Motley Fool Hidden Gems Investing - Motley Fool Money: 05.28.2010

Episode Date: May 28, 2010

Can BP contain the damage? Is the economic recovery half-full or half empty? Who will win the battle for your living room? On this week's Motley Fool Money Radio Show, we discuss those stories and share some stocks on our radar. Aflac Chairman and CEO Dan Amos talks about a ducky decision that remade his company. And Corporate Library co-founder and film critic Nell Minow reviews some Memorial Day movies.   Learn more about your ad choices. Visit megaphone.fm/adchoices

This family is on the brink of civil war. On September 18th, Mobland, the hit original series, is back on Paramount+. We are the Hartigans. Don't know them yet? Then Google us. From the underworld of Guy Ritchie... Do you want to step up the ladder? I want Comet dead. Starring Tom Hardy, Pierce Brosnan, and Helen Mirren.

Do I have to do everything myself? You want more? I'll give you more! Mobland, new season hits September 18th on Paramount+. 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 Zimmerman. Guys, good to see you. Good to see you, Chris. On this week's show, Apple reaches a milestone, BP tries to get a handle on the spill, and the SEC may have found

a rat inside Disney. We'll get the story behind the Aflac duck, kick off the summer movie season with some films for Memorial Day, and share a few stocks on our radar. But we begin with the BP story. On Friday, CEO Tony Hayward called the oil spill, quote, an environmental catastrophe. He had previously said the impact would be modest. On Thursday, President Obama addressed criticism of the government's response, taking responsibility for the relief effort, but saying the government does not possess technology superior to that of BP. Seth Jason, you're a BP shareholder.

In the past week, we've seen people in the media saying everything from BP's handling of this crisis is textbook on what not to do to BP's handling may become the gold standard of what to do. Where do you come down? Can I pick somewhere in between? Please do. It is inevitable that people are upset about this. This is a horrible tragedy.

Remember that people died in this, and that's horrible. And what could happen to the marshlands and the wetlands all across the Gulf Coast is very bad. I think that the rush to judgment, however, is understandable but completely misplaced. We're at the point already in the early history of this where we're going back a couple of weeks and looking at statements that are now turning out to be inaccurate and presuming them to have been made in bad faith or been made in malice. And again, I'd like to point out that this is a hole in the ground that starts a mile below the surface of the ocean.

It's not only incredibly difficult to do, it's incredibly difficult to know what's going on down there. And so could they probably have handled not only the drilling better, but the response? Yes, but I'm not willing right now to go ahead and say they're doing a horrible job or they're doing a great job. I think they're doing a pretty good job, but we'll have to judge this from further out. Says Seth as a BP investor.

Exactly. After five weeks, they finally admit it's an environmental catastrophe. You know, they sent a guy out there to manage this rig who was out there to, quote, learn about deep water. The Wall Street Journal has a great series on this. And as we see, that's an isolated specific thing, not a whole company-wide thing. But, you know, BP— And it may also be something that's done across the—

I mean, remember, they've dug a lot of wells like this. So if we look at stuff like this, if we don't know whether that's abnormal, it's really tough for us to say, how could they have done this? Well, there's no doubt that, you know, the NMS, you know, the Minerals Management Service did not do a good job of policing this stuff in general. You know, and I'm sure there are other issues out there, too. But, you know, BP could have to pay a fine on all the oil that's leaked. So they do have an incentive to sort of lowball these estimates. BP is also the largest supplier to the Department of Defense, according to the Wall Street Journal, in terms of fuel. So they could lose $2.2 billion worth of these contracts.

I think, you know, even how the PR stuff handled was aside, that's a big issue for BP. And obviously, they've now messed up offshore drilling for pretty much everybody else now, too. Yeah, I'll just add that there's a way in which both sides on this debate are accurate. Certainly, BP has kind of blown the PR war. They've gone from modest to catastrophic, and along the way it was modestly catastrophic, I think. So they have definitely mucked that up. But to Seth's point, BP, prior to this catastrophe, did have the best reputation among all of the majors in terms of their environmentally correct record. So here's hoping that they've figured out a way to solve this problem and that it works in a way that's consistent with their track record.

Did they have the best safety record or was it just lip service? I think it would be interesting to – So I base that primarily on the fact that in the world of socially responsible investing mutual funds, no major oil company is ever touched except for BP. Yeah, and the other thing to remember here is that these oil companies, BP and the rest of them, they don't have some cavalier attitude about this. This costs them tons and tons of money when things like this go wrong. So there's no business incentive for them to be lax.

There's a lot to lose and very little to gain from them not paying enough attention to this. The thing that amazes me is that we don't have one of these every few years because this is really, really complex stuff to do. Speaking of tons and tons of money, as of Friday, shares of BP have fallen around 25% since the explosion. That's a little more than a month ago. Just quickly around the table, Shannon, are you buying shares of BP right now? Does it look attractive from an investor standpoint?

Buy, baby, buy. So now BP has all the incentive in the world not to muck this up again. And consistent with their track record, you know, if you're going to invest in a major and you're concerned about environmental catastrophes, BP was a good company before, it's a good company now. James? I'm not buying it. If there is gross negligence proven, I think BP is in big trouble legally. Seth? I think the odds of that are low.

I think I would just continue buying and I'll at least continue holding. The Commerce Department said on Friday that consumer spending was unchanged in April, making it the weakest showing in seven months. consumer spending accounts for around 70% of total economic activity. So, James, is the economic recovery missing the actual recovery part? Well, it's a good question, Chris. The way I see it is some people have real nerve, you know. Personal incomes rose 0.4%, and they're not spending all of it. I'm kidding.

I mean, this is what I like. This is the best news I've seen in a good while. I mean, the irony, the government wants people to spend. People want the government to spend. But I've never understood how we're supposed to get ourselves out of a spending problem with more spending. You know, I think it's a good thing that we're earning more and actually saving money for a change. And James has been consistent on this point for basically since the beginning of our broadcast. Because he hates America.

I think he does. And it's sensible, smart advice. But what's sensible and smart for individuals isn't so much for the economy when the economy is powered by consumer spending to the tune of 70%. Yes, there will be a time to save. That time is not now, James. 70% is the problem in the first place. Well, fine. Yeah, let's solve the problem, and then people can save again.

Yeah, geez. If everybody say, I'm with James. Actually, everybody in this room is really, really cheap as far as I'm concerned. That's true. And we are savers. The problem is that if everybody pulls back and saves at once, then there are no jobs for anybody else. So what has to happen is that we have to have enough economic growth now

that things get a little bit back towards normal, and I don't mean housing bubble normal. I mean other normal. And then after that, people need to ease back and become responsible. That's right. Okay, loyal listeners, drink some coffee, grab a can of Red Bull. It's time for This Week in Financial Reform. House Financial Services Chairman Barney Frank says he expects financial reform to be the law of the land before the July 4th recess.

But he also said that the derivatives regulation in the Senate bill, quote, goes too far. Shannon, on last week's show, you were excited about that regulation because it would require investment banks to spin off their derivatives business. Any response for Chairman Frank, who we can only assume is a loyal listener to Motley Fool Money? Disappointment springs eternal, Chris. It's really sad, tragic when you're on the cusp of having something, it's a meaningful reform that has teeth. I think I said last week that the derivatives piece of financial reform legislation

was kind of a proxy for how serious the legislation was going to be. And lo and behold, you've had not just from Barney Frank, but from other folks who you would think would be great proponents of this, walking it back already. I hear you, actually. I understand the derivative stuff. There is some benefit to spinning it off. The banks would be a lot safer, but just to be devil's advocate, would transparency alone fix the problem? To me, the big problem was not anything more than untransparent securitization. And so if we do bring all the derivatives trading onto an exchange, banks have to report that.

Is that so bad? It's a giant step in the right direction, but not sufficient. to the extent that, you know, traders are going to be motivated to take on outsized risks that could have ripple effects across the more conservative parts of a bank with the implicit guarantee of the federal government via the FDIC. That's just not something that I think is tenable, and the legislation could have, and maybe it will still, yank that out. But right now, it looks like it's on the ropes. So, your problem is because we can't bucketize the implicit guarantee, it should be separate. In other words,

the government wants to guarantee the good part of the bank, but if the bad part comes with it, that's the problem. Absolutely. And I agree with that. I just worry that Wall Street will figure out a way around these rules. And so I would really rely more on transparency and the greed instinct of Wall Street banks. Let them slug it out in a way because it'll be easier to watch what's going on. The problem with regulation is it always has unintended consequences at some point. And these are some very smart and sneaky guys. It actually does. And I think that what people shouldn't get in their minds is that, oh, this regulation is the end of it all. Everything's fixed.

It's whack-a-mole. And so, you know, exactly right. They're very innovative on Wall Street. And so the conversation, which is really what it is about regulation, would have to continue. Would you go so far as to say they're sleagle? I absolutely would. Coming up, the adventures of Mickey Mouse and the alleged insider trading. Stick around, kids.

You're listening to Motley Fool Money. Welcome back to Motley Fool Money Chris Hill here in the studio with Seth Jason, James Early and Shannon Zimmerman as we dig into some of the companies making headlines this week But first, time to welcome a new radio station to our growing list of affiliates WLBY AM

1290 in Ann Arbor, Michigan Go Blue! So to all you Ohio State fans out there Hey, sorry, we're rooting for Michigan in the big game. Do we not have an Ohio State affiliate? No, but if our listeners want to start pinging the good folks in Columbus, hey, we'll get on that bandwagon, too. We're shameless.

All right, back to the actual company's making news. Walmart is cutting the price of the 3GS iPhone. The old price, $200. The new price, $97. You still have to get a two-year AT&T contract. Seth, people are expecting Apple to introduce the new 4G model next month, So is this a good move for Walmart, or is it a good move for Apple, or both? Well, it could be both.

You know, people go to Walmart, that cart is really big, so you just put that little iPhone down in there, and you're going to have to buy something else, you know, a couple of bales of toilet paper or something. This is very interesting. The speculation is that this is happening in order to blow out inventory on this phone before introducing a new one, and that may be true. The interesting thing to me is that when you get into the $99 range,

you're starting to get toward a price point where you wonder if you're going to get into a fight and war on dollar signs. And that's not a fight that Apple can probably win in the long, long term. So they've got a great lead in smartphones right now. I think they have the best one out there. I don't think the Android phones are nearly as good. But if they're getting to the point where entry-level iPhones are going to have to compete with even cheaper phones, which do similar things, I'm not so sure that's great news long term for Apple. Yeah. And I don't think that's a game that they're going to play. And they know their customer base pretty well, and it's

upscale. Do you think this is a one-time kind of thing? I think so, in advance of what appears to be an earlier-than-expected release of the next go-round of phones. In some ways, it's a public service. It is a fantastic device, and if it is going to be able to appeal at the pocketbook level to folks who might otherwise not afford it,

it's a good thing. Do they turn off the faithful by selling it at Walmart? Because the Apple fans I know... It's not a chic. Yeah. Well, you know, in some ways, that's inevitable. Their market cap now is larger than Microsoft's. In spite of the Zune. Speaking of commodity pricing, apparently Microsoft's thinking about cutting its price there, too. It's inevitable.

I mean, you've got to go where the growth is. And for Apple, that's a segment where they could possibly grow. When you look at Apple's competition, you've got the Android software for whatever they're worth. Dell and others are trying to compete with the iPad. There are reports that the government may have some antitrust questions about Apple. What's the biggest threat to Apple's plan for world domination? Steve Jobs. I don't think it's the probe, certainly, into the music side of the business.

I think Apple has played that pretty efficiently and effectively. And that game is just about up, as I think they sort of tacitly acknowledged when they bought La La last year. It's all going to be in the cloud. This physical storage thing is going to go away. And so the iTunes, as we currently know it, is probably not going to be a part of the plan for Apple that much longer. I've got to say, I think it's hard for any tech company to get really big without some kind of antitrust issue coming into play. We saw it with Microsoft, and I think that would be, to your question, Chris, the impediment. And that's why I said Steve Jobs. If you can trust the reports, and this is all just

sketchy rumors and people who don't want their names given. But first we talked about the antitrust on software applications. Apple supposedly trying to strong arm developers into only developing for the iPhone and the iPad. Now we're talking about Apple possibly leaning on record labels to not work with Amazon and others. When you're as big as they are, you don't get to do that anymore. That's right. Time for the adventures of Goofy and Dopey. No, it's not a new Disney cartoon.

It's just the latest corporate scandal. An assistant to a high-ranking Disney executive and her boyfriend have been arrested and charged with insider trading. According to the Justice Department, the perfectly named Bonnie Jean Hoxie was attempting to sell information on Disney's quarterly earnings to hedge fund managers

who just happened to turn out to be undercover FBI agents. James, you're our resident former hedge fund analyst. What do you think about Bonnie Jean? Well, frankly, Chris, as long as she hasn't delayed the Jonas Brothers tour, I'm fine with her. Jonas is a Disney property. Actually, you know, it does say something about the hedge fund people. Like I said, I used to work at a hedge fund, and they are actually some decent people. I heard that it was actually the hedge funds that turned her into the SEC.

Yeah, they ratted them out. She sent some spam email to 33 different fund managers, and they passed that along. So the lesson is don't send mass emails about this kind of stuff. Just send something to us, and we'll—I'm kidding. Do not send anything to us. We're rolling these lines. Please. There's another lesson.

Go ahead. If I could interject quickly. Sure. And that is I'm going to suggest that Bonnie Jean learn how to use the Google. And before you try to give people insider information, you might want to use the Google to look up sentencing guidelines, especially before you set your price because according to the story anyway, They asked for $15,000 for information that could get you 20 years or so in jail. That's a really lousy annual wage.

Bad price point, is what you're saying. I think you guys are way too hard. For my part, she had me at Bonnie Jean. Sony wants a bigger piece of your living room. The company announced it will offer on-demand access to HBO through its PlayStation 3. Seth Jason, Microsoft and Nintendo already have deals with some of the cable networks, film studios, and Netflix. So a lot of competition for your television dollar.

Who's going to win? I think the game consoles stand a very good chance of, if not winning, of interrupting some revenue streams and changing the playing field to a great degree. I stream Netflix on my Xbox at home, and that's the only TV we watch anymore. I'm not so sure that what we're seeing right now from Sony, this is just HBO, and this is still the sort of pay-to-download model, so you buy a show for $3 or for 99 cents. I'm not sure that that's a little bit like the iTunes model.

I'm not sure that works the same for video as it does for music. But in the long run, I think that this is a winning technology because there's only so many plugs in the back of a TV, and people only want to put a couple of things in there. And so game consoles are already incredibly popular. To the extent that they can replace yet another TV cable box, I think they're going to do very well. But what if TVs just add more plugs?

Well, that's actually already happening, but I think people's appetite for boxes hooked up to the TV is pretty low. All right. If you could only watch one TV show for the rest of your life, what are you watching? Seth, I'll start with you. I have a very strange. It's All Creatures, Great and Small,

the British series based on the James Harriot books because they're kind of funny, but they also are very feel-good. So if you pick something kind of edgy that's got more personality, the kind of thing I would like to identify with, I think it starts to feel old after a while. This is something you could watch and feel good about for a long time. You really love the animals. You were talking about not being able to eat pigs because you find them cute.

You were showing us a koala bear that looked like a— I like the animals, yeah. Except chickens, right? Except chickens. I'll eat it. I don't care about it. James Early? Chris, I promise I'm an intellectual in other ways, but I'm going to go with Beverly Hills 90210. Oh, we knew that.

This is a solid show. Yeah, you knew that. Not in Melrose Place. That was trash. They were doing anything for ratings. What a terrible spinoff. It got like 10 years. It was a solid run. There's so many possibilities.

If you got Seinfeld along with Curb Your Enthusiasm, that would be one of them. You only get one, dude. Six Feet Under, that could be great. First season of Twin Peaks. But I think I'm going to have to go with I Dream of Jeannie. I Dream of Jeannie? And the reason should be obvious. That's good.

And you know what? Reasons. You know what? For our listeners, that balances out the erudite BBC stuff that Seth was watching. Steve Broido, do you have a show you'd like to pick for all of eternity? I think it's a coin flip for me between Frontline on PBS and Celebrity Rehab. Any chance there could be a combination there? Could they get some PBS celebrities on Rehab?

Or could we get a Frontline special behind-the-scenes Celebrity Rehab? Sounds like magic to me. Oh, can I change to cops? You want to go from the BBC feel-good animal show to cops? Yeah, but that show is genius for a season. Season 180, not so much. The guys will be back later in the show to share the stocks that are on their radar, but we want to hear from you.

Tell us your one go-to TV show, and tell us what you think of BP and how they're handling the crisis. Email us at motleyfoolmoney at fool.com. That's motleyfoolmoney at fool.com. coming up corporate library co-founder and film critic nell minnow gives her review on bp and some movies for memorial day stay with us you're listening to motley fool money Welcome back to Motley Fool Money. I'm Chris Hill. Nell Minow is the co-founder of the Corporate Library, which reviews and ranks corporate boards.

She's also a film critic known as the Movie Mom. Her recent reviews have included the words excruciating and out of control and utterly toxic. One of those was in reference to the performance of BP's CEO, the other in reference to the movie MacGruber. Nell Minow, welcome back to Motley Fool Money. Thank you very much. Good to be back. Let's start with BP. Earlier in the week, you said that BP CEO Tony Hayward's behavior was out of control and utterly toxic. Just like the oil spill. On Friday, Hayward said the spill was, quote, an environmental catastrophe.

Does his coming around to that change your mind at all? It's too little, too late. They've made so many mistakes. I'm not sure that they can ever come out of this again. They may be like Philip Morris and have to change their name, and he may not survive. I'm predicting he may be gone by the end of the year. The fact is that his initial response was so clumsy and so inappropriate that it's taken a terrible reputational hit that it didn't need to take. What should he be doing that he's not?

Well, basically, if he did the opposite of everything he's doing, he would be in much better shape. I think that, you know, going down over the centuries, it will be up there with let them eat cake will be his description of the spill, the oil spill, as tiny in proportion to the size of the ocean. Yeah, that was bad. That was bad. The other thing, I understand, I am a lawyer, I understand what his lawyers have told him, but to say, of course, we will play all legitimate complaints to appear before Congress and blame the contractor. It's just shameful. What he should do is say, we accept responsibility. We are going to first devote our full attention to stopping and mitigating and curing this problem,

and then we are going to devote our full attention to making sure it never happens again. That's what he should do. You've written about how BP has really worked to set itself apart as one of the good guys. What's the disconnect here? Was all of that just clever marketing by BP, or has the company's leadership lost its way? I was very suspicious of BP. They were never on my good guy list, partly because of their involvement with PetroChina, which I thought was reprehensible.

But, yes, they have said for years BP stands for Beyond Petroleum. We're just, you know, the green company, and we're going to help people. But most of that was under Hayward's predecessor, Lord Brown. So they have not been on as many good guy lists since he took over. So he's kind of known as the green eye shade guy. And I don't mean green in the sense of environmental. I mean green in the sense of sharpening pencils and cutting costs. You're listening to Motley Fool Money.

We're talking with Nell Minow from the Corporate Library, also the movie mom. Memorial Day weekend, traditionally the start of the summer movie season. So let's dig into the movies a little bit. Shrek 4 opened last weekend. Disappointing box office, really. Is that because of the film itself or because of these stories I'm seeing about $20 tickets? I think, yeah, I know what a demand curve looks like, and I think it definitely has to do with the $20 tickets. That's a lot for a family of four.

And it's just, in this day, it's difficult to get people to get that kind of money together for a movie. I think that the Shrek franchise still has a lot going for it, and I think that the movie is a lot better than Shrek 3. It may be suffering a little bit of the backlash from Shrek 3. and I think it will do very, very well ultimately. It did a lot better than Shrek 1 in its first week in the theaters because it took a while for that one to gain momentum. So I think this one has got some staying power, and I think it will do well. One thing that bothers me a lot about the Shrek movie, though,

is that they announced this week a number of what they call marketing partners. You know what that means? That means product placement. Of course. Shrek is out there shilling everything from, hold on to your hat, green Twinkies. And again, I don't mean green the environmental. I mean the color. to credit cards, because all these kids, of course, are very excited.

Wait a minute, hold on, hold on. Shrek credit cards? Yeah, there's a Shrek credit card promotion, and they're just doing so much damage, it seems to me, to their brand and to their character by showing him out this way, and I think it's particularly unfortunate in a movie that is directed at kids. I understand that Sex and the City has got a lot of marketing partners and they're selling laptops and various other things, but that's okay.

The movie is basically an infomercial, but for a kid's movie, I don't think they should do that. Oh, is there no shame? We had a debate on this program a couple weeks back where we were basically trying to decide between Iron Man 2 and Toy Story 3, which movie we thought was going to be more successful. Now, obviously, Iron Man 2 has been out for a few weeks. It's made gobs of money. Have you seen Toy Story 3 yet? I have not, but I'm betting on Toy Story 3.

Why is that? Well, past performance sometimes is an indicator of future performance. Pixar is the most successful movie studio in history, the only movie studio in history where not only has every one of their movies made money, but every one of their movies has made over $100 million. There's a very, very strong franchise there with Toy Story. People love those characters. They can't wait to see them again.

And Pixar seems to be the only studio that understands, I'm talking to you, Prince of persia that it's the script that really matters are you suggesting that jerry bruckheimer is producing movies that may not have the the strongest storylines that is what i'm suggesting you know it's fine if you want to make a movie based on a theme park ride which is what jerry bruckheimer did with pirates of the caribbean but if you're going to make one based on a video game you've got to you know bring your a game when it comes to creating a story and characters people care about and i don't think in ancient persia when they were fighting with each other they said things like, is that all you got? Yeah, probably not. In honor of Memorial Day,

what are two or three of your top movies when it comes to dealing with the topic of war? I have a bunch of them from Memorial Day up on my website, and I think that some of the best are, I really love Friendly Persuasion, which is a Civil War movie with Gary Cooper. I think that's It's a terrific movie about what war means. Sergeant York, another Gary Cooper movie, is a classic. I like Mr. Roberts because it's about how even the people who are not right on the battle line are serving honorably and how much we depend on them. I like Gardens of Stone, one of Francis Coppola's least known,

but I think best films about Arlington Cemetery. And, of course, some of the great battle movies. He's Audie Murphy, who starred as himself in To Hell and Back. He was the most decorated soldier of World War II, and he tells his own story. It's just extraordinary. All right, time to wrap things up with a round of Buy, Sell, or Hold. As you mentioned, this movie just opened. Buy, Sell, or Hold, Sex and the City 2.

Hold. I think that at two and a half hours, it's too long just as a narrative matter, but also it makes it hard to have a lot of showings, And when you make a movie that long, you cut down on the number of tickets you can sell. They've been heavily criticized for their privacy policies. Buy, sell, or hold Facebook. Sell. Sell today. There are no barriers to entry.

Everybody is looking for an alternative. Facebook is last year's news. And finally, this movie opened at the Cannes Film Festival. And as investors, we can't help but be drawn to it. Buy, Sell, or Hold, Wall Street 2, Money Never Sleeps. I was very bearish on it until I saw the trailer, which I thought was super. I think it's definitely a hold and maybe a little bit of a nudge toward buy. I think it looks very good.

But the real movie at Cannes that you want to keep an eye out on is Charles Ferguson's new movie about the Wall Street meltdown, which I think is going to be bigger than Michael Moore's best film. It's a documentary? Yeah. And what's the title? I think it's called Inside Job. She is the co-founder of the Corporate Library. She is the movie mom, and she is absolutely one of our favorites.

Nell Minow, thanks for being here. My pleasure. Do you go to the movies? Find a frame in a film? Hold hands with the hero? Fall in love with the heroine? Coming up, the man who brought you the Aflac duck. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. I'm Chris Hill. Dan Amos is the chairman and CEO of Aflac, the largest provider of supplemental health and life insurance in the world and a Motley Fool stock advisor recommendation. He was named CEO in 1990, and one of his decisions would end up making Aflac a household name. he joins me in studio now. Dan, welcome. Oh, thank you for having me. So when I say Aflac,

everybody automatically thinks of the duck. How did the duck become part of this historic company of yours? Well, I've been CEO now for over 20 years, and I was trying to get name recognition for the company. And for the first 10 years, I just couldn't move the needle. We went from like 2% to 10%. And I knew that I could never really get it up. And so we put out bold opportunities for people to bid on coming up with the idea of something that would get our name recognition. Ad agencies? Ad agencies, exactly. And a particular ad agency came up with the idea of the Aflac duck. They kept saying Aflac, Aflac, and they said, that sounds like a duck. And so we ended up going with the Aflac duck. And today our name recognition is 94%.

Now, how do you make that sell to your colleagues at the company, to the board of directors? I mean, this is an insurance company. Insurance is not a particularly bold and innovative industry. We're certainly not known for that. No, that's right. I think insurance companies, as a general rule, are considered somewhat stodgy. And that was one of the challenges we had is we tried the traditional way of doing it, of being very conservative, and we just couldn't do that. And so I finally said, let's do something different.

And we tested different commercials. And one of the stories I like to tell is that commercials of insurance categories and financial services test it kind of like a 12 on average for these particular tests they give. And we came up with the idea of a commercial back in 2000 with Ray Romano that we thought about making. and it tested with little children and building blocks in the end it formed aflac and it tested an 18 well we'd never scored higher than a 12 before and so that was perfect but then the aflac duck idea came up and it tested a 27 and so uh it was very hard for me in some ways to do it because you're basically making fun of your name but i thought this will ultimately be better i remember, though, one of my friends that's the CEO, I called him, and I said, now, what would

you do? And he said, look, nobody's ever gotten fired for doing 50% better. Go with Ray Romato. But ultimately, I took him to the board, showed him the 27 scores, and said, look, y'all just have to trust me. We're going to try this. If it doesn't work, we'll pull it fast. And of course, we got more hits the first week we introduced it than we did the entire year before on the internet. What has it meant for your business, you know, beyond just the name recognition of your company skyrocketing? What does it mean in terms of revenue for your company? Well, in the United States, the first three years that we brought out the Aflac Duck, our sales doubled. So it was a tremendous, a positive thing for our sales. And then it, you know, leveled off to some

degree. But it was an exciting period for us. And it helped us in recruits. It helped us with existing policyholders. And I think to some degree, even people like to be able to identify with stocks they own. So I think from that standpoint, to say, I own X, and they say, oh, yeah, I know that. I've seen the commercials. I think people like that. So it's worked out well. You're listening to Motley Fool Money. We're talking with Dan Amos, the chairman and CEO of Aflac. Japan represents a huge chunk of your business. Is this right? You insure one out of every four households in Japan? Yeah, most people don't realize how much of our business is in Japan. Almost 80% of our business is in Japan. We insure one out of four households. We insure

90% of all the companies listed on the Tokyo Stock Exchange. And we became the number one insurance company in Japan in terms of policies and force, passing Nippon Life, who held that title for over 100 years. How did you get that kind of foothold in Japan? Well, the health care environment over there has gradually changed. They have national health care. They had gone from a zero deductible in copay to 10 percent, then 20 percent, and now 30 percent. And so they needed something to help fill those voids and we've always been the low-cost producer over there and given the best product at the best value and so our business skyrocketed and it's continued to grow over there and we're having a great year uh this year how does the duck translate over in

in japan the duck is very interesting um the duck is a much softer duck we we use for example the gilbert godfrey in the united states sure but japanese do not like loud voices or strong voices So Gilbert Gottfried not doing big business in Japan. So Gilbert Gottfried is not. We use a much softer voice. The other thing that's interesting is in our commercials, you've probably noticed that only one person notices him. There's this African-American that we use who notices the duck, but nobody else does. And that works very well in America because many people feel they're being ignored, and it actually relates to people.

In Japan, that's considered rude. So everybody sees the duck in Japan. And it is a very big hit over there. Aflac, the stock has, your company has a market cap of $20 billion. For the past eight years, Aflac has been on Fortune magazine's list of America's most admired companies. For the past 12 years, Fortune's list of 100 best companies to work for. Do you ever get sick of talking about the duck? I mean, you've amassed an amazing track record here.

Doesn't that, I don't know, does that ever bother you on some level? Oh, no, it doesn't bother me at all. In fact, I get kidded all the time. I only own duck ties. I gave away all my ties. I came from marketing, so I like to be branded with the duck because the duck has been a winner. And so anytime I'm in the presence of a winner, I enjoy it. And so from that standpoint, it's been great. Since Dan Amos became CEO in 1990, Affleck stock is up 27 times in value against the S&P 500, which is up three times in value over the same period. Talk about shareholder value. Dan Amos, thanks so much for being here. Thank you for having me. 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.

Chris Hill and back in the studio with me, our trio of senior analysts, Seth Jason, James Early, and Shannon Zimmerman. Guys, let's go around the table, talk about the stocks that are on our radar. Shannon Zimmerman, we'll start with you. Well, my radar stock is Costco. C-O-S-T is the ticker. And I think that there's a case to be made for Costco being one of the best companies on the planet, top five easily. Things just keep rolling along for Costco.

Sales up by about 12%. And a lot of that owes to gasoline prices, which were up over the quarter as well, and some favorable currency effects. But you even back that out, and they're still growing. And their membership base is growing as well. And, of course, that's their bread and butter. That's where they get their operating profit, right? Yeah, they're printing money with that operation. And there's something special about Costco.

You know, you would think that Walmart would be able to take away a bigger piece of its market share through the Sam's Club, and they're making some progress, but not even Walmart can take down Costco. So it doesn't look cheap at about 18 times analyst estimates for earnings, but still, give it a close look. It's a great company. Any place selling a 100-count toilet paper is good with me. James Early? Chris, before I get to my stock, I just want to say, I think Greece might still default eventually, and I think there's some articles out there to this, so I would still steer clear of Europe.

Separately now, my stock is Clorox. This is also an Income Investor Recommendation. It just raised its dividend 10%, even more than Heinz. It yields about 3.5% now, and its brands include not just Clorox, but a lot of others. I'm just going to read 40 of them right now. Burt's Bees, Liquid Plumber, Brita Water Filters, Hidden Valley Ranch, Pine Sol, Kingsford Charcoal, and actually a lot more. It really gushes free cash flow. It's really, really profitable in a cash sense.

And the shares have been a little bit left behind in the markets rallied this past year. So I think now could be a good time to buy it. I'm just a little squeamish at the fact that Clorox has Hidden Valley Ranch in its portfolio. Like the cleansing products and the charcoal, that's all good. But I don't know. Common thread, corn syrup. I heard that a friend of mine from college designed the Clorox bleach pen. Really?

She wasn't even a chemistry type. I've got to find out if that's true. Sarah Snudden, are you out there? Give us a call. Seth, what's your radar stock? Well, I have to scream about grease because they hurt my radar stock this week. Guess, which I've talked about before. Yes, the jeans makers.

I don't want to hear any more acid wash jokes from any of you. It's true. It's funny because it's true. They reported first quarter results, which were amazing. Another record quarter. Revenue increased 22%. EPS up 54%. Double-digit comps all over the place.

Here's the problem. Well, actually, after hours, after they delivered this news, the stock dropped. But then it bounced up in trading after that because what they said is they lowered their guidance for the next year but that was all because of the euro it wasn't because they didn't think they'd sell more stuff it was because they thought the stuff they were going to sell in europe would be worth less in dollars and it's worth less in dollars because of the euro because of this whole grease thing so dang you grease leave my jeans alone but guess actually looks pretty cheap to me the stock has been creamed lately so we'll end it there seth jason james

early shannon zimmerman guys thanks for being here good to be with you thanks to our special guests this week, Dan Amos and Nell Minow. If you missed any part of the show, you can find it at our website, MotleyFoolMoneyAtFool.com. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.