Motley Fool Hidden Gems Investing - Motley Fool Money: 05.31.2013

Episode Date: May 31, 2013

Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, joining me in studio this week from Motley Fool Income Investor, James Early, and from Million Dollar Portfolio, Charlie Travers and Ron Gross. Gentlemen, good to see you as always. We've got a big deal in the energy industry, some big numbers in the housing industry, and we've got a big promise from Apple CEO Tim Cook. And as always, we've got a few stocks on our radar. But we begin this week with the big macro, and there's a lot going on, Ron, but I'm going to hit you with two reports that came out this week. On Friday, consumer sentiment numbers were out, confidence at a six-year high, and the Case-Shiller Home Price Index was out earlier in the week biggest gain in seven years it's all roses it's all good things look pretty

good right it's all that's what they want you to think who's they they you know that no things are looking up we're getting a lot of positive reports a lot of great momentum here let's not forget it's because interest rates are at zero and that's artificial um and that's not going to last forever so the big question is can the economy um get it off on its own um take its own steps forward without the quantitative easing, which is going to be going away at some point. We don't know when. But for now, I like what I'm seeing. The economy is picking up steam. And if the Fed plays it just right, we're all going to be in for a nice soft landing. Case-Shiller only looks at 20 cities and only sales of existing detached single-family homes,

correct? Are you saying that's too specific? No multifamily. No, but clearly the real estate market is picking up, and it's even stronger in more affluent towns, which I guess is not surprising. But we're still off from the highs back in 2006, which we were in bubble then, so I guess that's appropriate. But as the husband of a realtor, I can tell you anecdotally that things are definitely hot. I mean, there's multiple offers again. There's people taking out contingencies from contracts.

There's elevation clauses being put back in. And it's starting to feel a little bit like it did back in the day. When I hear you say that, what I think that means is you're spending a lot more time heating up frozen dinners for yourself. That isn't untrue. Charlie, what happened to sell in May and go away? The market's up about 3.5% in May. Hey, don't let the party stop, Chris. I'm certainly not complaining.

We had a very long streak of up days, which has seemed to come to a halt later this week. But, yeah, I think that's nonsense in the first place. And you should be always investing in a company because you like its prospects and the price and not off of some, you know, inane lunacy like selling a particular month. But to Ron's point, there's also the question of, it's the Lance Armstrong question, what's us, what's the drugs in terms of the performance of the economy? We have QE, which has been stimulating the stock market as well, right? Totally agree. Shares of Envy Energy up big this week on the news that it is now part of the Berkshire Hathaway empire. Empire. It's being bought out by MidAmerican Energy for $5.6 billion. Charlie, do you like

this move? I think it's a nice asset for MidAmerican Energy, a subsidiary of Berkshire Hathaway, to add to its portfolio. They serve the customers solely in the state of Nevada, which is a favorable regulatory environment. They only have to renew their rates every three years instead of every year, which is a nice spot to be in. MidAmerican, though, is still kind of a small part of Berkshire Hathaway's overall business. It's only 7% of their revenue. And even if you add in the $3 billion in revenue Envy Energy did last year, MidAmerican's still only 9% of Berkshire as a whole. I'm not sure it's a needle mover for the company overall, but I do like this acquisition. Ron, we were talking a couple of months ago, and I remember you said everyone

in a diversified portfolio should have some exposure to energy. I said that? You said that. It sounds so smart in the video. Do you think this qualifies if you're a Berkshire Hathaway shareholder? Can you check that box? Or do you think that if that's not enough and you need more than that? Well, since it's, you know, it depends how much Berkshire, I guess, you own. But you probably need a little bit more than that since it isn't an extremely large part of Berkshire. And it's likely that Berkshire isn't an extremely large part of your portfolio, or perhaps it is.

I know several people who it's the vast majority of their portfolio. So it's a case-by-case basis, but you probably do have to add some. This is a regulated utility energy company. It's a little bit different than what we were probably talking about last time when I made that comment, which was like an exploration and production company, an oil and gas company. So it's a little bit different. It's a regulated business. This was not – we talk about Buffett's lieutenants, Todd and Ted.

They weren't involved in this. This was Greg Abel, is that right, at MidAmerican Energy? Can he just pull the trigger on a check this big by himself, or does Uncle Warren need to give his seal of approval? I'd imagine a conversation with Warren and Berkshire's board of directors did happen. You don't just go off rogue here. The thing about utility mergers is they almost always work out compared to most deals because you're just combining two companies. You have a better capital position. Yeah, I think this will work out.

It's clearly a bet on Nevada, I think, on a continued recovery there. It allows Buffett to unload partially some of that elephant gun he's been talking about, putting $5 billion of cash to work. It's a $10 billion deal overall if you add in the assumption of debt. So it allows him to put some nice cash to work in a good regulated business. On Wednesday, a company in China agreed to buy Smithfield Foods for $4.7 billion. Smithfield is the largest pork producer in the world. And, James, this is the largest ever purchase of a U.S. company by a Chinese company. Some people out there are concerned about this.

Are you? I am not. You know, it's getting a lot of play as a national interest level story. But the bottom line is ordinary Chinese people don't like to eat glow-in-the-dark meat any more than the next guy. And that's what this comes down to. I mean, the tainted meat is an issue domestically there. But this company wants to import this pork and sell it at a premium, which Chinese customers can now pay. It's not a strategic asset.

It's not a telecom. It's not a defense contractor. It's just meat. So, yeah, it's not as though they're taking a big stake in Lockheed Martin or something like that. Correct, correct. You're a healthy guy. When's the last time you had some bacon or some pork? You know, I don't really.

I wouldn't eat anything from Smithfield. Wow. I eat organic pork. If they make an organic product, I would eat that. All right, good. This week at the Wall Street Journal All Things Digital conference in California, Apple CEO Tim Cook made several interesting comments. He took a shot at Google Glasses, saying that he doesn't think that that's going to be a mass market device, unlike something that you would wear on your wrists. Or that added fuel to the fire in terms of Apple working on some sort of a device for the wrist.

But, Charlie, he also went on to say, we have several more game changers in us. That seems like a really big statement, a really big promise that, I don't know, was that a smart move to raise expectations like that? I think everybody's working assumption is that Apple has other products waiting to be launched when they're ready, whether that's an enhancement to their Apple TV product or a wearable device like a watch, which he seems to be very excited about without also providing anything specific for us to chew on. And so my bet is Apple does come up with something exciting sooner than later. He did mention the culture that created the iPhone and the iPad is still there, still attached, trying to make products consumers love.

So I think he's on the money and they're just not ready to talk about it. Chris, I have to side with you, though. I mean, I think Tim Cook is kind of like an A-list movie star who's on the verge of making a skin flick or something. He's got to prioritize his credit and heft here and not just go for the quick fill. You don't pre-announce this sort of thing. You just do it and surprise everybody. Agreed.

I'm not a big fan of bluster. I don't like when companies talk up their stock. I don't like when they talk up what's going to happen in the future. Just execute. Don't worry about Wall Street. Don't worry about investors. Just do the work and the stock will eventually work out. But, Charlie, in terms of the timing, a couple of months ago when Samsung had their big event,

one of the things we talked about at the time was, boy, it was brilliant timing, whether they meant it to be this way or not, brilliant timing on Samsung's part because it didn't look like Apple was going to have anything coming out in terms of a big launch device, whether it's an upgrade of the iPhone or something new, until September at the earliest. I hear this comment from Cook, and it makes me think, boy, you really better have something before the holidays. Well, their developer conference is in two weeks. They're going to talk a little bit about the future of their operating system, and we might get a better peek at it then. All right, we'll keep our eyes on that.

Coming up, the greatest innovation in finance since the ATM. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with James Early, Charlie Travers, and Ron Gross. From time to time, we are happy to welcome a new station to our radio show family. Today, I'm very happy to announce, not just a station, but an entire network, the American Forces Radio Network. Motley Fool Money is now part of The Voice Channel on over 1,000 outlets in 175 countries. U.S. Navy ships at sea.

That's amazing. To all our hardworking military men and women out there, thank you for welcoming us, and hopefully we won't bore you to tears. No promises. We'll try. We make no promises, though. Costco, third quarter profit up 19% from a year ago. But, Ron, there was a slight miss on the revenue. I don't think investors really cared because shares hit a new all-time high this week.

Yeah, it's getting kind of redundant, right? Here's a little boring radio for you. They just keep getting it done. They keep putting up great numbers. Margins are improving. Retention rates are great for their membership fee. What a beautiful business model. People actually pay for the right to shop at Costco.

It doesn't get much better than that. So the stock continues to perform. The membership fee increase that was put in place, that ripple effect continues to work out well for Costco, but that's got to be coming to an end soon, right? It does. It happened at the end of 2011, but the way this accounting works is it kind of dribbles in over time. So about $26 million of the incremental membership fee increase in this quarter was due to that membership increase. We'll probably get another $35 million total before it's done in this quarter and perhaps a little bit into the next quarter. And then we'll be on an apples-to-apples basis, kind of waiting maybe in a couple of few years for the next price increase. Does that concern you at all that that amps up the pressure?

Because once that gravy train, for lack of a better term, runs out, then it's all about the operations. From a valuation perspective, it does. from a business, looking at the business and the cash flows, it's a very thin amount of money they make on actually selling their products. Most of, 75% or so of their operating income comes from these membership fees. So, clearly, if they can continue to raise those prices, it'll continue to fall to the bottom line. If they have more trouble doing that, then we'll see slower growth. Hedge fund investor Dan Loeb owns about 6% of Sony. And just a few weeks ago, He hand-delivered a letter to CEO Kazuo Hirai – I hope I'm pronouncing that correctly – urging him to spin off Sony's music and movie business.

And, Charlie, at the time, we talked about it, and there was a polite response from the CEO. But personally, I didn't think it was necessarily going anywhere. Now we see reports that Sony has retained Citigroup and Morgan Stanley to consider the proposal. Is this going to happen? It sure looks that way, Chris. And when you consider that Sony stock is down about 85% from where it peaked 13 years ago, and they've had cash flow declines three years running. Something's got to happen here. Something's got to change.

And Loeb's proposal to spin off their entertainment division, their life insurance division. Sony is just a massive conglomerate. They make TVs, mobile phones. They're one of the biggest record labels in the country. And, you know, a lot of the electronic stuff is underperforming. There are divisions that are making money or what Loeb is proposing to spin off, which is a little disconcerting because then if you stick around to Sony, you're making a bet on a turnaround in electronics when they're competing with Samsung, LG, and Apple. Not necessarily a bet I would want to make. But Loeb, he's got a great track record, and you can do worse than riding his coattails.

But if you hand deliver a letter, why wouldn't you just talk to the guy when you're there, right? I mean, maybe it's a language thing or something. I believe there was a meeting, and this is uncharacteristically polite for Dan Loeb, and I think it's sensitivity to the business culture over there. Usually he files a 13-D with a scathing letter. It's very entertaining reading. Either that or he'll do a 110-page PowerPoint presentation just destroying, in this case, Green Mountain Coffee Roasters. Back to Sony for a second.

Do you think this is reason alone to buy the stock, or is it a situation where if you think this is going to happen, you wait and then you just buy the spinoff? I think it does make Sony interesting, and I do think that's something that's going to come of it that's positive. Fast food chains and packaged food companies have come under fire for selling things that contribute to the rising obesity rates. this week at an analyst conference in New York City, McDonald's CEO Don Thompson revealed that he has lost 20 pounds in the last year by, quote, getting my butt up and working out again. And James, he also said he has not changed his habit, which I was unaware of, of eating at McDonald's every single day. Chris, I lost 20 pounds when I had a tapeworm once. Well, technically it wasn't a tapeworm. It was intestinal parasites I got in Pakistan. But the point being that it doesn't

doesn't prove any point, right? I mean, he's compensating for the food. It doesn't make an argument to me. But do you think, as we have seen things like Mayor Bloomberg in New York City targeting the soda companies and that sort of thing, and McDonald's coming under fire, and others, I mean, there are plenty of companies out there. How do you think this all shakes out? Where do you see this going in the next couple of years? Because I don't own shares of McDonald's, but I look at it and I feel like if I were the CEO and I could point to, look at all the healthy things we have added to our menus, even though salads only make up about 2% to 3% of sales, hey, look, at least we're putting it out there.

I feel like they're covered. He's right. I mean, it's the public's choice, and there's always going to be a choice for the lowest common denominator. The question is, you know, do people know what's best for them? You know, we get into a philosophical and political question. I don't think we're ever going to legislate away greasy fast food. That's the problem. I wish we would.

I wish we would. You worried about this at all, Charlie? Worried about which part of this? Just the legislation part. In general, yes. I'm not a fan of – I'll say on the opposite side of the table, James, if people want to jam 1,000 calories worth of hamburgers into their mouth at lunch, that's their business. In late 2011, the Canadian government released a new $100 bill, and the bill was noteworthy because it's made of polymer, not paper. Now it appears that it is noteworthy for having a distinct scent, and that is, of course, because it's Canada, maple syrup.

The Canadian press obtained a year's worth of correspondence to the Bank of Canada from ordinary citizens about the new currency, and dozens of citizens were emailing and writing and calling the Bank of Canada claiming that the bill smells like maple syrup. But they say it doesn't. Is there an official denial? I think there's an official denial, but first and foremost, I love that this is just a groundswell of people. This is not one sort of random person. This is many people coming forward and saying this. But two, it makes me think, shouldn't we be doing this? Can you do it?

It's popular. Is it possible? I would hope so. I think on a brand new minted bill you could, and then it would dissipate over time. Yeah. It's got to start somewhere. It's got to start with Ron Gross. Just maple syrup your bills.

Well, I mean, maple syrup makes sense for Canada, and God bless our friends up in Canada. But I don't think if we're picking a cent for currency – let's bring in our man Steve Broido from the other side of the glass. Steve, in America, if we get to pick a cent for our currency, what are we going with? One word, progress. The smell of freedom. And apple pie. I was going to say, there was a poll thrown up on NPR's website. People choosing between apple pie and bacon.

I think apple pie was the slight winner. But we'll just go down the line. Personally, I would go with cinnamon rolls. I'm a big fan of bacon, as you know, Charlie. But freshly baked cinnamon rolls, you open up your wallet, and that scent wafts out. Who doesn't love that? What about you, Ron? I've said it before.

I'm a fan of anything that is banana-scented. What? So I'm going to go with a banana-scented bill. That's crazy. McDonald's french fries. Now, wait a minute. Hold on a second. Yeah, you can't do that.

It's not my personal preference. Ron's going with a personal preference. I'm going with what we as a nation seem to embrace. Oh, okay. What would your personal preference be? Kale? Like a fir tree scent. It's very refreshing.

Okay. As a native of Maine, I applaud that. Charlie? Beef brisket. Beef brisket. I changed my vote to beef brisket. Yeah. See, you know, now all of a sudden banana doesn't look so good anymore, does it?

All right. Drop us an email. Radioatfool.com is our email address. That's radioatfool.com. If you're from Canada, we want to know if you have a maple syrup scented $100 bill on you. But anyone else, please just let us know what scent the money should be. Radio at fool.com is our email address. Ron Gross, James Early, Charlie Travers.

Guys, we'll see you a little bit later in the show. Up next, if you want to make money investing in the stock market, there is one type of stock you have got to stay away from. That's next. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. The allure of getting rich quick is so powerful that it leads some investors to invest in penny stocks.

Because, hey, if it's a 50-cent stock and it goes up a quarter, you just made a 50% return on your investment. And while you may realize that penny stocks are, in fact, a terrible investment, what you may not be aware of is how some penny stock promoters are out to scam you. joining me now in studio, Brian Richards, the managing editor of Fool.com. Thanks for being here, my friend. Thanks for having me, Chris. You recently wrote just a brilliant article, and the headline says it all, The Desperate Deceptive Measures Penny Stock Scammers Use to Dupe Investors. And what I love about this story is that you wrote it from your own experience, which is learning about a company called Goff Corporation, which, and here's the

first stat that blew my mind, was that in three months, it traded more shares than Apple and ExxonMobil combined. I've never even heard of this company. How is it trading like this? It didn't even exist as a public company until March. So in its first six weeks, it traded more shares than some of the most liquid large cap US names in the world. And it's a social recruiting company turned Colombian gold miner. Boy, I mean, you talk about diversification. Well, you'll see this a lot if you dive into the world of penny stocks. You'll see a company that has no business, really.

They exist on a sheet of paper, on an SEC filing. This company was founded to become a LinkedIn competitor. That was what they were founded to become. And it didn't work out for whatever reason. Shocker. And so in February, they changed strategies and they decided that they were they were going to become a gold miner in Medellin, Colombia. Sure, sure. Yeah, naturally. So they changed their business model, their strategy, and they had a complete overhaul of their management. And I would use air quotes here if people could see me listening because they had two directors and they both departed the company and a new person stepped in. And so part of their strategy, all kidding aside, part of their strategy was to just go out and promote the stock.

And you first learned about this through one of our bloggers. And we've talked before on this show about the Motley Fool blog network. One of our bloggers was contacted by Goff with a very attractive offer, it sounds like. Right. And so here I will say legally, I don't know whether the company was behind this stock pump because they did not reply to any of my inquiries. And so I have no evidence. It could have been the company. It could have been a third party who was totally not affiliated with the company. But, yes, so what happened in our situation was our Motley Fool blog network, which is an open blog platform. Anybody can sign up to write a post. We had a blogger on there who was contacted by somebody through LinkedIn and asked for a phone call.

The blogger spoke to the gentleman on the phone. the gentleman on the phone uh offered him a four-figure sum to write a positive post about this company golf and at that point it had been trading for about three weeks when the blogger showed uh some concern about this offer the gentleman on the phone offered to write the post for him if he would simply put it under his own byline nice yeah so uh the blogger and we give him a lot of credit here because he refused and brought it to our attention. I eventually spoke to the guy on the phone who made the offer. His name was John O'Connell on LinkedIn, but I did a Google image search and found that he had simply stolen somebody else's

LinkedIn profile photo, an insurance salesman from Milwaukee, Wisconsin. And the picture of the insurance salesman was a gentleman who had gray hair. He was probably in his 50s or 60s. The person I spoke to on the phone was not a day older than 19, I guarantee. And we go further down the rabbit hole because it turns out other bloggers are contacted either by this company or a third party. And here's one of the quotes from your article, which is one of the bloggers saying, I am on a regular basis offered compensation to write about multiple firms. How prevalent is this? Well, it seems to be more prevalent than anybody knew. We have some standards in place on the

Motley Fool blog network to make sure that people aren't taking advantage of the open platform. and we had to disassociate ourselves with we had to ban four bloggers who wrote about golf in various forms some of them were mentions in passing and some of them were longer profiles of the company and we saw some of this on other blog sites as well like seeking alpha and seeking Alpha actually has recently announced that they have new standards in place for the size of the company you can write about. I mean, this was a company that at its peak was trading at 65 cents. That was its all-time intraday high. It was 65 cents, which gave it a market value of $50 million maybe. The last I checked, it was at 2 cents and it had a $6 million market cap. But we have rules

in place to prevent talking about stocks that small for the simple fact that in the penny stock land, the movement of the stock is frequently totally detached from the quality of the underlying business, from the business fundamentals. You're listening to Motley Fool Money, talking with Brian Richards, Managing Editor at Fool.com, delving into the mysterious world of penny stock scams. This is where your article really took a hard turn for me. Again, and we were talking about this during the break. The Motley Fool's been around for 20 years, and pretty much from day one, we have been screaming from the mountaintop that penny stocks are a horrible investment. People should just stay as far away as they can. And yet,

even I was surprised by part of the strategy here being the advertorials that show up and they they look like they're just you know you get to the bottom of an article on a web page and it's like oh you may be interested in this other article and you think maybe it's a legitimate piece of journalism or an opinion piece and really it's just a scam it's a scam yeah it's meant to look like proper editorial content trustworthy editorial content these advertorial sites you'll see them all over the internet they have such snappy headlines as why you should never use shampoo again, and how penny stocks will make you rich. And you click on one of those. It looks like a normal editorial article. Click on it, and you'll realize soon that it's an advertisement

for a penny stock site. And really, the penny stock site wants to get you on their email list because that's how they alert people to the new trades. That's how they're able to get that trading volume up so high. They get tens of thousands of people all buying the same tiny company. And what's amazing about this is it ties into the two emotions that we touch on frequently here at The Motley Fool, and that is fear and greed. And we quote Buffett all the time, I like to be greedy when others are fearful. I like to be fearful when others are greedy. And this really taps into both because it's just the natural allure of if it just moves $0.10, I can get a great return on my investment. And with the market at an all-time high over the last few months, you have people saying, gosh, I've missed out either altogether or partially.

And here's a way I can make it up quickly. That's exactly right. I think this is not investing at all. This is speculation. and it's not much different than rolling dice at a Vegas casino. The other thing that I was both surprised at but also sort of chuckled at was the use of fake celebrity endorsements. A picture of Mark Cuban, the entrepreneur and owner of the Dallas Mavericks

and his Twitter handle and it's a screen capture and it looks like, hey, Mark Cuban is endorsing this penny stock site, that sort of thing. We actually contacted him immediately, and he was like, no, that's not me. He confirmed that it's a fake. Donald Trump is on there, and Mark Cuban, and there's a few other celebrities, 50 Cent, for all those rap fans out there, who did not actually endorse pennystocks.com. Are there any additional lessons that you take away from this as an investor? I mean, we've talked before about transparency, and there is greater transparency in the public markets now than there was 10, 15, 20 years ago. But this is one of those situations where it seems like, yeah, there's more transparency, but there's also a greater ability for people to scam you.

I think that the greater amount of transparency is only useful if it's taken advantage of. Most of the research I did for this article was out there in plain view. It was – you could tell that the company had a wholesale management change 90 days prior to going public. You could tell that the person running the company had absolutely no experience in gold mining. And, you know, there are so many red flags here that for people who invested in this, they didn't do it after performing great amounts of due diligence. So, you know, I think, as I said, this isn't investing. Investing is about finding companies with competitive advantages, with competent management, with market opportunities. And this was not happening.

Investing was not what was happening with people who were buying golf. Well, again, the article is The Desperate Deceptive Measures Penny Stock Scammers Use to Dupe Investors. And I'm not the only one praising you. Seeking Alpha, when they announced their policy change, gave you credit. And you also got a very nice shout-out from the Columbia Journalism Review. So that was fantastic. Before I let you go, I wanted to touch on one other thing. One of the people I follow on Twitter is Tess Vigland, who for many years was the host of Marketplace Money.

And she had pointed the way to a very in-depth article in USA Today about millennials, people 18 to 29 years old, really struggling with financial literacy. And I was saying during the break, I was surprised by this in part because I just imagine people who are 20 years younger than me being much more savvy about money in general, but certainly about the world in general, and having greater awareness about money, financial education, that sort of thing. Before we dig into the particulars of the article, were you surprised by this? Not really. um i i i'm i know that there was no golden age of financial literacy it's not like our parents and our grandparents were experts in these topics um there are exceptions of course but i think the the big change today is that the world has gotten a little more complex and so the products the financial products that are out there are harder to navigate and are more

overwhelming and confusing. And, you know, what you find in those scenarios is people kind of throw their hands up and say, well, I don't understand it. And so they end up going through life not understanding it. What do you say to a 20-something person listening or to someone who knows someone in their 20s who may be struggling a little bit? What are like one or two things they can do? Yeah, I would say to those people, I would say, number one, to the extent possible, make savings automatic. So have it deducted directly from your paycheck. Do it the first day you get a paycheck and just have it automatically go into a savings account or an investing account. Obviously, that applies for a 401k. Take the maximum deduction that your

company would offer, match to, etc. So number one, make it automatic. There are all sorts of studies showing that behavior is really the thing that gets in the way so to the extent that you can take the behavior out of your own hands right um do it and then the second thing is i think that there's a lot of uh borderline condescending advice about doing away with your three dollar latte and how that is going to change you know change your magic magically change your financial life exactly you'll be a millionaire if you just hadn't drank uh you know 50 lattes in 2013 I would say that's important. And yes, you should be conscious of how you're spending your discretionary cash.

But more importantly, it's something that Dayana Yochum here at The Fool says all the time, which is sweat the big stuff. So negotiating a 10% raise with your employer is going to have a larger effect than doing away with a weekly $3 Starbucks. um you know switching to cheaper housing uh figuring out uh how to how to save money on gas mileage or those those those more frequent expenses um paying down high interest uh debt first so if you have a credit card that charges you 17 i mean those are the sorts of things that over the course of a lifetime those are going to add up a lot more than the the little tiny three dollar lattes at a time now i'm not saying that you should go spend six dollars on lattes and have to a day um i think the advice though is really focus on the big stuff and make sure that

you are uh maximizing uh income and minimizing outflows out of your out of your pocket he's managing editor at fool.com brian richards thanks for being here thanks chris If you do not need it badly, thanks, we'll give it to you gladly. Ah, yes, but if you need it, we're nuts to you. Funny, funny, funny, what money can do. Coming up, we'll give you an inside look at the stocks on our radar. You're listening to Motley Fool Money. Oh, I'd like to be that man.

He's got money to burn. 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. Joining me in studio once again, Charlie Travers, Ron Gross, and James Early. It is that time once again, time for the stocks that are on our radar, and we'll bring our man Steve Broido in from the other side of the glass to hit you with a question.

Because you know what? Steve wasn't here last week. I'm not sure where he was. No one is. There's no confirmation that he may or may not be a spy and have some illicit activities on the side. I have no idea. I'm not asking. Ron Gross, you're up first.

What's your story? Oh, Stevie. Nathan's Famous, N-A-T-H, the restaurant and packaged food company. It's a small cap company. Quite frankly, I've missed it. It's up 50% this year, but it looks like it could still have some room to run. There's some lawsuits going on, some things that need to be worked out that maybe are creating an overhang of the company, but it's doing really well.

They report next week, so I'll be really interested to see what they have to say. Steve, a small cap with lawsuits. Is this a hot dog company? Yes, Nathan's. Yeah, sure. Coney Island. Is that a good thing? Have you never eaten at Nathan's?

I probably have, but I don't know. The French fries. It's also Arthur Treacher's Fish and Chips, Kenny Rogers' Roasters, Miami Subs. Yeah, Arthur Treacher kind of freaks me out. All right, so maybe this isn't for you. Let's move on. James Hurley, what's your stock? I'm watching.

I'm not endorsing it, but Mike Olson, an analyst here, is key on Lazard. This is an investment bank that is big in M&A and increasingly asset management. They're sort of building back their business. And Nelson Peltz, who's an activist investor, took a 5.2% stake in it. He's going to try to cut compensation, which should drive up earnings. Where are they based? I believe it's New York, right? Okay.

And the ticker symbol? LAZ. LAZ. Steve, question about Lazard? How transparent are they in terms of what they're actually doing? Well, these guys are going to be more transparent than, let's say, like a Bank of America or something. It's got a lot of weird instruments that they hold. The big risk for Lazard is going to be M&A volume.

If there's a lot of deals, they'll do well. If not, they won't. All right, Charlie Travers, what do you got? I'm going back to Sony, Chris. The ticker is S&E. And not only do we have the catalyst of a highly regarded activist investor here, but there's the E3 gaming conference coming up starting on June 11th, and we should get a lot more information about their PlayStation 4,

which should be out in time for the holidays. I view the console market as a two-horse race between Sony and Microsoft. Nintendo's just really fallen back way behind the pack. So I think this could be a good catalyst for the shares, along with the other stuff we talked about earlier. Before I kick it to Steve, when we talked earlier about Microsoft and the new Xbox, you were pretty bullish on that new system. Is Sony going to be able to really compete with that? Absolutely.

I am bullish on the Xbox One, but both consoles have their own legions of fans, and I expect both will sell very well. Okay. Steve, question about Sony? Does Sony have any play in the smartphone arena? They do, Steve. And if you go right to their website now, showcased on their front page is a smartphone device. I don't imagine they're selling particularly well,

but it is something they're working on. Steve, just a rainbow of options for you. Sony, an investment bank, Lazar, and Nathan's. Do you have a preference? If you had to add one to your watch list or just buy outright, what would you go with? Well, I love Sony. We use a lot of their products here, including their cameras, and they're fabulous. So I'm going with Sony.

I think it's a terrific company. I don't know how the investment angle. The Sony stores seem a little confusing to me. It's not just you. And I don't know why they don't have a bigger presence in the smartphone space, because it seems like they could really do well there. Have you been to a Sony store? I have.

And you got lost and just hated the experience? I just wasn't quite sure what I was supposed to buy there. And just to bring it back to Ron, was it Arthur Treacher? It was Arthur Treacher. Have you had Nathan's french fries? Probably at some point. They're very good. They were that memorable to me, Ron.

All right, Ron Gross, James Early, Charlie Travers. Guys, thanks for being here. Thank you, Chris. That is going to do it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening.

We'll see you next week. Thanks for watching!