Motley Fool Hidden Gems Investing - Motley Fool Money: 04.27.2012

Episode Date: April 27, 2012

On this week's show, our analysts discuss earnings news from Amazon.com, Apple, Coca-Cola, Dunkin' Brands, Ford, Netflix, Panera, Procter & Gamble, and Starbucks.  Plus, we debate the relative merits of Google's driverless car. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and joining me in studio this week for Motley Fool Inside Value, Joe Mager. For Motley Fool income investor, James Early, and for Million Dollar Portfolio, Ron Gross. Gentlemen, good to see you as always. Good to see you, Chris. How are you doing, Chris? We've got earnings from Apple, ExxonMobil, AT&T, and more. We've got so many earnings, we're actually foregoing the-

Would you say it's chock full of earnings? It is so chock full of earnings that we are foregoing our weekly interview with a guest. We are bringing in a second panel of analysts just to get through all the earnings. Are we charging more as a result? Same price? Same price. Wow. Same price.

Same show, same price. We are going to begin, however, with the big macro. The GDP numbers came in on Friday, grew at 2.2%, and Ron Gross, Spain. Bad news for Spain. Yeah, sorry, Spain. Got downgraded by the good folks at Standard & Poor's. I'm going to stick here at home and go with the GDP numbers as my story of the week from a macro perspective. 2-2's not strong.

Companies really bulked up on inventory last quarter, and we're seeing reduced spending there. And that's what partly caused this number to come down. Government spending was down, as it has been consistently as well. Listen, if we stay in the low twos or even if, God forbid, we drop into the ones, that's definitely going to signal that additional stimulus is necessary, which the markets will probably like in the short term. For me, it's just nothing but concerning because we just can't get ourselves out of the woods here. James Hurley, what do you think?

I'm actually in big macro also and maybe a little different slant. 2-2 to me is still okay. It was down from 3%, which in 3% was actually a very good number for comparison. But we've had so much government intervention in this past recession that I think only a numbskull would try to read something too definitively into the tea leaves here. Maybe I am that numbskull by saying it. As long as I'm the numbskull you're referring to. It's not a big deal. But I think we should be grateful for the growth that we've got.

Tutu is good enough. And let's just roll from here. Joe Maker? I'm ungrateful. This week, there was some protest over the fact that student loan debt has now climbed up to the trillion dollar level. Meanwhile, 20-somethings recent college graduate unemployment is very high. And Social Security, a group of trustees, came out this week and said that it's looking to run out by 2035. That's all to say, on behalf of young people everywhere, I hope all of you folks are living well.

Because we will not be. Because we will have much higher tax rates in the future. But kidding aside, I do think we have a very serious issue looking ahead here where we have a lot of young people with high unemployment, so they don't have money coming in. We have student loan debt that's at painful levels, and you're basically going to be losing the safety net that a lot of people relied on for a long time with Social Security. And it's not something that's going to unfurl for a long time, but decades from now, 20, 30 years, you're going to see a very different lifestyle among retirees than we have today. Well, and Ron, speaking of young people, we were talking about this before the taping. You look over at Spain, and the unemployment in Spain is very high. And when you look at unemployment among young people, I mean, I saw one report that it's over 50%.

Yeah, it's actually not funny at all. It's brutal. And there's no easy fixes. It's going to take years to fix this, if we're lucky. All right, let's move on to the earnings news. Bad week for investors betting against Apple. Shares up this week after blowout earnings. Ron, I'll start with you. Just a few of the numbers. 35 million iPhones, nearly 12 million iPads, 4 million Macs. You watch this company

closely. What's your headline when it comes to Apple? It continues to be incredible, the numbers that they're putting up. We've never seen numbers like this. Gross margins were 47%. iPhones came in way ahead of expectations, even though Macs and iPads were a little bit light. The company is just really continuing to put up tremendous amounts of free cash flow. We think it's worth probably about $850 per share, so we're around $600 now. Plenty of room to still run 40% upside from here. There was obviously, and rightfully so, given the size of the company and its impact around the world, a lot of coverage this week. Is there anything that's really not getting talked

about? Anything about this company and their operations, and even just the next couple of years, that really isn't getting the attention that you think it should? Joe, what do you think? Yeah, I think the double-edged sword of more sales coming from outside the U.S. So, 64% of sales in this quarter were international. On the one hand, that's great because they've diversified the brand, geography, and they're really taking this American brand and wringing it out for everything it's worth. On the other hand, all these sales are coming in economies where Apple purchases are much bigger ticket items than they are relative to here they are in the States. And what that means is people are less likely to replace their iDevices than they are in the U.S., where here we have a little more discretionary income.

And also, the way our carrier system works with phones is we have kind of a natural built-in replacement cycle, and our phones are subsidized. But that's not true internationally. So what I think you're going to see is a lot of these international sales are still going to exist, but you're going to see longer replacement cycles in between when people will refresh phones. And that's a great point. I mean, they're not going to last as long internationally. And in the U.S., we have to be getting closer to a saturation point, I have to think. Every man, woman, and child is not going to have two iPhones. But we seem to be headed that way.

Shares of Coca-Cola hit a 14-year high this week after strong first quarter results. The company also announced a two-for-one stock split. Joe Mager, what do you think? Oh, great quarter. Coke's been killing it overseas for a long time. Great emerging market story. The stock split is a great non-story story. Not my favorite kind.

Absolutely. Absolutely. So, stock blitz don't actually create any value for shareholders. In fact, there's a case that they destroy value because it costs money to go through the process. All that happens is you get twice as many shares at half the price. That doesn't do anything to create value for you. And what it does say is that the stock has done pretty well in advance of that, and it's run up quite a bit. And so, it's a nice backward-looking sign that, hey, you've done pretty well, but it doesn't mean too much looking forward. Sticking in the beverage industry, Pepsi's first quarter profits down slightly from a

year ago, but that was better than analysts were expecting. James Early, it's one of your stocks. What's the headline? Yeah, well, better than expected, but a decline nevertheless. The CEO, Andrew Nguyen, has come under some fire. The board has been defensive of her, but Pepsi has basically lagged Coke. It's now the number three soft drink in the U.S. behind Coke and Diet Coke. They're trying to get back into gear. They're going to spend 25% more on advertising this year. They're going to push the bad-for-you products. They focus too hard on the healthy stuff, they think. So now they're going back to the sugar-filled, you know, rut-gut formula that's worked so well for them.

So we'll see what happens. I'm bullish on the stock. I see about 10% upside. But Coke has lagged share price-wise for a while, so it's good to see Coke do well, too. It's also an eye wreck. When you look at these two stocks, and we talked about this a little bit earlier in the week, I mean, over the last one year, two years, five years, Coke has significantly outperformed Pepsi. What is the case for investing in Pepsi over Coke over the next five years?

Well, Pepsi is more of a restructuring play, I would say, than Coke is. Pepsi also is a world's largest snack maker. Coke is much more of a beverage company. Pepsi is still ahead internationally. Coke is now catching up, so it has that extra sort of runway. But Pepsi's also a little more active acquisition-wise, too. Joe, do you agree with that? I do, yeah.

Yeah, it's a turnaround story. I mean, they've been under-investing in their brands for a long time. They just haven't spent nearly as much money as Coke has relative to their sales. And that's shown up in how the sales have been. But they've committed to spending more on advertising. And I think over two or three years, you're going to start seeing the fruits of that. Walmart was in the news this week, but it had nothing to do with earnings. The New York Times reported that Walmart executives bribed officials in Mexico to obtain permits for better locations.

There was an internal investigation at Walmart that was then covered up by the company. Allegedly. Let's just go ahead and make liberal use of the word allegedly. James, I'll start with you. This is a stock that you'd recommended in the past. What do you make of this story? Well, Chris, unfortunately, Walmart paid me 50 pesos to keep quiet. But I am happy to talk about the wonderful things they're doing in communities like ours.

Allegedly. I did sell it for an income investor in my newsletter recently. The stock is down just a little bit. I was worried, not a lot of upside, and I don't want to just wait around for more bad news to potentially drop. The problem is less so the bribing is the fact that according to this New York Times story, there was a pretty thorough investigation done by this former FBI guy who was working at Walmart, and he did a good job, deposed a bunch of people, and presented this evidence to senior management, including the current CEO and the current chairman.

And they basically didn't inform law enforcement. They supposedly swept it under the rug and, in fact, promoted the head of Walmart in Mexico to be a vice chairman of Walmart overall. Was that wrong? It may have been, but by some standards. That's your definition of wrong. Yeah, I was happy to take our gain and jump ship. Ron, what do you think? Because the shares did drop about 4% when this story broke.

But over the rest of the week, it has basically made up that gain. Right. We sold our entire stake as well out of a million dollar portfolio. We tried to hold the leaders of our companies to a certain standard. And that combined with the fact that there really wasn't much upside left in Walmart made it an easy decision to sell. If it had been 50 percent undervalued still, then we would have had to scratch our heads and think about the morality even more. But still, it seems if these allegations are true, we don't want to be owners of the company. Your morality has a price, basically. No, I didn't say that. That's kind of what you said. Joe, what do you think? I think Walmart's a sell, but not for this reason. I think it's a sell because Costco, Amazon, and dollar stores are just crushing them at the top end and the low end.

And the competitive environment's really fierce in retail. I don't really like the long-term story here. And the international stores are doing okay, but they're just getting trounced in the U.S. Coming up, Earnings Fest 2012 continues with Procter & Gamble, Verizon, Baidu, and more. Stay right here. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here in the studio with James Early, Ron Gross, and Joe Maeger. More earnings stories, guys. ExxonMobil's first quarter profit fell 11% on lower oil and gas production. The company also announced it is increasing its quarterly dividend by 21%, up to $0.57 per share. Joe, what's the headline for investors? The headline's a dividend increase. 21% is a huge amount, especially for a company that's paid about $40 billion in dividends over the last five years for a little bit of effect. That's about a Netflix paid in dividends every six months. That's awesome. What kind of yield is that, approximately? Do we know?

It's about 2.7, I want to say. So, pretty hearty sized. I mean, the S&P 500 is about 2.2. You know, whereas stock splits are about the past, dividend increases are about the future, and that's about company management's confidence and its ability to grow and the steadiness of its cash flows. In Exxon's case, there's also a little bit there, too, where they may not see a lot of reinvestment opportunities. So, at least I appreciate that they're upping the dividend and returning that cash back to shareholders. James? Not that I'm one to gloat here, but Chevron, whose drum I beat occasionally here, actually had a 4.2% gain in profits compared to Exxon had a drop, and then ConocoPhillips also had a drop

of 3%. So I'm just saying, I think Chevron is a solid company here too. When it goes the other way on you, will you come and admit that as well? I will. I will actually. All right. Let's move on to some big products companies. Procter & Gamble's third quarter profits fell 16%. Shares were down on the news. Meanwhile, shares of Unilever up on news that first quarter revenue came in up 12%. James Early, what do you think of these two? Chris, Unilever was really the goody two-shoes who cleaned everybody's clocks. I guess it's a mixed metaphor. This quarter, beating P&G.

So he's like a hardcore nerd? Yeah, beating Nestle. 12% profit gain from both. This is the key point. From both volume, growth, and price gains. It's traditionally been one or the other. And from both developed markets and developing markets. It's traditionally been just volume and emerging markets.

Unilever did it both ways. Even great results in North America. Procter & Gamble, meanwhile, kind of stunk up the bed at a 16% drop. They lost market share in both their categories. Is that a phrase? Stuck up the bed? Stuck up the bed.

And they admitted they raised their prices too much. They're going to have to drop them down a little bit. So Unilever really has the momentum here. James, without using any metaphors whatsoever, over the next few years, you match up these two product giants, Procter & Gamble, Unilever. Which one do you like over the next few years? Unilever is a little more steady. I think P&G has more upside if they get things together.

Good week for a couple of the big telecoms, AT&T and Verizon, both coming in with better than expected earnings. Both stocks beating the market this week as well. Ron Gross, what do you think? Story for both companies is a transition from subscriber growth to more data usage. 60% of AT&T's customers are now on the tiered data plans. 70% of those are opting for the more expensive plans. That's where this goes. ARPU, listeners should remember, average revenue per user. That's what this is all about. I will stick up for that.

These new networks, though, that the companies need to build out to allow for this data, very expensive. The LTE technology. So, for example, CapEx in the first quarter for AT&T, $4 billion, $4.3 billion. Very expensive. So there's going to be a lot of cash outflows here. And we touched on this on MarketFoolery, our daily podcast. This is not really a case of rising tide lifting all boats. because when you look at another telecom like Sprint, they really didn't get it done in terms

of their earnings. If you're an investor, you're looking at this space, is this really where you should narrow your universe to? Are these two sort of best of class? I think they are. Sprint has kind of tied their wagons really to the iPhone to a very significant extent. Verizon and AT&T have not to the same extent. And when Microsoft comes out with their new phone, I think they'll be beneficiaries as well. So I would focus on either one of these two. Joe, what do you think about sort of the ripple effect of the smartphone when it comes to these companies? Yeah, well, the trouble for them is that they're having to raise their CapEx significantly to pay for all the data that's flowing through AT&T. You know, the iPhone was

a blessing and a curse. Blessing brought in tons of business, curse that it just totally overwhelmed their networks. And now everyone just mocks AT&T's coverage relentlessly. So tough to say exactly that worked. Chinese search engine Baidu's first quarter earnings were up 76%, and yet it was not enough for Wall Street because shares were down on the news. Joe Mager, it's a company you watch. What do you think? Pretty amazing quarter. Anytime you boost sales above 70%, that's pretty strong. It seems good. Yeah, they grew their customer base in the high teens, and they grew the average amount of revenue per customer by almost 50% in the quarter. Again, pretty strong results. There's just a lot of concern about the Chinese economy right now, which is well-founded,

and investors were concerned about guidance being a little bit soft. But I still think you're looking at a business that's a first mover, got a big competitive edge, has around 80% market share in Chinese search, and has a long growth runway. We got an email earlier in the week from one of our listeners basically asking about investing in Chinese companies because there is a heightened risk of fraud when it comes to dealing with investors in China. Moving away from Biden, just sort of investing in China writ large, Ron, how do you think about that? How do you approach that? Do you factor in a greater level of risk? Do you stick mainly to U.S. companies that just have a bigger presence in China?

Yeah, we've learned this firsthand. If you're going to go to pure play small Chinese companies, You need to be very careful. You need to use very high discount rates, for example, when you're modeling to value these companies. But I think it's even maybe more prudent to just stay away and play China either through multinational companies or larger, well-established companies in China that have major big four auditors and are really complying with U.S. standards. And finally, you probably use Google's search engine or Gmail, but what about a Google driverless car. A company executive made a successful trip from Silicon Valley to Lake Tahoe. Tahoe?

Tahoe. Tahoe. Or Lake Tahoe. Either one. And guys, as I did, if you think this is a whim, think again. The Detroit Free Press reported that Google is serious enough about this that the company has been in discussions with major auto insurance companies about the implications of incorporating this technology into vehicles on the road. Are you getting in a driverless car, Rob? I'm not at this point. I'm not what you'd call an early adopter of technology.

But did you hear of the blind man who took the trip and he stopped for a taco in one of these driverless cars? Really? Yeah, they're pretty incredible what they can do. And they've had a lot of miles that they've put on this fleet of 10, I think they have. So it's not for me yet, but it's pretty interesting. So they're out there on the road.

James, you're a gearhead. Are you getting in a driverless car? Chris, I have been sentenced to defensive driving school four times, So it might be good for me to get into one of these things, but not for a long time, not for a long time. I've been squeaky clean for like a good while. For a month. No, I would not get in. If it had override controls, I might get in, but barring that, no, I just don't trust it.

Joe, you'd do this, wouldn't you? I totally would, and this is such a brilliant long view move by Google. I know it sounds totally harebrained, but one, there's a safety component, and two, what would you do if you didn't have to drive in the car? You'd probably sit there and surf the internet. You do more internet searches, and that exactly plays into what Google wants. I'd sit there and be terrified that the driverless car is going over a cliff. Well, I ride the Metro every day, and I'm not terrified that it's going to crash, even though it maybe should be. You know what the Metro has?

A driver. Touche. Ron Gross, James Early, Joe Maker, guys, we'll see you later in the show. See ya. Coming up, Earnings Palooza continues with Amazon, Starbucks, Netflix, and more. Don't go away. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Joining me in studio now, for Motley

Fool Pro, Jeff Fischer. For Motley Fool Stock Advisor, Jason Moser. And for Million Dollar Portfolio, Charlie Travers. Gentlemen, thanks for being here. Hey, Chris. Earnings Palooza continues with a brand new team of analysts. Let's start with Amazon. Shares of Amazon up big on Friday after the earnings blew away expectations from Wall Street. Jason, I'll start with you. Really strong sales of the Kindle Fire. Big jump in first quarter shipments.

What do you think? Yeah, I think Amazon did a really good job of setting themselves up here. Because if you remember last quarter, they had released the news that they continued to see growth in revenue, but that they were going to be investing more in the business, building out those distribution centers. And probably that was going to result in a potential net loss as far as operating income goes. Well, they came in operating income positive, really parlayed on the success from the holiday season of the Kindle, Kindle Fire in particular, I think. And so we're seeing the results of that today. Jeff, what do you think?

Yeah, Chris, so Amazon, their goal is to be Earth's most customer-centric company. And they need to spend money to keep working towards that goal, of course. So Wall Street is used to Jeff Bezos doing this by now. 10 years ago, they were skeptical when he would spend and spend. Now, they're actually rewarding him. They see that his vision is working. That said, one thing that caught my eye in the latest filing was that Amazon spent nearly $1 billion this quarter on share buybacks, and their free cash flow the past 12 months is just over $1 billion and down sharply in the past year. So, to me, that's a curious use of cash. You'd rather see them spend that cash in other ways?

Sure, even if it's warehouses or technology, or just sit on it. Yeah, it just definitely is to offset dilution. To be fair, you look at something like Apple, where they implemented the new dividend and the share buybacks there. They were very plain and upfront, too. Those share buybacks were to offset dilution. So, I do agree there. I'd rather see them do something else with that cash than just buy back shares to offset that. So, when you factor in the shares popping on Friday, how does the stock look to you, Jason?

Anybody would probably say, from a PE perspective, the stock looks expensive, and that's probably fair to say that. But when you look at the amount of cash that the company generates, I think it looks a little bit more, not cheap, but affordable. And when you take into consideration the growth prospects, really what is still out there, just the innovation that Bezos brings to the table, it's hard to say that it's not a stock you'd want to buy today. I own it personally, and I would definitely go buy more. Netflix reported its first quarterly loss since 2005, and the stock tanked. The company added 3 million subscribers to its streaming business but said that international expansion is taking longer than expected. Charlie Travers,

what do you think? I like following up Amazon with Netflix because of Jeff's comment about Jeff Bezos, where the company used to get pounded for spending heavily and now it's getting rewarded. Netflix is in that situation right now. The market clearly does not like that it is investing heavily in overseas streaming. It is taking the profits from its legacy DVD business and transforming the business into a streaming provider and, in the process, killing its profitability. But the fact of the matter is, if they don't invest heavily in streaming, they're not going to be a player in this highly competitive space for long, and they have to get out front, and that costs money.

Yeah, and I think, further to Charlie's point there, Netflix also did a pretty poor job of communicating in the shareholder letter. We know that Netflix's model is all based on subscribers. They continue to grow subscribers, and that's how that company's going to make money. And it was something in regard to the seasonality of net ads that they were talking about, where they broke out these different mathematical models to explain their rationale. And I mean, you have to look through it three, four times to really even get a beat on what they were trying to say, and ultimately still not quite sure what it all meant, other than to say that their percentage of net ads is going to drop maybe a little bit because of

the scale of the company. But I think that was a miscommunication that led to some questions on Wall Street as to what it meant. Right. Netflix does a great job communicating excruciating details about its business to the investor community. But in this case, they really went overboard. It was more counterproductive than anything. What do we think about the stock? Because our colleague Joe Mager, who's a value guy, said that he thinks it's starting to get down near towards value territory. If you like the company and what they're doing, which I do, I think they're running it like a private business and not trying to appease Wall Street anymore. I

I think you have to give it a look right now. Starbucks' quarterly earnings rose 18%, and the company raised its forecast for the year. And, Jeff Fischer, despite all that, the stock was down on Friday. Why? It was the best of times, it was the worst of times. And that's really what's going on. Results in North America are great, but Starbucks has losses in Europe. And that's what the market focused on. Starbucks is saying Europe, especially Western Europe, looks a a lot like the U.S. in 2008. Consumers are not confident, sales are down a little bit, profitability is not there. So, they're retraining baristas, they're advertising more, they're

putting into place a similar turnaround plan that they implemented so well in the U.S. the last three years. But that's going to take time to take hold in Europe. But overall, the company is doing very well, and shares are still up 25% this year alone. Can the growth potential in China offset Europe, or is Europe still too mature a market for Starbucks? The growth potential in China certainly can, but Starbucks needs to be a company that operates at a healthy profit in every region where it operates, and Europe is a very important region, of course. I mean, I think you have to liken something like Starbucks as aspiring maybe to one day get to where sort of McDonald's is now, in the sense that McDonald's generates about 70% of their revenue from outside of the United States.

And so, as long as Starbucks can continue to penetrate these overseas markets, whether it's Latin America or Europe or Asia or whatever, they are going to need to be relevant in every single market to really make that next leap. Panera's first quarter profits rose 26%, better than expected, and the stock jumped on the news. Jason, this is a stock advisor recommendation. What do you think? I love their bagels. Well, apparently a lot of people love their bagels. I think a lot of people do. I think a lot of people do. No, the company's done really well. They continue to grow same-store sales, which we know we

talk about these retail and restaurant companies, that's a really important metric. They've done a good job of opening stores slowly and methodically, not really trying to oversaturate the market. And I think part of that is, so we know co-founder and CEO now Ron Shay, he jumped back into that CEO role over this past quarter. And I think that's really because he does have a vision of where he wants to take the company. He communicates a good bit with Howard Schultz, CEO at Starbucks. And so, I think he's learned from some of Starbucks' mistakes and growing too fast. We look at where Panera is today with just over 1,500 stores in existence, and I think they really have room to double that footprint over the

course of the next decade. That's really not taking into consideration international expansion. So, with a company capitalized under $5 billion, there's still a lot of room to grow, and I think that investors are taking note of that. One more company in the industry of deliciousness. Big week for Dunkin' Brands. Better-than-expected earnings, great same-store sales growth in the U.S., and lower, but still pretty good internationally. Dunkin' also declared a dividend. What's that about? The company hasn't even been public for a year. Right. And they came public with a massively levered balance sheet. They have $1.4 billion in debt, very significant interest expenses, and they decided to pay out a dividend

$0.15 a quarter, which gives the stock about a 2% dividend yield right now. And I think this is a curious choice. They are saying it's going to be about 50% of 2012 earnings, which seems quite high. I would think it would be more advantageous to them to shore up the balance sheet a little bit rather than committing paying out so much of their money right now. Yes, here's what I think is going on. So this is about $72 million a year they're going to pay out in dividends, and who's getting more than half of it? The three private equity firms who still own 54% of the company. These are, I guess we could name them, Bain Capital Partners, Carlisle Group, and Thomas H. Lee Partners. The three private equity firms that took a

$500 million special dividend from Dunkin' Donuts before taking it public. Basically, they said, hey, give us this money, throw it on your ... and that's the debt that Charlie's talking about, part of it. So, anyway, they stand to make more than $35 million or so a year extra cash from this dividend. And they're the majority owners. So, I have to think they were a big part of it. Between them, at least four board seats. There you go. Is that why Mitt Romney loves Dunkin' Donuts? Because he's a Bain Capital guy?

No, because they're tasty. They're the best donuts in the world. They absolutely are. Thank you. That's debatable. Krispy Kreme's really up there. Let's just close out on the stock. When you look at Dunkin' brands, we've talked before, we talk when the company went public about giving companies that go public just a little bit of time, maybe a couple of quarters, to see how they do in the public markets. Do you still feel that way, or do you think that it's worth jumping into Dunkin' Brands? Well, I think they're doing a good

job. They're going to put down 600 more stores globally, compared to a store base of 17,000 Dunkin' Donuts and Baskin-Robbins, which is massive. But at 27 times earnings, I don't really like the stock here. Coach reported stronger-than-expected earnings, strong results in China, more than made up for weaker numbers here in the U.S. Charlie, are you loading up on handbags? No, the stock more than the bags, Chris. This company is doing very well. It has such a strong brand. They are essentially impervious to the economic environment. It's one of those few companies that can boast that. Earnings were up 24% in the current quarter, and they once again increased their dividend, this time by 33%. Coach introduced its dividend in 2009 at just

$0.08 a share, and this year they're going to pay out $1.20. That is very strong and consistent dividend increases out of them. And with such expansion opportunity, particularly in Japan and China, I think Coach has a bright future. It's worth a look. What's the big threat to a company like Coach if they're doing this well in uncertain economic times? I would say there's a couple of other brands that they would compete with that could kind of steal market share. Fashion tends to be a little fickle. A company like Burberry in the U.K. and the like. But right now, it looks like nothing's going to stop them. How does the stock look to you? I'm very interested in this stock. It's one that's been on my radar for quite a long time.

Despite earnings falling 45%, Ford Motor still beat Wall Street's expectations. But Jason, plummeting sales in Europe? They're not helping. No, but Europe's in a recession. We know that. So, I think, you know, this is sort of a tale of three different, you know, markets here where they're investing strongly in Asia. And so, they're going to continue to spend to get that investment broken out there. And then, Europe obviously is dragging down results. But they had really the highest operating profit in North America since they actually started breaking that out back in 2000. So, you know, great performance at home. They've paid down more of their debt, which is really a good thing. I think it's a big deal, really, to note that

their credit rating is now officially investment-grade. It was recently moved to BBB-. Now that they're investment-grade, it's going to attract a lot more institutional holders. Their debt looks certainly more attractive because they realistically can afford it. A lot of things that they're doing right, the auto show, I was really encouraged by their move into all sorts of alternative energy vehicles. It's not just hybrids or natural gas. They're doing a little bit of it all with hybrids, plug-in hybrids, regular gasoline cars, because we know those aren't going away anytime soon. They've done a good job producing cars that people actually want to drive. All in all, I'm feeling pretty bullish about their future.

I'm a little concerned with Mulally leaving. He's certainly done a great job bringing the company back from the dead here over the past few years. We're going to have to keep an eye on it. Europe is going to drag down, I think, continually. But China, Asia in general, and North America should help keep it afloat. Is Europe the key thing that investors should watch over the next six months, or is there something else? Well, I think they also need to keep an eye and make sure that investment in Asia is paying off. Because that could be off or not, and if it is, that would be real trouble.

You know, what's funny is, we may be entering a time, long-term frame, where not all three markets in the world are all doing well at the same time. You'll have the Americas doing well, and Asia right now, and Europe not so well. In the future, maybe it's Asia and Europe doing well and not here. But these multinational companies will find a way to make it work. Shares of Zipcar hit a new low this week after the car-sharing company reported another loss. Charlie, you're a Zipcar consumer. I have been for two and a half years, and I love the business. I'm a huge net promoter

for them. And yet? And yet, the market hates the stock. The company IPO-ed about a year ago, and it's been straight down ever since from $25 to $12. And it's a similar theme to what I talked about earlier with Netflix. Zipcar has to invest heavily in its growth. It's not making any money right now. It's guided to make a couple million dollars for the full year. But the market doesn't like that. This is a capital-intensive business, and Zipcar has to market heavily. It has to buy new cars. For example, they added 1,100 cars to their fleet over the last year. Cars are not cheap,

as we all know. And I think the market is short-sighted in not seeing that its consumers love this business. It grew its membership over 23% last year. There's now over 700,000 people using Zipcar. I think this is the wave of the future, but you've got to be patient to get there. I think the market's missing the story, and I think this is a great opportunity. You think it's a value? Absolutely. Sticking with cars, we talked earlier in the show with the previous panel about Google's driverless car that they've been testing. One of the executives at Google successfully,

I guess I was going to say drove, was driven in the driverless car from Silicon Valley to Lake Tahoe. We kicked this around with the other panel. Would you get in a driverless car, Charlie? That's frightening. I like the illusion of control that I get from driving myself. I don't even want other human beings driving a car that I'm in. Jason, you getting in? I was apprehensive enough getting in the Ford car months back when we had that demonstration of the one that parallel parks itself. I mean, and you're going like two miles an hour there. So jumping in a car seems to me you just would be always on guard with hands not quite on the wheel.

But I don't think I'd want to be on the car. What if Google sweetened the deal and it's, Jason, test this out for us. It'll drive you up to New York for an all-expense-paid weekend. Expense-paid weekend doing what? Just, you know, hotel and restaurants. Yes, yes. All the great golf courses in New York City. Sweeten the pot a little bit, Chris. Jeff Fisher, you hopping in a driverless car?

No, absolutely not. I'm afraid when my wife is driving, I have to keep my eyes on her. Well, anybody. Not to pick on my wife. Jeff, did your wife listen to this show? Not this week. I won't let her. Anybody else driving? No, I need more control. I'm a mess that way. All right. Drop us an email, radioatfool.com. We'll take a little informal poll. Let us know if you would get in a driverless car. Charlie Travers, Jason Moser, Jeff Fisher.

Guys, thanks for being here. Thank you. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. 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 back in the studio with me, James Early, Ron Gross, and Joe Mager. Gentlemen, that time, once again, time for the stocks that are on our radar. Our man Steve Brido, not on the other side of the glass this week. What did you say? He is on assignment in Florida, but our man Mac Greer is on the other side of the glass. So Mac will be coming at you with a question, so I hope you're ready. Ron, you're up first.

All right. Omega Protein is my company, ticker symbol O-M-E. A microcap company. Now stick with me. Leading producer of fish meal and omega-3 fish oil. They fish the fish called the menhaden, and they really have a monopoly on fishing that type of fish. The company is struggling. Fish oil yields are low. Regulation is troublesome. 80% upside from here. Mac, what do you think? Question for Ron?

Ron, it's a micro-cap. We typically stay away from micro-caps, so convince me that this isn't a really bad idea. Don't confuse the word penny stock, which has a certain stigma to it, with microcap. It's a small company, $140 million in market cap, profitable, great balance sheet. It's a fine company. It just happens to be small. There's nothing wrong with small companies as long as they're operated well. Okay. James Early, your stock this week? Chris, I'm going with Click Software. The ticker is CKSW.

This is a recent II recommendation. It's already up 5.2% for subscribers. It's basically started out this Israeli math and statistics PhD guy was scheduling things for the Israeli Air Force. Then he thought, wait a minute, I could use this sort of software intellectual property to help reduce the cable guy weight. So, you know, cable guy comes, I'll be there between 7.30 and 5 p.m., you know, and it's like, it kills your whole day. So he basically helps these companies reduce the wait time of their customers. It's software, but it's a public company. He's an American hero.

Yeah, he's an American hero. And it's just sort of a simple business. It's actually nothing super high tech, but he has this IP in his program. Matt, question for James? So what's the big untapped opportunity? I mean, it sounds like a nice service, but I'm not sure I hear the business there. Well, it saves these companies money and it increases customer satisfaction. Companies like Best Buy, cable companies, and telecom companies are sort of the bread and butter.

But any company that has service people going to visit you, they can better fill their time. So they have fewer gaps. That part saves the company money. And then they save you time as the customer by giving you a tighter window to boot. Sounds like a nice acquisition candidate for somebody. Would you think? I think he would be willing to sell at the right price. I'm not surprised.

Joe Mager, your stock? I'm going to go with Chesapeake Energy. Wow. It's one of the largest oil and gas producers in North America. Maybe best known right now for having a CEO who's grossly overpaid and informally being investigated by the SEC. Makes himself loans from the company, things like that. Very, very questionable management.

I wouldn't trust this guy to house Tim Hansen's cat, but I do think the stock is really cheap, and I like the strategy they're taking of chopping up the business and selling the individual properties they've got. I know you kind of got to hold your nose with this one, but I think it's really interesting. Mack? Any chance we're going to see a change at the top and that Aubrey's going to go? Maybe. They've been getting a lot of heat. I think he would stay on as the chairman, but I have to admit, I'd still be surprised if it happened. Would you prefer he stays or goes? I would love to see him go.

All right, Mac, three stocks, Chesapeake, Click Software, and Ron's Omega Protein. Omega Protein, 80% upside. Did I say that? You know, I've got to say I like the Click Software idea. We're going through a final nightmare right now. It's a sucker for a math PhD every time. All right, congratulations, James. Thank you.

Ron Gross, James Early, Joe Mager. Guys, thanks for being here. Thanks, Chris. That's it for this edition of Motley Fool Money. Our engineer this week is Gail Agnew Nuevo. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening.

and we'll see you next week.