Motley Fool Hidden Gems Investing - Motley Fool Money: 05.10.2013

Episode Date: May 10, 2013

Whole Foods produces big earnings. Tesla surprises. Groupon delivers. And Facebook eyes the map app Waze. Our analysts discuss those stories and share three stocks on their radar.  And Motley Fool Income Investor Advisor Joe Mayger talks about the philsophy behind his top-rated investing newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

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That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to 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 from Fool.com, Matt Kopenhafer. Good to see you guys. Good to see you, Chris. Earnings Palooza rolls on. We've got the latest results from Disney, Whole Foods, and Tesla

Motors. Just in time for Mother's Day, one restaurant is making a very, very special offer. And as always, we've got a few stocks on our radar. But we begin this week with the market in general. The Dow index hitting a record high this week, crossing the 15,000 mark. James, we were joking earlier in the week on Investor Beat when we had our 15,105 special. But come on, this is America. We love big numbers that end in lots of zeros. But all kidding aside, when you think about the market hitting a new high, what does that do for your investment thinking? Well, Chris, what's interesting about this new high is it's set not so much because of

high expectations, but because there's not many other places to put the cash. I mean, bonds aren't any good. People are just fearful. It's kind of like the high school girl who asks out every guy she knows to go to the prom until someone finally says yes. It's not so much a union made of passion, just because it's more default. Just settling. I would say practically speaking, though, you don't have to buy the whole market. That's the beauty of investing. A lot of the larger cap blue-chip names are a little bit rich, but there are plenty of smaller and more international companies that I see a lot of value in. Jason, what about you? How are you

I think that James is spot-on. With the high school girl analogy? Well, to his point there, I think now we really need to look for quality. You really want to go after the prom queen, or if you're a girl, the prom king. You really need to find the quality in these companies, because this rising tide is lifting all boats. Fixed income is dead for the foreseeable future, and really, the market is the place to go for returns. That's where the money's going. It's bidding up all of these prices. It's not to say that some of these companies don't deserve these prices that they're fetching, But it does make me, it raises the burden for me even more when I see these lofty valuations.

I really, really want to make sure the companies that we're buying into have sustainable ways to make their money. You see a lot of these dot-com companies that have yet to really prove in sustainable models that they're fetching some pretty high valuations. And that's why I would tell people to be very careful. Matt, you agree with that? It's one of the weird things about the stock market, right? That people get excited when prices go up and they get depressed when prices go down. I'm on Banana Republic's email list, and they send me way too many emails.

When I get an email that just says, buy our stuff, I usually don't click through. When they send me an email that says, we'll give you 30% off, I usually click through, and I'm looking at some stuff. In the stock market, it's the same thing. We're looking for sales. We're looking for lower prices. When prices go up, eventual returns go down. But like these guys are saying, if you look for individual companies, if you look for good deals out there, I think there are still some that are worth buying into. Are you a Banana Republic guy in general, like fashion-wise?

You seem pretty fashionable. I'm thinking about role modeling you, so I'm asking you. The Banana Republic clothes fit me. It's good enough. It's easy. I like shopping at places I don't have to think about, and bananas won't. Maybe I'll get on the email list, too. We need all the help we can get. All right, let's get to some of those individual companies. Facebook is reportedly in the final stage of negotiations to acquire Waze, a GPS software startup company based in Israel. Matt, the price tag is reportedly somewhere in the neighborhood of $800 million to a billion dollars. That's more than they paid for Instagram. What do

you think about this? Well, the first thing that comes to my mind is, so Facebook now will, they know who my friends are, they know who my family is, they know what I like, they have lots of pictures of me, and now they will know where I am at all times and where I'm going. This is the next level of creepy here. Working at Facebook must be a stalker's dream. I mean, think about that. From a business perspective, I think there is some good news in this potential move. It's kind of a sniper's thing.

They're narrowing down all of the different places that their customers are, that their subscribers, the people on Facebook, where they are, what they're doing. This makes the advertising that much more attractive. What do you think, Jason? I was really blown away by just the screenshot I saw of Waze and the little characters that are in there. It's like you've got guys with crowns and swords, and it kind of took me back to King Arthur's Court there for a minute. But I have a feeling that when Facebook buys Waze, they're actually going to probably change it immediately to Trafficville or something like that. Because that's what it strikes me as.

I mean, the one thing with Facebook, it fetches this high multiple, and it's yet to really prove out its business model. We're not sure how they're going to be making their money. Well, I think this is just really another example of how they plan to make their money. and they're just going to buy it. So I'm still very skeptical of Facebook as far as its monetization goes, and I think that today's price still doesn't put me in a range where I'd feel comfortable buying the stock. You guys were trying to explain to me Waze earlier this morning, and I was just trying to get it, but I'm not sure I do.

It's just like a GPS system where people input things, right? And then they get Lucky Charm-type feedback if you input a lot. Is that correct? Right. So it's not just like a Google Maps where you're figuring out the best route to drive along. It goes one step further to include interactions and engagement with the people who are driving. I'm not sure how the people who are against texting while driving will feel about this. But among the features is a police officer spotter. So that if you're driving along, you can press a button and indicate, oh, there's a speed trap right there. And then if I'm driving a little ways behind you, I'm also going to get the benefit of that input.

I think it's also sort of that garbage in, garbage out mentality. And they're rating people who are putting in good information and recognizing you as someone, if you put in good information, then maybe you get the crown or the sword, and people will look at you with awe. And this improves my self-worth as a human being on this planet, right? If I get these charms? More or less. I mean, you would feel good about it. Okay, okay. I'm just trying to get the value add.

Hopefully they integrate it to the point where then you can take your lucky charms and then go to Farmville and buy a pig or something like that. Which is what we all want to do at the end of the day. Absolutely. Just to wrap up on the stock, next week is the one-year anniversary of Facebook's IPO. And on that opening day, it hit a market cap of just north of $100 billion. Right now, it's around $65 billion. Put a time frame on it. When do you think this company is going

to get back to that level of valuation? Is it within the next 12 months? Is it farther down the line than there? You know, truthfully, I think it's much farther down the line. I mean, anything can happen. Obviously, the market behaves the way it wants to behave. But when I look at something like a Facebook, from a longer time perspective, they just still have not really proven to me, beyond a reasonable doubt, that they'll be able to sustain a real money-making model. And so, even at today's prices, I'd still stay away. Yeah, I'm with Matt. They seem like a bunch of obnoxious peeping Toms to me. I mean, I'm

going to say 50% chance it never goes above $100 billion. I don't think Matt was actually indicating that, but we'll move on. Microsoft has reportedly offered $1 billion to Barnes & Noble to buy Nook Media. Microsoft would get the Nook tablets, e-readers, e-books, and the college book division. Jason, shares of Barnes & Noble shot up 24% on Thursday when this news broke. Is this a good move for either company, for just one of them, for both? What do you think? Well, I think that remains to be seen. I think it's probably the most logical deal, given Microsoft's ties with Barnes & Noble today. But, I mean, the fact still remains that you're

going up against these other big players in the space, like Amazon. Amazon, obviously, the No. 1 player there. And even Apple, to a degree. So, they've done a great job of getting those devices in our hands to buy books. And so, it kind of gives you sort of a feeling that the physical bookstore is going away to some degree. I don't know that this really is a good deal for either squad, but I would have to imagine that Barnes & Noble's investors are more, I guess, optimistic about it than not, because it does give them a chance at least for potentially Barnes & Noble to go back to their physical bookstore, which is really their bread and butter.

Is it like a person donating all his blood? I mean, what do they have after this is gone? I was going to say, we talked earlier in the week about this. It seems like, at the end of the day, while Thursday was obviously a great day for Barnes & Noble shareholders, if this deal gets done, then they're going to have a big pile of cash and a bricks-and-mortar business. Yeah. And I think that those who own Nook devices will probably have some nice paperweights. But, I mean, I think this lends back to what we were talking about earlier

in the week with Microsoft. For a long time, Microsoft was a very innovative company, and they've turned into this reactive company. They're not very innovative right now. They're kind of doing that same thing in trying to buy growth and buy new ways to sort of diversify the business. And this probably isn't really going to do much to gain share in that e-book segment when you're going up against something like an Amazon already. I don't know that it really works that well for either one. Shares of Bank of America hit a two-year high this week when news broke the Bank of America and the MBIA reached a $1.7 billion settlement. James, this stems from the days when MBIA

was dealing with Merrill Lynch and Countrywide. Is Bank of America anywhere close to the finish line in dealing with just the residual effects of the Countrywide acquisition? Probably close. I mean, the sub-40-minute version, Chris, is that acquisitions don't always work out very well. These guys bought Countrywide indirectly a few years ago, wrote a bunch of garbage loans. MBA insured these loans, and then that sort of went bad, so they're trying to recoup. These guys have settled, but we still have the U.S. government is suing Bank of America for Fannie and Freddie problems. Bank of America is trying to settle with country-wide investors. Some European banks, AIG, they have lawsuits. So, we're

not done yet. Is the stock at all attractive? Obviously, it's at a two-year high, but is it time to jump in? Yeah, that's not saying much. I'm still not a buyer at these prices. Sticking with banks, Matt, there have been more calls this week for J.P. Morgan to separate the positions of CEO and chairman. Both of those positions held by Jamie Dimon right now. He's feeling more heat. What do you think? Is this a smart move or is this just people are looking to punish Jamie Dimon for the whole London whale incident last year? I think it's a little bit

of noise. I have this personality where when everybody is of one opinion, I want to automatically be of the other opinion. So coming out of the financial crisis, everybody loved Jamie Dimon. He was the greatest banker out there. I said, well, there's probably more to the story than that. Since then, we've seen the more to the story. We've had the London Whale situation. We've got this new lawsuit from California. Jamie Dimon is not the amazing banker that people thought he was, but now that everybody's on the anti-Diamond bandwagon, I'm thinking, he's a good banker, and I don't think there's any reason to split up these positions. O' But is part of him being a good banker the company he keeps? Because certainly,

to go back to Bank of America, you look at a Brian Moynihan who, charitably, his track record over the last few years is not that great. Diamonds over the last few years? O' I would say Moynihan. So if you're Diamond, you're hanging out with the likes of Brian Moynihan and once upon a time Vikram Pandit at Citigroup and it's- Oh yeah, there's not much of a comparison. The only really big bank out there that puts Diamond to shame is you've got Wells Fargo and John Stumpf, and they put Diamond and J.P. Morgan to shame to a considerable extent. So, it's not a very high hurdle for him,

but he did clear the hurdle. Great hair, too. Great hair. Great hair on J.P. Morgan. Coming up, some hedge fund managers have been betting heavily against Tesla Motors, and those hedge fund managers had a really, really bad week. Stay right here. This is Motley Fool money. Hey, it's Chris here. Is your business protected from data loss? If not, join the 80,000 businesses who trust Mozi to protect their important information. Mozi automatically backs up your critical files to world-class data centers with maximum security. It's easy to use and costs up to 80% less than other solutions. Learn more at mozi.com. That's M-O-Z-Y.com. Mozi, it's always there.

Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, James Early, and Matt Koppenheffer. Disney's second quarter profit was up 32%. I'm going to use the word up a lot, Jason. Parks and resorts were up, studios were up, media networks up. Shares hitting a new all-time high this week. They had a movie called up, too. They did, once upon a time.

Is there any badness to their quarter? Well, sure. I mean, we can always find badness. I mean, you know, I think that when we talk about really looking for quality companies today with this rising tide, I think Disney stands out as an example of one of those companies that you really want to seek out. I mean, definitely tremendous global scale. I mean, you look at the different ways they make their money,

and I think that's one of the most attractive parts about the company. But for the quarter itself, the thing that really stood out to me was the park segment. It's one of their bigger moneymakers, but for the longest time, the parks have really had a lot of trouble because they've had to discount tickets to figure out ways to get people in the door. And because they have so many fixed operating expenses in those parks that have to run no matter what, their operating income in those parks had been low for a number of years now. But we saw sort of the flip side of that coin, that when they're able to bring more people into the door, traffic was up 14%. Revenue was up 14%.

Attendance was up 8%. Spending inside the park was up 10%. I went to a park this past quarter. Yes, you did. My first time ever. Seven days this guy pulled like a marathon. Wow. That's impressive.

That's a bit too long, but I'm sure you probably contributed to these results, James. But, I mean, I think that's one of the most encouraging parts about Disney, and I think it speaks a little bit to the general economic recovery as well. I mean, people are going back out and spending a little bit more money. We were talking during the break about Bob Iger, the CEO, and what an amazing job he's done over the last few years, particularly with acquisitions of Pixar and Marvel. He's going to be in the CEO office for another couple of years, But how soon does he need to start paving the way for his successor?

Because somewhere, probably not this year, but certainly in 2014, shareholders are going to want to know who's going to be next. Yeah, and I'd like to believe they're probably looking at that as we speak. I would think that in 2014 we'll probably get some more clarity as to the strategy there. But you're right. I think that's one of the biggest risks with Disney right now is because Iger has done such a great job with those three acquisitions. Or at least he's done a great job with the two. Lucasfilms has yet to prove out, but I think we all are relatively optimistic that it will. Everybody loves Darth Vader. That said, I do think that's probably the biggest risk

with the company right now, and we'll probably get some more insight to it in 2014. Whole Foods' second quarter profit rose 20%. Same-store sales were up 7%. Stock hit an all-time high, Matt, and they announced a two-for-one stock split. It really seems like things are going well over at Whole Foods. Well, Jason was just talking about people spending more money, and I guess that's definitely the case here. Now, I can't actually do all of my shopping at Whole Foods because they don't have Captain Crunch or Cookie Crisp, but people are definitely shopping there. One of the things that jumped out at me, interestingly, Whole Foods stores over 15

years old had comp store growth of 5%, which I thought was very impressive. The margins there are just so strong. I mean, the grocery business is such a thin margin business. You just got to do a ton of volume, Whole Foods just blows away all these other stores. O' Mango flash sale. Mango flash sale, yeah. When you look at the stock, though, is it a little pricey? It seems like this might not be the time to jump in. I don't know. I'm a bad one to ask. I get too focused on numbers like that, on valuations like that, and I'm always saying, oh, it's just a little bit too expensive. But you end up missing so many good stories,

good companies by doing that. O' Just to understand, underscore the power of the brand, Chris. My cholesterol is a little bit high, so I've been eating oatmeal from Whole Foods in the morning for breakfast, and shortly before coming into tape here, I was chewing the oatmeal, and I felt something a little bit hard. I almost just swallowed it, but I figured I'll see what it is. It's actually somebody's fingernail. So, I threw that away. But, I'm going to go back and get oatmeal again on Monday, because I love Whole Foods that much.

Now, are we clear this is a fingernail that didn't come from your house? It was colored from being heated with the oatmeal, yeah. Moving on, for the first time in its 10-year history, Tesla Motors has reported a quarterly profit. They made $11 million in profit in the first quarter. Revenue up 83% from the previous quarter. Stock up big, James. Those people betting against Tesla had a really bad week. It was a bad week for them, Chris. To be fair, this is an overnight success that was 10 years in the making. This is their first profit in 10 years. The shorts actually had an understandable case. They didn't win

this one. The stock is about a double over the past couple of months. It's gone from $4 to $8. I think there used to be 40% short interest, which is really, really high. It's not in my camp. It's not the kind of stock I would buy. It's just my style of investing, but I wouldn't bet against it. What do you think, Jason, when you look at the stock at an all-time high? Again, it seems like for people who want to go the other direction and say, oh, it's nothing but profitable quarters from here on in. Yeah, they're all-time highs that you want to buy into, and then the other ones that you want to run away from. And I think this

is one that you probably want to run away from. It's not to say that Tesla won't be able to succeed. I think we're all probably rooting for them to a degree. But as James mentioned, it was one profitable quarter. They are going to have to probably raise some more capital here very soon. So, I imagine we'll see a better stock price in the coming months. In the minute, we have left. It's Mother's Day weekend. And guys, you could go with the usual cards and flowers and that sort of thing. But one all-American restaurant chain wants to welcome mom with open arms. And I'm referring, of course, to Hooters. This Mother's Day, Hooters is offering free entrees for mothers who bring

their children and buy any drink. Dave Henninger, the chief marketing officer, said, we know you don't think of Hooters as a typical place to take mom, but we want to make it more appealing for mom to come in. What do you think? I think they can make it really appealing if they offered free photographs with Ricky Bobby to come with your brunch at Hooters. Bringing the kid, is this the hard part? It just seems icky. Wings and orange hot

pants? I mean, what is Mother's Day really all about if it's not that? Wow, when you put it that way, I mean, what's more all-American than that? Alright, Matt Koppeneffer, James Early, Jason Moser. Guys, we'll see you a little later in the show. Coming up, we'll head to Sydney, Australia to catch up

with an old friend who just happens to be running the number one investment newsletter service over the last five years. Uncle Joe Mager is next. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. For more than 30 years, the Hulbert Financial Digest has been tracking the performance of investment newsletters. And over the past five years, the best performing newsletter is Motley Fool Inside Value, run by our own Joe Mager, who joins me now from Sydney, Australia. Congratulations, my friend.

Thanks. Thanks. Well, I've been running it for three, so I can't take all the credit, but we've had a good run. You can take 60% of the credit. I should point out, selfishly, hundreds of newsletters track Motley Fool Inside Value as number one over the last five years, but right there in the No. 2 spot, Motley Fool Rule Breakers, and in the No. 6 spot, Motley Fool Stock Advisor. So, the Fool universe is doing quite well when it comes to investing. Full-on, David. It's interesting to me that inside value, which focuses on, I always think of it as

slightly more conservative, a little bit, dare I say, stodgy companies. Rule Breakers is more focused on growth stocks, and the returns over the last five years have been great for both. Yeah, you know, I really just think that gets to the kind of the core essence of the full philosophy, honestly, which is just business focus and long term and contrarian and, you know, inside value and rule breakers don't have a lot in common on the surface, but those things run true underneath. And I think that ultimately, we're both looking for ideas that have great payoff potential that is a lot higher on the upside than it is the downside. And it's definitely interesting to see that shake out. But it's great. Now, I'm not overly surprised. Well, at least I'm not surprised that we're posting similar returns. I am pleasantly surprised with how we're doing. We've seen over the last week, the Dow hitting record highs. Is it harder for you to find good values in the stock market when the Dow is hitting record highs? Yeah, it is. I'm not one of those value guys, and there are a lot right now who are freaking out about record high profit margins. That said, I'm just not finding as many good

bottom-up opportunities as we usually do. There are only eight companies on the IB scorecard selling for below our buy below price today, eight out of 38 recommendations. So just as like a personal little index I follow, that is a low number and definitely a little bit of a challenge. It's forcing us to dig a little bit deeper. A lot of the consumer names that a lot of retail investors are familiar with are very expensive these days. So that's tricky. I think banks and insurance companies continue to be some of the only cheap stocks in the market. But yeah, and big tech, a lot of big tech is still cheap. But other than that, it's really slim pickings out there. It's obviously been a great last few years for the stock market in

general, but you've had a great run running Motley Fool inside value. When you're looking to pick stocks, what are one or two things that you look for that other investors might overlook or just outright ignore? Well, I think we try and stick with what we're good at, which is analyzing businesses and not making macro calls. And it seems like most investors, including a lot of value guys who used to probably would have described themselves

as being bottom-up, fundamentals-focused, business-focused investors, are suddenly making these complex, arcane options trades and convoluted portfolio decisions that I think are getting a little bit too cute and they might be overthinking how this works. Sometimes it really is just as simple as finding great businesses and good prices

and having the conviction to buy and hold them. And that's really just kind of what we're trying to do is find those businesses and just to put a little more nuance around it, I guess, we're trying to find companies that have durable competitive advantages that are actually growing. And there aren't very many companies

that fit that bill but we're trying to find them and you know companies that can reinvest in high rates for a long time are incredibly valuable and oftentimes they'll end up getting kicked to the curb when the market does and I think we saw a lot of that in late 2011 when we got especially aggressive when the market pulled back and that was just a you know a great time to hop in so focusing on quality focusing on what we're good at being willing to walk away from industries or companies where it's just too hard for us or we don't feel like we have an edge. And, you know, honestly, I think that's the recipe for us. And we're not the first people to think of trying to invest that way. But that's the playbook we try and follow. And it's working.

You mentioned financials earlier. And I know that that's an industry that you like to focus on. And frankly, a lot of people, myself included, stay away from financials. One of the companies in That's why I'm interested. I know that one of the companies in that financial universe that you're a big fan of is Markel, the insurance company. For those who may not know the story, what is the background, what's the thumbnail sketch on Markel, and why do you like the stock so much? So, Markel is like a little Berkshire Hathaway, headquartered in Richmond, Virginia. It's my largest personal holding for Time Reckon Inside Value.

It's a specialty insurance company, and they focus on insurance policies that there's not a lot of competition for, so things like bars or yoga studios or weddings. People need insurance for these things, but there's not a lot of competition for it, which means that Markel can price pretty aggressively, and you just kind of have to deal with that. means they also have a specialization where there's not a lot of competition in terms of thinking about what good pricing is. And so it's a very profitable little niche. They have tons of these little niches. They bring that money in and they hand it over to Tom Gaynor, who's their chief investment officer. He's a very savvy value investor himself who invests the money on Markel's

behalf. And it's just kind of a virtuous circle, really, of good underwriting driving good results. and then the investing side growing the business as well. And that's done incredibly well over the long haul. And right now the shares are pretty out of favor for a couple of reasons. One is that insurers at large are unpopular these days because interest rates are low and that's hurting the investment income that they're earning on their float. So the premiums they've taken in but haven't paid out. And the second is insurance prices have been really soft for a long time,

And I think that had to do with too much capacity being in the market, low rates not helping in a soft economy. But right now we're finally seeing rates, insurance prices across the board starting to increase. And I think the recent acquisition that Markel did, they're acquiring a company, Altera, is going to turn out to be a very smart one. The market didn't like it, but I think it will turn out to be a good move because it's going to give them a lot more float to put to work and diversify the business. So it's one of my favorite little businesses that not too many retail investors know a lot about. You're listening to Motley Fool Money, talking with Joe Maker, the advisor behind Motley Fool Inside Value, just named the number one performing investment newsletter over the last five years by Hallberg Financial Digest. You mentioned Markel being a mini Berkshire Hathaway. Last week you

attended the Berkshire Hathaway annual meeting out in Omaha. What was the big headline as far as you were concerned coming out of that meeting oh i think berkshire and buffett both still have it you know i've been to a few of these now and it's so interesting to see the energy level that warren and charlie bring to the show uh and it really is a show i mean these just got these guys just come out they're so energized and so is the crowd you get a stadium full of people 30 000 people all there to hear two old guys talk and answer questions and i never feel to fail to be amazed that at the end of the day, I'm the exhausted one, and they are just still rattling off answers and facts from very deep memories. And, you know, they're very smart guys. Obviously,

they're both in their late 80s, and they're not going to be running the business for that much longer. And I think it's important to take a grounded perspective with that. That said, I think the meeting is a great reminder of the culture that Berkshire and Buffett have set in place, and the quality of the businesses that they have and their ability to keep generating strong returns over a long time. And I think if you're a Berkshire investor, you got to feel good about that. I mean, ultimately, you're talking about a company, Berkshire, that's a parent company of dozens of smaller ones that are handpicked from history's greatest investor, specifically looking for ones with durable competitive advantages that are built to last. And when you think about it

through those terms, I certainly feel like Berkshire investors should feel comfortable about life in a post-Buffett era, and I'm a large, or Berkshire is a large position for me at least, and I certainly feel good about it. We had a bunch of people from The Motley Fool attending the event, including your colleague in Australia, Scott Phillips. One of the things Scott said, that he was hoping to hear Buffett announce another acquisition. Obviously, the Heinz acquisition is the most recent one. And Buffett said to criticism that maybe he overpaid for Heinz, that no, it fit his model of this is a great company at a fair price. But as Scott noted, it really wasn't the kind of discount that Buffett got in the early years. And I'm wondering,

what you think about whatever comes next? Because Scott was thinking that the next deal that gets made is either going to be a return to, oh, this is Buffett getting another great deal at a discount sort of thing, or it is going to be sort of in that mode of the hind, where whatever you think of the business, he definitely paid a little bit more than he was able to pay in the past. First, do you agree with that? And second, is that something that at all concerns you? Yes, I agree. But no, I'm not concerned. I think Buffett, and I actually had a chance to ask him about this a couple years ago. It's my one shining moment of getting to talk to him. I asked him about hurdle rates and how he thinks about required returns. And

he is very upfront about he doesn't have a specified target he's trying to hit. He's just trying to put capital into the market or a business or any market that's going to deliver the best return to him over time. And right now, you're in a very low yield environment. stocks aren't especially cheap. And so when you look at the Heinz deal, is it a home run? No. But is it a much better use of cash than just sitting in the bank for Berkshire? Absolutely. I think that if we ran back to a 2008-2009 kind of scenario again, and hopefully we don't get there, but if we did, Berkshire would be in a very good position to put capital to work just like it did then, essentially bailing out GE, Goldman Sachs, and getting some very nice plum

warrants in the process, Bank of America too. And that's the benefit of having a giant balance sheet and the ability and willingness to put money to work quickly. And I think that in a post-Buffett world, Berkshire is going to lose having the face of value at the top of the company and that Buffett trademark that really was valuable during the financial crisis. That said, I think that when times get tight, Berkshire still is going to be a first phone call for people who are looking for capital in mass quantities. And I think that Buffett's successors are still going to be guys willing to write those checks. So as long as they take that mentality, I think that they'll keep being the beneficiary of being kind of a lender of

last resort in the private markets. You're listening to Motley Fool Money, talking with Joe Mager, the advisor behind Motley Fool Inside Value, and now also one of the advisors behind the Motley Fool Hidden Gem service in Australia. You've been in Australia for a couple of months, and you and I were talking recently about how your investing view has been altered somewhat now that you're not in the States. And it seems to me like you're spending more time, maybe more so than ever before, looking at smaller companies, small caps to maybe even micro caps. Is that just sort of the nature of the beast of the investing life in Australia? Yeah. Well, large caps in Australia are very expensive. I recently did a little

valuation work here, just breaking down the market. And the top 20% of companies here sell at about two times book value, and the bottom 20% sell about 1.2. That's a pretty huge disparity. Now, sure, the larger companies generally are higher quality, but not that much higher quality. and that's a massive gap. Like a lot of markets that aren't as fully developed as the U.S., I'd say none are as fully developed as the U.S., but there's not as much interest in kind of the middle market and smaller market companies that get a lot more attention in the U.S., and part of the reason is there's just not as much institutional investor demand, and there's frankly just not as much research. So there's a lot less competition among small caps, which is

true in any market, but especially here. So that's where I've been poking around, spending a lot of my time. And it's been fun. I mean, you will come across a lot of different business models here, just like working in any foreign market that you're not used to at home. And it's interesting to kind of take some of the models of working in the US and applying them in a different place and seeing what works and what doesn't. But yeah, for right now, I'm looking at very small, occasionally dirty, companies. Dirty value. You've never been averse to dirty value in the past. No. Moving away from investing, what has it been like living in Australia? What's been maybe

the biggest surprise so far, just on the personal front? Well, everything is really expensive, which I knew it would be. Sydney is a very pricey town. the weather is as great as advertised the people are as friendly as advertised it's it's been a lot of fun my wife and I just went for a stroll earlier today and couldn't uh I don't know just couldn't believe how nice it is in Sydney it's just a lovely town um and we're very happy to be here and I guess that I don't know it's kind of the overwhelming thing I love DC I miss DC, but it's very nice to be somewhere where it's consistently warm and people are friendly. Give me one tourist tip on the off chance that I'm able to weasel my way out of

the office and get a ticket to Sydney, Australia for anyone who's going. What is one or two must do's, whether it's a place to visit or a cuisine to sample? What's high up that list? Well, the Asian food here is fantastic, especially in Chinatown. That would be one. Another is that you can take the ferry here and it's part of, it's an extension of what amounts to the subway system. And you can take that through Sydney Harbor and it's more or less like taking a water taxi, only it's not designed for that, but that's what it is. And so you can just see amazing views of the bridge and the opera house and it's pretty cost effective and it gets you around town. It's very nice. Robert Brokamp. Halbert Financial Digest named Motley Fool Inside Value the best-performing investment newsletter of the past five years. Keep up the great work, Joe. Thanks for being here. Joe Brokamp. Thanks, Chris. Robert Brokamp. Anyone looking to kick the tires on Inside Value, just to check it out, take a free trial. Go to insidevalue.fool.com.

Coming up, we'll give you a look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interests 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. Joining me in studio, once again, Jason Moser, James Early, and Matt Kopenheffer. Time for the Stock Center on our Rado this week. We'll bring in our man Steve Broida from the other side of the glass. I know he probably wanted to get in on the Hooters conversation, but we just didn't. No, I didn't.

He'll hit you with a question. Matt Kopenheffer, what is your stock this week? So, I spent the weekend last weekend with Joe Mager of our Inside Value service at the Berkshire Hathaway annual meeting. We did most of our talking about Berkshire, but Joe is a big fan of Amazon.com. It's a fantastic business, and it's about where roughly 50% of my paycheck goes. I am not an owner of Amazon.com. I am a numbers value kind of guy. And I'm revisiting this stock, revisiting this company. I think this is one that I might like to own. And the ticker symbol? AMZN.

Steve, question about Amazon? I'm an Amazon Prime customer, so I subscribe to their Prime service. And do you feel like it's slipping lately? I feel like they were really fired up to send me my stuff real fast, and I feel like they're just kind of letting it go lately. This will throw myself under the bus. I order so much from Amazon that I forget what I order. As everything arrives, it's just a great surprise every time. As a longtime shareholder, I can say you are a dream customer, so thank you for that. Is it possible, Steve, you're just raising your expectations?

It could be that, too. I don't know. James, what about you? I'm going with Brightburn Energy Partners. This is an oil and gas business. It's a master limited partnership. It's about as exciting as it sounds. They own and lease oil and gas companies. Their fortunes are going to rise and fall with oil and gas prices, but they do hedge a lot. The key point here is they pay a 10% dividend yield. It's very hard to get a 10% dividend yield in this market. So, if you like a 10% dividend yield, BBEP. Can I trust that dividend yield? For how long?

It's pretty good. Anything that high is not guaranteed, right? But it's more solid than others. So, it's like a 6 out of 10. It's got the James Early pretty good stamp of approval, so I think we all know what that's worth. Jason, we've got about a minute left. Okay, so I don't think you really need to. This doesn't really apply to Mother's Day brunch at Hooters, but I think in many restaurants nowadays, you need to get a reservation. And I'm finding that I'm making more reservations, which has opened my eyes to open table.

So, you know, I'm looking into this business a little bit more. I like the fact that they're getting themselves installed in these restaurants with their electronic reservation booking system. And they make money from selling the software to the restaurant, to providing the service, to getting a scrape off of every reservation that's placed. And, you know, they continue to grow their base of restaurants that they're in. So, between North America and the rest of the world, this is a company that's going to, I think, continue to grow over time. And the ticker? The ticker is O-P-E-N. Steve?

Last time you used OpenTable? Actually, about an hour ago to make a reservation for Mother's Day brunch. He's talking his book. All right. That does it for this week. James Early, Matt Coppenheffer, Jason Moser. Guys, thanks for being here. Thank you, Chris.

Our engineer is Steve Roido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.