Motley Fool Hidden Gems Investing - Motley Fool Money: 03.26.2010

Episode Date: March 26, 2010

What does the overhaul in health care mean for investors? What does the crisis in Greece mean for investors? How much is Facebook really worth? And just how good were Best Buy's earnings? On this week's Motley Fool Money Radio Show, we tackle those stories, share three stocks on our radar, and talk with Stocks for the Long Run author Jeremy Siegel.  We also talk about the value of celebrity with Corporate Library co-founder and film critic Nell Minow.      Learn more about your ad choices. Visit megaphone.fm/adchoices

Stop wasting your nights on a mattress that doesn't get you. Experience the most comfortable mattress in the world. The Sleep Number Smart Bed. At the touch of a button, you can personalize your comfort. Choose firmer or softer. Adjust cooler to warmer. And right now, save up to $2,500 during our massive Labor Day event. Hurry into your local Sleep Number store today.

Because we have your number. everybody needs money 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 zimmering guys good to see you good to see you chris on today's show we'll head to Philadelphia to talk cheap stocks and double dips with Wharton professor Jeremy Siegel. We'll head to Athens, Greece for an on-the-ground report on the economic crisis. And we'll head to our nation's capital to talk with corporate library co-founder and movie critic

Nell Minow. And guys, yes, we will be talking some hot tub time machine. All that plus we'll talk Best Buy, Buffett, and the stocks that are on our radar. But we begin with the week's big news. The health care reform legislation is now the law of the land. The law will provide broader access to health insurance for an estimated 32 million people who currently don't have it. Guys, a lot of new customers now. What does the health care law mean for investors? It is very complex.

It's probably too complex to know how this will shake out because you don't know what kind of bureaucratic decisions will, how those will affect what actually happens to companies, and you don't know how they will respond. However, it's probably possible to say in the broadest terms that likely winners look to be doctors and hospitals because there's precious little price control in this and likely losers, probably the insurance industry.

Some new changes can't deny coverage for preexisting medical conditions, ends lifetime coverage limits. So that's probably the general takeaway. James? Obviously the uninsured win to a degree too. But I think pharmaceutical companies, I think are also good winners

because the government isn't stepping in and negotiating with them directly. And that was a big thing that we were worried about happening. But I agree with Seth. The big, big issue is, you know, we have a little more clarity about what the government's doing. We don't know how the free market is going to respond. What's the insurance climate going to look like in five years? That's the big question in my mind.

Shannon, what did you think? Well, health care stocks as a group have looked cheap to me for a while. And I think that now that this uncertainty is lifted, that there's still bargains, and the market will ultimately respond favorably in the aggregate. Cherry-picking winners, as Seth says, is going to be a little bit more difficult right now because we don't have sufficient clarity. I think that one thing about the health, it's really health insurance reform program

that is unfortunate is that we have this gigantic opportunity and something historic has been done in terms of expansion of coverage. But in terms of addressing the fee-for-service aspect that is driving healthcare inflation, nothing got touched there. Nobody wanted to tackle the hard issue.

Yeah. In terms of the healthcare industry, obviously you've got pharmaceuticals, you've got medical device companies. Let's just go around the table real quick. one healthcare stock that's on your radar? Shannon, I'll start with you. Well, so Stryker, which is a stock that I own and is in one of the services that I run here at The Motley Fool. And I love this company. It's a very attractive profile, a dominant player as an

orthopedic implant manufacturer. But I think that anybody, and what we said before is true, the cost controls that we would hope to see in this legislation are not there. However, there is going to be some clamping down on Medicare and Medicaid reimbursement levels, and manufacturers like Stryker could take a hit on the margins there. What's the ticker? SYK. James Early? Chris, I like the pharmaceuticals, but they're a little risky to me in some degree,

so I'm going to go with pharmacies themselves, Medco, MHS, Express Grips, ESRX are the spicier names, or CVS, CVS is the ticker there, is the safer one. Seth? I'm going to stick with my recent radar stock, Atrion, the people who make the tubes, putting stuff into you. Exactly. You get more people in the hospital, their visits are actually paid for, I think they sell more product.

This week in mortgage debt. On Friday, the Obama administration announced a new plan to tackle the mortgage crisis. The plan will allow some homeowners to refinance into new mortgages with lower payments, and the plan temporarily reduces mortgage payments for borrowers who are unemployed. James, early in the week, Bank of America announced its own plan to reduce mortgage loan balances. What was your take? Well, Chris, on the Bank of America specifically, they're doing similar to what the government's doing, cutting loan balances for people who are underwater.

And those are the people who are most likely to just walk away. So it's sort of the equivalent of throwing like a fake wallet at a thief, you know, with a couple of bucks in it. He thinks he has the better of you, right? So these people think, you know, but these loans have already been written down by Bank of America in the first place. So I don't have your real wallet then? Maybe not.

So yeah, it's more show than substance, I think. The government's plan is interesting. wants to do that, but also lower payments to 31% of income for the unemployed, who I don't see them having much income in the first place. That's got to be pretty low. Shannon? Yeah, well, this is a good idea because the Obama administration's first approach to solving this problem was not working at all. The incentives of mortgage servicers still put them on the side of letting things go into foreclosure. Now there's some more teeth to the policy that they've adopted. I think that's a good thing. There's always the risk of moral hazard when you're going to do any kind of

principle of forgiveness. But as we've discussed before, if your neighbor's house is foreclosed upon, the value of your house also falls. I think on balance, this is a good, somewhat aggressive step and larger than I think a lot of people thought they were going to come out with. Well, it's very aggravating to people, including the people in this room who paid their bills to think that we're getting punished for having done that. Who pays their bills in this room? Realistically, they probably did have to do this and the writing was on the wall. I mean,

a lot of these modified loans were just re-defaulting at huge rates. And there are studies that show that people make the decision to leave their home not based on whether they can afford the payment. In circumstances like this, they make that decision based on whether they feel helpless, whether they feel like they're underwater. And earlier we were discussing this and it's something like 25% of mortgages are underwater. But if you actually look at the number of homes in the US that have mortgages and do the math, that comes out to about 8% of all the homes in the U.S. being currently underwater. That doesn't sound like very much, but it has a huge impact.

And I think it's a proxy for, A, just how much they listen to Motley Fool Money at the White House, and, B, how worried they are and ought to be about the second wave or the latest wave of foreclosures, which is not subprime, folks. I mean, Alt-A and A-rated loans have been getting closer and closer to default as well. And so I think that if this is a signal of anything, it's the Obama administration has finally figured out, A, its initial program didn't work, and B, this is something that we ought to worry about. Exactly. It's an admission that the prior program just wasn't doing it. And a tacit admission that they're listening to this radio show?

I'm sure. You're listening to Motley Fool Money. We're talking through some of the week's big stories. Is Warren Buffett a safer bet than Uncle Sam? The bond market seems to think so. Shannon, can you explain? I hadn't thought about it before, but Warren Buffett kind of looks like Uncle Sam, doesn't he? Minus the beard. Yeah, exactly. Minus the green beard.

Yes, it's a bit of a head fake, though. It was basis points of difference, and the two-year treasury note was yielding slightly higher than some Berkshire debt. But the interesting story here is one of risk. You know, after a season of, what, about 22 months now, where corporate America has been deleveraging and downsizing and shoring up its balance sheet, Uncle Sam has been spending out the wazoo, necessarily so. And so at the end of the day, when you're doing credit analysis, you're looking at balance sheet health. And, yeah, I think on balance, even though it's the United States, the balance sheet health of Berkshire is stronger than it is of the U.S. government. Yeah, the ironic point, and this has happened from time to time, this is sort of a little statistical blip,

but the ironic point is that it's close in the first place, you know, that it is, that the U.S. has gotten that, I don't know, dubious, but I think we've got to watch our spending. I have to just be the ignorant art history major here for a few minutes and just say that I don't get this much at all that these yields would be like this because the way I look at it is, someone will have to explain this to me, the worst thing that happens if we can't pay, as the U.S. government can't pay off these things, is if we print more money and you get inflation, right?

Isn't that the doomsday scenario? You get a bunch of inflation. Well, if you get a bunch of inflation, then these bonds that are paying out in dollars, aren't they equally worthless? That's not just the worst thing that could happen. It's what is going to happen. I think that we all kind of know that.

Best Buy reported better than expected earnings thanks to strong sales in flat panel TVs, notebook computers, and wireless gadgets. Seth, shares of Best Buy have climbed back to around where they were two years ago. Were you impressed by the new numbers? They were okay, but I have to say that just reading the first couple of paragraphs of the press release made me a lot less impressed. Let's just start with earnings. $1.82 a share, 13% better than last year.

And here's the line that gets to me. On a very strong 7% gain in comparable store sales. Now, if you look at the footnote, which to their credit, they provide right there, they actually count online sales as same store sales. And I don't know too many companies that do that. And it doesn't make a lot of sense. And here's why. If you go through and run the math, which is a little bit complex and they don't do it for you, you actually find out that the real comp, the real same store sales growth was about 0.3%, not the 7% reported. The bulk of the gain came from a big increase in online sales.

And that's fine. That's okay. but they're not giving you really complete information. And if you're trying to decide how much these piles of bricks are worth and how much the existing piles of bricks that sell stuff are doing better every year, they're not giving you that information, and Best Buy deserves at least a finger wag for that. Absolutely. And, folks, that may sound in the weeds, but it's important stuff.

The financial media, here comes Best Buy with their earnings, and they read the first two paragraphs and write up the stories that basically regurgitate the press release. Oh, wow, it looks great. Well, not really. You need to get into the weeds to understand what the news actually is. So they're counting BestBuy.com as its own store and wrapping that into same-store sales? It doesn't make a lot of sense. And let's also point out that BestBuy benefits from an environment where there's less competition,

where you've got no circuit cities and other smaller businesses going bankrupt everywhere. So I would not expect to see this kind of growth all the time. What's going to happen going forward, we don't know. BestBuy, still a great company, but really not as great as they want you to think from this report. General Mills reported a 15% increase in third quarter profits. The company is getting a boost from its snack division and from its Big G cereal lines. Wait, Big G? Big G, that's the name of their cereal line.

You don't get to make up your own nickname. Come on. General Mills. Hey. Come on. It came out a couple years ago, wanted everybody to call them the Big K. Yeah, I want everyone to call me Big S, too, but it's just not going to happen. Let me just finish the read here.

General Mills has beaten the market over the last one, two, and five years. J.E., Big James? Yeah, Big James. I'll take that. What's your take? You know, this is really the kind of quarter you want to see if you own General Mills. Kind of nothing razzle-dazzle, but cash flow was solid. Margins were up.

They raised their EPS forecast. I like General Mills a lot. You know, I like Kellogg's, too. These are the number one, number two. Cereal makers, or Kellogg's is number one. Kellogg's is a little spicier. It's sort of like the Frosted Flakes. if General Mills is Fiber One or something.

With cayenne pepper? Yeah, it was really spicy. Favorite cereal, James? You know, I am on mostly a no-grain, no-dairy diet. James is on a no-grain, no-dairy? That's cereal. What was with the Greek yogurt the other day? That was a couple months ago as I was phasing that out.

Count Chocula. Absolutely Count Chocula. Seth? I just don't eat cereal anymore. No, it's oatmeal. I eat oatmeal every morning. We have no Cap'n Crunch fans in... Oh, Cap'n Crunch is great too.

Sure. Steve Broido, can you weigh in here? What's your favorite cereal? Frosted Flakes. Love them. Frosted Flakes is like Babe Ruth, just hitting a home run every single time up to bat. You're listening to Motley Fool Money. We're going through some of the really important stories this week.

Like your favorite cereal, drop us an email, motleyfoolmoneyatfool.com. All right, guys. So how much is Facebook worth? According to the Private Equity Data Center, Facebook is worth $35 billion. for some perspective. eBay is currently valued around $35 billion. Yahoo, around $23 billion. What do you think? Is Facebook the next big thing to hit Wall Street? Let me check my calendar. Is this 1999 all over again? Facebook, I don't know. It's interesting. It's a great aggregator for personal content and sharing out things with your family, I suppose.

But I wouldn't pay $0.35 for a share of that stock. Well, I mean, let me just play devil's advocate here. They got 400 million people online every month half those people are going every single day uh they claim to be cash flow positive there were those made-up metrics from the late 90s don't give me a headache here first of all this this valuation eyeballs equals yeah it's interesting but it's based on a kind of a technical evaluation of stock option pricing because facebook of course is handing out stock options to people who work there they're they're based on what a share is worth shares aren't publicly traded whatever but it's very technical but it's a little like saying that you know what

my underpants. My dirty shorts are worth 500 bucks a pair each. I say that. I've got 200,000 pairs. I'm worth $100 million unless I misplace a decimal point. Facebook may actually be collecting more eyeballs than Google and other people, but they have yet to prove that they can do anything profitably. And this whole idea that their search is worth a bunch of money, I think is odd because most of what's on Facebook really is nonsense. All right. Then let me put it to you this way. I give you $35 billion. You have to buy either Facebook or eBay. Which one are you buying? Oh, eBay, come on. eBay.

Yeah, that's an easy call. Although I will say, you know... Nobody wants to buy my shorts for $35 billion. You're the big Seth, huh? The big Seth. The big S. As Facebook evolves, if it becomes more of a programming network, it's really well positioned to do...

What was it, Lonely Girl 15? Remember this from last year? It was a web... On YouTube, it was several years ago. Yeah, and people thought it was real. You can have some great reality-based programming on Facebook from actual real people. They better have a lot of it for $35 billion.

The guys will be back later in the show to talk about the stocks that are on their radar. But coming up, we head to Athens, Greece for a field report on the economic crisis in the EU. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Every week on this show, we're trying to help you make better financial decisions. And we do that by looking at companies across America. And we do that by looking for investment opportunities around the world. Joining me now from Athens, Greece, is our own Motley Fool senior analyst, Tim Hanson. Tim, good to talk to you. Hey, Chris. How's it going?

So, on Thursday, the European Union announced a new rescue plan for Greece. The plan is going to tap the IMF and provide a safety net. What did you think of the plan? It's an interesting development. I'll say first that we were speaking to people earlier in the week who nailed this. They predicted that this was going to be the plan that eventually got approved, and they were spot on. And so that was great to hear from them and confidence-inducing for us and the other things they told us. But from a plan standpoint, it's very interesting.

Basically, this is going to bring the European Union tighter together. It's going to make Greece's balance sheet more important to the rest of Europe. And so they're really solidifying the EU. And when we came here, we originally thought maybe the EU was going to be falling apart. And the second part of that is the IMF involvement, which really gives political cover to Germany and the chancellor there, Angela Merkel. But also they have expertise in sort of making countries do the hard work of flashing their budgets and raising revenue.

So they're really going to be looking over Greece's shoulder now to make sure they do the right thing. Now, you've spent the last week in Greece. As you mentioned, you've met with folks from investment banks, leaders in academia. How has your thinking evolved based on those conversations and based on your experience there? Well, we came here really thinking that Greece was in serious trouble, the euro was in serious trouble, and that we were going to come here and find, for lack of a better word, protests and riots. And it's been very different. I mean, we spoke with folks from the investment bank of Greece earlier in the week,

and we asked them about the protest, and they said, you know, it's funny you ask that. By the Greek standard, I emphasize that, by the Greek standard, protests have been nothing. They've been very benign, and that turns out to have been true. We went to a firefighter's protest. We went to a supposed lawyer's protest. There was really nothing happening, and the reason we heard for that is that the unions are actually quite supportive of the now socialist government here, and so they actually do want to see this government succeed with their austerity plan and other budget measures.

Were you able to find, because at The Motley Fool we're all about investing in stocks, are there stocks in Greece that you find more attractive now that you've been over there and had a chance to do some on-the-ground research? Certainly. The Greek market is down more than 30% since October, whereas the sort of broader index is actually down less than 5%. So there's a huge discrepancy between the two markets. And, you know, if you believe Greece is going to be falling apart, then that discrepancy is sort of, that should be the case.

But having been here now, we sort of have a more optimistic vision for Greece. It's still going to be zero to negative GDP growth over the next one to two years, but stocks are still oversold. There are some interesting opportunities. We've been looking at the National Bank of Greece, which also has big operations in Turkey. We've been looking at the local telecom operator and a few other companies around here that do look interesting from a valuation perspective relative to the expectations that are pressed into the stock right now.

Now, final question here. Help me out. If I'm out with my friends watching the NCAA tournament or just, you know, it's Monday morning, I'm at work, I'm hanging around the water cooler, and I want to impress people with my insight into the crisis in Greece, what is one line, what is one observation that I can just drop into the conversation? You'd say probably now that we have this EU backstop bailout plan, you can say, You know, it's crazy that Greek debt is selling for almost 200 basis points more than German debt. That gap has to narrow. Tim Hanson, Motley Fool senior analyst in Athens, Greece.

Tim, thanks a lot for talking to us today. Thanks so much, Chris. Are we headed for a double-dip recession? Our next guest is business professor and best-selling author Jeremy Siegel. We'll find out what he thinks. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Jeremy Siegel is a professor of finance at the Wharton School

of the University of Pennsylvania. He's a bestselling author whose books include The Future for Investors and Stocks for the Long Run, which the Washington Post called one of the 10 best investment books of all time. He joins us from his office in Philadelphia. Professor Siegel, Welcome to Motley Fool Money. Thank you for having me. You recently said the worst was over for the U.S. economy, and you said that the stock market was, in your words, extremely cheap. But we've got some weaker-than-expecting housing numbers. There's talk of the possibility of a double-dip recession.

What is your take now? I don't believe the double-dip story at all. Why is that? Well, first of all, because we're not seeing it. We are seeing really steady improvement. It's not what I call gangbusters, but it's definitely growth. You know, GDP this quarter is going to be about 3%. That's not a double dip.

I think most economists now don't think the unemployment rate will move beyond the 10.2% high. As time goes on, we see the economy has been saved, the financial system has been saved, and that we can look forward to stronger demands. The fourth edition of your book, Stocks for the Long Run, was published in 2007, close to the height of the stock market. I know that you still believe that stocks are the best place for an investor's long-term dollars. We certainly believe that here at The Motley Fool.

But how have the events of the last couple of years on Wall Street changed your thinking? Well, certainly it's been humbling. people say, and I look back on your career, what do you regret most? And I would say, yes, I failed to see this coming. I had a lot of company. I didn't see the concentration of very risky real estate assets in the financial firms that, you know, then when they were levered and collapsed, really just ground our entire credit system, the world's credit system to a halt. But it's interesting. I was just looking at the data, and the Russell 3000, which is, of course, the biggest, most inclusive of U.S. indices, is now about 24% below that all-time

high that it reached in October of 2007. And just with a few more points, it'll be under 20. And What's the significance there? Well, if you went to sleep at the peak and if you got up and say, oh, yeah, the market's down 19%, but that's not a bear market. I mean, bear market's 20% or more. I guess things are still pretty good. You would have missed all the drama of the last two years, but you also will realize the reality that our markets are now moving back towards certainly not all-time highs, but at levels that we experienced in 06 and early 07 and are no longer devastated the way they were one year ago today. We're talking with Jeremy Siegel, professor of finance at the Wharton School in Pennsylvania.

Jeremy, we have a new health care law in this country. Do you have some early thoughts on stocks or sectors that you expect to be either adversely affected by this new law or stand to benefit? Let me say I'm very disappointed in the law. I recognize, I think most of us do, there are a lot of things wrong with our health care system, a lot of things wrong with the way doctors get compensated, procedures are the way the insurance companies go. And what disappoints me is that, you know, this new law doesn't really address those questions, doesn't address the questions of healthy living styles, which are critical to our health care bill. So, you know, I'm disappointed. You know, with that being said, there's two things to be realized. First of all, these taxes on capital gains and dividends, and certainly kind of a shocker it wasn't in the Senate bill.

it is in the House Reconciliation Bill, don't take place for another three years. A lot can happen between now and then. So I'm not sure that we're going to get quite the punitive taxation that we did. And in fact, you know, I think if the American public has its voice said, we're going to get a lot of modifications to the law, not every part of it. I mean, there's a lot of things that I think Americans like in terms of pre-existing conditions and in terms of lifetime limits. A couple of other things I think could be modified. But in terms of the bulk of the law and a lot of it, I'm not sure that we can say for sure what it's going to be because so many of the provisions don't take place for years and there's going to be an awful lot of elections before then.

All that said, the health care sector has rallied since the passage of that law, which either makes them think that things are going to be modified or they've learned to live with it. And the truth of the matter is a lot of the managed care and drug companies lobbied and got a lot of softening of provisions that don't make it a nightmare the way it seemed at the beginning. So I think we can get through this thing, and I don't see it as a disaster for our economy, but certainly I think we could have done better. When you look across the globe, there's talk of a bubble in China. There are certainly challenges in the European Union.

What do you think is the biggest threat to the U.S. economy? Well, I think Europe is in trouble. I do think the euro is going to suffer because of the peripheral countries, Portugal, Spain, Greece, et cetera, being a drag. So I see the euro being weak, and I see European stocks being weak, although already they're selling at around a 20%, 25% discount to the U.S. stock. So some of that's already factored in. China, the bubble is in real estate, really not in the stock market. It's nowhere near the crazy highs that it was two, three years ago.

So that part at least is better, but they're going to have to move against a bubble in real estate. I mean, all they have to do is look at the United States and see if you let it get out of hand, you could be in trouble. So I think they are taking measures as far as that's concerned. Really what I worry about, I worry about oil going over 100 again and another spike upward in those energy costs. We import two-thirds of our oil. That's a big tax. And if we can keep oil in its current range, 80, it's okay. I'd love to see it lower.

I'd love to see it get off of oil. I'd love to see it get a natural gas, which is actually going down in price. I think there's a lot of room for conservation and alternative fuels. I think that's going to be a big set of industries going forward. We're talking with Jeremy Siegel, bestselling author of Stocks for the Long Run. How much do you think investors should factor in global changes and macroeconomics from other countries when they invest? Well, in the long run, it comes out in the wash. You've got to be internationally diversified. More than half the world's equity capital is outside the U.S.,

and we know that fraction is getting larger. So I'm a fan of emerging markets. I think that that is worthy of a good allocation out there. And international investing, as I say, even though Europe, I think, is in trouble, you're getting those stocks at a discount. So you've got to be internationally diversified. It's very hard to play the business cycle. Listen, even in the United States, it's really hard to play stock markets in the business cycle. Trying to do it, you know, in other countries is also very difficult. So, you know, just stay the course, keep a good international allocation, and I think you're going to do well. You've obviously been looking at the markets for a long time. What has been either your biggest

shift in thinking about investing? Or what is something that you know now that you wish you had known when you were starting out? Wow, I mean, that's a very good question. Certainly trying to time the market is extremely difficult. But trying to stick with the market is very difficult. I mean, you know, getting through this last year and a half, you know, with the Dow down in 6,000, wow. I mean, it took all the fortitude I could not to say, hey, throw in the towel, and unfortunately, a lot of people did. So I say, you know, keeping your focus on that long run,

and in fact, when everything is doom and gloom, if you got any cash like it was a year ago, hey, that's the time to put it to work. We're talking with Jeremy Siegel, professor of finance at the Wharton School in Philadelphia. All right, Professor, we're going to wrap things up with a round of buy, sell, or hold. These are not stocks, but these are concepts, people. Let's start with buy, sell, or hold, the prospects for meaningful financial reform. Some of the things in the Dodd-Bill is good. You know, I have to see the final thing.

I'm going to call that a hold. Fair enough. He's been in the news lately because he's making his return to golf. Buy, sell, or hold, Tiger Woods. uh let's buy that we'll see if he uh you know breaks into the top two or three but it stirs the pot and gets up the excitement is it safe to say that tiger woods is a little bit closer to being a value stock now if you could buy him on the exchange i think he's probably in the early stages of a bull market again and finally keeping in mind that restaurants will now be required to

display calories next to items on the menu. Buy, sell, or hold Philly cheesesteaks? You know, I think hunger pangs come ahead of calories. And that fat is terribly addicting. It's still going to be a winner. I'd still buy it. Jeremy Siegel is a professor of finance at the Wharton School of the University of Pennsylvania, and you can read more from him at jeremysiegel.com. Professor, thanks so much for talking with us. Thanks for having me. Coming up, we'll talk with Nell Minow, an expert on corporate boards of directors and also a movie

critic. Stay tuned. I promise you this is the only investment radio show talking about corporate boards of directors and hot tub time machine. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Want to make some money for your shareholders? The Wall Street Journal this week reported on a new study published by the University of Missouri that says appointing celebrities to corporate boards increases shareholder value over one, two, and three-year periods. Got us thinking to a conversation we had with corporate library co-founder Nell Minow, who analyzes corporate boards and reviews movies. Nell, welcome back to Motley Fool Money. Well, thank you very much. You could hardly come up with a better

intersection of my interests than this question. Okay, so the study looked at 700 celebrity appointments to corporate boards from 1985 through 2006, and it concluded celebrities enhance shareholder value over one, two, and three-year periods. You've been critical of companies that have celebrities on their board. We talked about O.J. Simpson being on the board of directors of a couple of companies last time around. Does this study change your mind? No, it doesn't. The fact that two things exist together doesn't mean that one of them caused the other one. And we've seen a lot of very bad behavior from celebrities on boards.

They cast their net pretty wide in their definition of celebrities, too. I mean, there are some celebrities who've gone on to do other things. Dr. J has been on some boards. He's, of course, a basketball star, but he's also a businessman. And let's talk about O.J. for a minute. O.J. was on five boards, and he was half of the audit committee at Infinity Broadcasting. The other guy on the audit committee didn't know anything about accounting either. So, you know, I think it's fair to say that O.J. was not a good director.

And I think it's fair to say that Nancy Reagan, who was on a board, was not a good director. Beverly Philz was on some boards. You could say, well, she was on entertainment company boards, and maybe she brought some knowledge of entertainment there. She did some producing and managing work as well as being a performer. So we'll give her a maybe. I'm very familiar with a case where Art Linkletter, who was at the time one of the biggest celebrities in America, was on a board. And I was told by somebody else who was in that boardroom that he would go to the annual shareholders meeting, get a standing ovation, meet with the board afterward, and fall asleep on the table.

And that somebody sitting next to him would always say, Art and I discussed this before the meeting, and he said he wanted to vote yes. Fantastic. I think that in this day and age, we really need directors who can read the financial statement. What do you think is the single biggest change that needs to happen with corporate boards? They need to be picked by the shareholders and not by the management. I think that will make a big difference. Even the ones who are very good at what they do, forget who they work for. Warren Buffett has said that in the boardroom, collegiality trumps independence.

I think the only way to get around that problem is to give shareholders the right to vote directors off when they do a bad job. You're listening to Motley Fool Money. We're talking with Nell Minow, co-founder of the Corporate Library, but she is also the movie mom. So a couple of movies out this week I want to get your thoughts on. Let's start with How to Train Your Dragon. I've got three kids. Is this something I should be taking them to?

You should take them to it for at least two showings. I've seen it twice myself. I want to go again. There's so much going out on screen that you will need to see it a couple of times. I loved it. I thought it was the best film I've seen this year so far, and it has heart. It has great characters, very exciting action. And another thing it has is that very often in movies,

in those rare circumstances where we see a character with a disability, that disability is that person's defining characteristic. And it's great to see a movie that has three disabled characters, all of whom just go on with their lives, are perfectly cool, perfectly capable, and just happen to have disabilities. So I love seeing that in this movie. You're telling me I've got to take my kids to see this movie twice? I'm not made of money now.

I know, and they're raising the prices for 3-D. You know, the business story is, of course, about 3-D, with Alice in Wonderland knocking it out of the park. Avatar, of course, now the top-grossing film of all time. And we've got tons of 3-D. It's really interesting. Avatar had to be kicked out of theaters to make room for Alice in Wonderland, even though it was still making money.

And so what they've done, just as a business strategy, is interesting. They are releasing a very shabby DVD just for the people who can't wait in April. But then they're going to have another theatrical release, scoop up some more of that box office money, and then come out with the real DVD later on. Wow, James Cameron really is the king of the world. All right, one more movie, and this looks great to me, Hot Tub Time Machine. You can't beat a title like that. That's true. It's the most expository title since Snakes on a Plane.

But I'm going to say it again until they get it right. if you don't realize that referring to something is not the same as actually making a joke about it, you need to go back to the drawing board. So this one, really, the title says it all. And if you think that a flock of seagulls reference or a Miami Vice reference or having somebody in the 80s not know what email is, is inherently funny, then this is your movie. Other than that, not so good. Wow. So I mean, obviously at The Motley Fool, were all about investing, does one of these guys, when they go back to 1986, do they invest in the IPO of Microsoft?

Yes. Let me just say, they invest in, they totally take advantage of their knowledge of the future in terms of investing. I'll just say that one of the characters is named Lou, and when they return to 2010, it's no longer called Google, it's called Lugol. Brilliant. Nell Minow, co-founder of the Corporate Library and the Movie Mountain. Thanks so much, Nell.

Bye-bye. Do you go to the movies? Find a friend in the middle. 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. Back in the studio with me, our trio of senior analysts, Seth Jason, James Early, and Shannon Zimmerman. Guys, good to see you again. Let's talk about the stocks that are on our radar.

Shannon Zimmerman, I'll start with you. Well, it's a little company that perhaps you may have heard of, Chris. It's Starbucks, ticker is S-B-U-X, and they have gone from- I'm excited about this because I'm a shareholder. Well, that's good. But, you know, folks who got into Starbucks because it was a go-go growth stock may want to reconsider their take on the company because it is now going to become a dividend-paying stock. It doesn't mean that the growth days are over,

but the headiest growth days are certainly over. As a company that suffered from hypergrowth at one point, that's probably a good thing. I'm a massive fan of this. anytime that you can create value for your investors through means other than stock price appreciation, I think that's a good thing. I'm troubled a little bit because a lot of these announcements, the companies have actually raised their dividend, but they also announced they're going to buy back shares. Starbucks has expanded its share repurchase program.

I tend to view that very skeptically. Management often turns out not to be very good investors in their own stock. This may be that case, too, but the dividend is great news. And the ticker symbol? SBUX. James Early. Chris, with health care stabilizing, I'm liking Johnson & Johnson even more. I like it a lot already.

It's one of the core stocks in my income investor service. Moderate debt, returns on equity and capital both above 25%. That shows a strong business to me. 3% yield, makes a lot of free cash flow. What's not to like? As far as I'm concerned, the ticker, if you don't know, is JNJ. And since we all have kids, I think we all know they churn out a lot of Band-Aids with a lot of different colors. Yeah, and is their nickname the Big J?

That's next, Tim. Big S, Seth Jason. I'm going to have to go to a Hidden Gems portfolio candidate we have called Almost Family. They provide home care services, and yes, the whole health care reform issue is going to, in some ways, deliver a blow to how much money they will be able to charge. On the other hand, they are one of the big providers in the home care industry. They've got a lot of practice dealing with governments that don't want to pay, And I think that experience is worth something.

A.F.A.M. All right, Seth Jason, James Early, Shannon Zimmerman. Guys, thanks for being here. Thank you, Chris. Thanks to our special guests this week, Jeremy Siegel, Nell Minow, and Motley Fool senior analyst Tim Hanson, who called in from Greece. 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 report, The Motley Fool's Top Stock for 2010. 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.