it to buy exercise bands, but I don't know. And then I had to lose a certain amount of body fat in three months, so I owed $200. So it was a long-term goal, three months, not that long-term, but somewhat out there, as well as a weekly goal. And it kept me, and just having that accountability, someone who's going to say to you, did you do it this week, really helps. He's a certified financial planner and the resident retirement expert here at The Motley Fool, Ronald Brokamp. Thanks for being here, man.

My pleasure. It's the root of all evil, of strife and of evil, but I'm certain, honey, That life would be sunny With plenty of money Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against,

so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and joining me in studio once again, Jason Moser, James Early, and Charlie Travers. Guys, before we get to the stocks on our radar, last week when we were at the Kogod School of Business at American University, our man James Early was far, far away. That's why he wasn't there. And I'll be honest, the students, some of them were angry that they weren't there, the ones who listen on a regular basis. You were in China. You were in Beijing. Tell us just a little bit about your trip. This is actually the first time I've seen you since you got back. I'm back when I blow my nose as

the normal color now, which is nice, but I actually had a fantastic time. Everyone was super nice. People said that they're nicer to Americans than to each other, but hey, I'll take it. You know, people, lots of photos. I went to the Great Wall, and just everybody wanted to take their picture with me, and by the way, if my wife sees any pictures on the internet, these women were all just friendly strangers. Yeah. Nothing more than that. Of course. Of course.

Perfectly discreet. I picked up a habit of drinking hot water when you eat something. It's better for your digestion. Really? I'll just say Google the Chinese toilets. I think they're better, too. Okay. leave it at that but i had a great time uh business wise chris uh i got i met a lot of interesting people there are a lot of i mean the american perception is of china is such an

illegitimate place there's so much fraud and scandal and that's certainly true but i didn't realize how many because we never have scandals we never have we never have business scandals we might not have pigs floating in the water but we still have some scandals but there are a lot of really nice legitimate people who who are basically resentful of that and they're ready I mean, they are, that's sort of this untapped energy. And I think as the government, people realize that the past 25 years of Chinese growth has been directly as a result of capitalism. So one guy said it best, the golden age may be over, but the silver era is yet to come. Do you have a sense of, maybe not individual companies, but of industries that look like they are poised to do well?

Because as we've talked about before, there's not a single company that we talk about on this show here in America that when they talk about their operations in China or their plans for China doesn't paint it as, oh, it's a huge growth opportunity. Well, yes, in theory, it's a huge growth opportunity. But having been there, do you get the sense of which industries actually look like they may be poised for, if not huge growth, sustainable growth? I think the next thing we're going to see, Chris, is Chinese consumerism within China. And the government has been talking about that, but it's not really the government that's doing that. It's the people. It's the natural progression of the economy. I saw a lot of advertisements say, not just made in China, created in China.

The Chinese are aware that they've been importing a lot of creativity for a long time, and they're trying to self-generate. Now, it may take 5, 10, 15, 20 years for that to gain serious momentum, but that's going to be a big trend. And lastly, just one really selfish question. Millions and millions of people in Beijing. Did you run into anyone who had heard of the Motley Fool? Yes, I did. Wow. Just one.

Okay, good. Let's get to the stocks that are on our radar. We'll bring in our man, Steve Broido, from the other side of the glass, assuming he hasn't run off to get some of that food at Cozy. Charlie Travers, you're up first. What's your stock this week? It would be Coach. The ticker is COH. This is one of the best-run retailers around.

They have number one market share in the U.S. for women's handbag, and that's really going back to their heritage and making high-quality leather products. I think the growth potential for this company globally, particularly in Asia, they're doing well in China right now, and Japan, they've been in there a very long time, is amazing. They have not gone into Latin America or Europe at all. Those are completely new opportunities for them that they are pursuing. And the stock is down because of fears over competition from companies that are a little more trendy and hot right now, like Michael Kors. You know, Michael Kors benefits from Michelle Obama wearing their stuff all the time.

And Coach is, yeah, you know, Coach is like yesterday's brand. But I think that's a mistake. This is a superb business. And the ticker symbol? COH. Steve, question about Coach? My question revolves around the men's stores. I've seen some of those pop up.

Is that a good idea in your opinion or a bad one? I think it is very difficult to transfer a brand that has been so strongly associated with women and get men to actually buy their stuff. Is your lovely wife going to be shopping at any of those men's coach stores? Maybe get a little something for you to sort of ease you into that brand? I do think leather is a little bit universal. You know, belts, wallets, stuff like that. So we'll see. Am I wimpy because I have a coach wallet?

No. I have a coach briefcase. I got it for Christmas. All right. But let's draw the line at man purses. Can we just agree to do that? Absolutely. You know what?

We saw, we were reading a report the other day, actually called that the MERS. Oh, what a horrible name. James Early, your stock this week. I'm going back to China with a company called Xinyuan Real Estate. The ticker is XIN. This is a very risky company, but it's very legitimate in that it makes middle-class condominiums and apartments in non-frothy cities. In other words, where the price speculation hasn't been as crazy, and these cities are seeing a lot of rural to urban migration. It should benefit if the Chinese government is able to cool the property speculation without something draconian on a national level.

Steve Broido, question? There was a very damaging piece about Chinese real estate on 60 Minutes very recently talking about how there are entire cities in China that are empty because Chinese citizens have been investing heavily in real estate. The government doesn't allow them to invest as freely as we do and that they're buying these places and that there's basically vacant cities. Did you get a sense of that when you were there, and how is this company affected? Yeah, Beijing was certainly not vacant. I think these are more remote cities. The new tax the government implemented controls is a tax on second-home sales, which should help curb some of that. These are mostly in rural areas that that's happening, that these new cities have just sort of popped up.

These guys, Xinyuan, tends to build in more regular, healthy places, to my knowledge. Jason Mother, what's your stock? So going with a big chip maker, probably everyone's heard of Qualcomm. It's a well over $100 billion company, but they are playing a big role not only in the 3G technology that we know today, but helping develop the 4G technology that is not too far in the distant future. When you look at global mobile trends, global mobile traffic is really growing quickly right now. It drives about 13% of internet traffic today, and that's up from about 4% in 2010. So they obviously benefit from this trend towards mobile. The neat thing about Qualcomm is while they make their chips and they get about 60% of their sales come from that chip business, a good portion of their actual profitability, about 85% of the company's net profit,

It comes from the patents and licenses for their technology that all of these different phone companies, these phone makers use. And so Qualcomm plays a big role in whether it's an iPhone or whether it's a Samsung phone. And we know those are the two big leaders out there. And they'll continue to play a big part in that going forward. They just recently boosted their dividend and offered up a little share buyback authorization as well. It's not something that's going to double overnight, but I think it's a good steady tech play that will give you a little dividend while you sleep. And the ticker symbol? QCOM.

Steve? My question is, how many lives does Qualcomm have? I know it was a huge run-up in, you know, late 90s, 2000s of the tech crash. How many more lives does Qualcomm have in it? Well, I mean, I think we could just kind of think, well, 3G, 4G, eventually there will be 5G and maybe even 6G. I like their chances of playing a role in that. So I think that for the foreseeable future, they'll be helping dictate the technology in our hands, in our living rooms. What do you think, Steve? They all sound interesting to me. I think I'm going to go with Qualcomm right now. I think that was a good answer. All right.

Well, thank you. Jason Moser, James Early, Charlie Travis. Guys, thanks for being here. Thank you, Chris. That's it for this edition of Motley Fool Money. The show is mixed by Rick Angle. Our engineer is Steve Broido. Our producer is Matt Greer.

I'm Chris Hill. Thanks for listening. We'll see you next week.