Motley Fool Hidden Gems Investing - Motley Fool Money: 06.07.2013

Episode Date: June 7, 2013

The government reports surprising jobs numbers.  Amazon.com rolls out a new delivery service.  And IBM bets big on cloud computing.  Our analysts discuss those stories and share three stocks on their radar.  And Motley Fool co-founder David Gardner weighs in on Apple, Tesla, and robot overlords. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Motley Fool Money. Thanks for being here. I'm your host, 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. Good to see you as always, gentlemen. Good to see you, Chris. We've got a new deal from IBM. We've got a new service from Amazon and a new offering in the world of fast food. And as always, we've got a few stocks on our radar. But we begin this week with the big macro, and that means the jobs report, which came out Friday morning.

Ron, we added 175,000 jobs in May, slightly more than expected. Unemployment rate did tick up slightly to 7.6%. What did you think of the report? I think it had something for everybody. You like people? Yeah. 175,000 of them found jobs. You like stocks? The report was just tepid enough, a phrase I read on the intranet, for the Fed to keep their $85 billion easing program in place. Stock market

loves that. They love that easing program. So something for everybody. The report is good. We're putting people to work. We need to do better. We want to get down to that 6.5% unemployment rate. But the good news is that U6 unemployment rate that I talk about a lot, The broader measure of employment actually did tick down a bit, so that was good. It did, and that's your favorite measure. That is my favorite. If you have to have a favorite. I know many things about you, and that is one of them.

James, to Ron's point, you look at the reaction Friday morning in the market, the Dow up more than 1%. It definitely did seem like this was very well received among investors. Yeah, we've been waiting for some good news. We've had kind of tepid news, to Ron's point, for a while. And I think with the bond rates rising in the recent month, the market was getting a little bit too concerned that we'd see some Fed tightening. So this relieves, this allays some of that worry. We also saw earlier in the week, Charlie, the retail sales report for May, which seemed pretty good. When you look at that, when you look at the jobs number, anything in particular leap out at you?

I think there's a strong resiliency to the U.S. economy in the face of what's going on around the world. The Japanese stock market is collapsing. The Eurozone is going to contract this year again. And eventually, you would think with a globally connected world, that would ripple through to some of the results over here, especially that a lot of our multinationals do business in those regions that are in trouble. So it's good to see that the U.S. economy is doing well. Yeah, I think you're seeing some of that wealth effect that we used to talk about back in the days of the bubble, which is a little scary, I guess. Real estate prices are rising.

Everybody's stock portfolio is rising. seems like almost every day. And the May retail numbers show that people are spending, and that's because they're feeling wealthier. They're feeling better. Let's hope that continues. What do you like for retail companies? Where are you seeing the most spending?

Actually, it's really been across the board. Costco's numbers look good. The Gap is back with really strong numbers. That's okay. Give the Gap time. They'll stumble soon enough. I just saw one survey. Nine out of 10 retailers that were tracked by this particular company

had strong, positive same-store sales. So it's really been across the board. The big communications story this week centers around the National Security Agency. First, there were the reports that Verizon has been turning over records of landline and mobile phone calls of its customers to the NSA. And then later in the week, the program referred to as PRISM, which tracks communications over the Internet and through email. James, there's no shortage of shows out there talking about the politics at play here, talking about the privacy issues. But when you look at the stocks, Verizon, Microsoft, Google, Facebook, they appear to be unfazed by this news. And by that, I mean investors appear to be unfazed by this news.

I think so. Well, you know, I think, just briefly on the political point, I mean, I'm a free speech guy as much as anyone else, but I think I assumed the NSA was doing this kind of stuff anyway, and I think a lot of people probably did. And I think that's part of the reason we're not seeing the market reaction. We know they can see our phone records. We know they can read our emails. We know they can look at our browsing history. Most of what I look at on the Internet is probably okay.

So, you know, I don't think it's that shocking in a sense. And if it is bad, I mean, they got this under the guise of these were business transactions, the phone calls were, which I don't know constitutionally if that holds water. But the point is that it's not just Verizon. It's clearly a lot of companies. I don't think it's going to sink all these companies. Well, the phrase Big Brother is out there for a reason, right? And I think your assumption is correct. Yeah, I mean, it's creepy, but we all know it happens, and there's positive sides to this, too.

Yeah, but politics aside, I don't think this does anything to cash flow. It doesn't do anything to net income. I'm not canceling my Verizon account. I need my phones. And I think that continues. What it does do is it takes your eye off the ball if you're the leader of one of these companies. It's a distraction. Anecdotally, I called Verizon yesterday for a separate issue, and I was on hold for 20 minutes,

presumably because there were so many people maybe calling in to complain. So it does take your eye off the ball. It can lead to costs down the road as a result of that. For the most part, though, it's a big deal. People would call the customer service rep to complain about it. I mean, I understand their frustration. I'm sure the customer service rep is not in a position to stop the NSA. There are people out there who call 911 to order food.

So, I mean, you know. So, when a company makes its own privacy gaffe, like a Facebook has in the past or like Google has in the past, you do see the consumer outrage. In this case, I don't think you see it because it's not any policy shift on the part of the company. This is just something that's out of their control. Yeah, and Facebook and Google are more aggressive than the NSA in many respects. They know everything. Nobody complains about them, right? Yeah.

On Tuesday, IBM announced it is buying SoftLayer Technologies, a cloud computing company, for around $2 billion. Charlie, shares of IBM down this week. I'm surprised at this just because this is – we were talking earlier. This is not a company that has historically wasted money like a Microsoft or a Cisco system that makes a big purchase and then has to write it down later. I like how you work those gratuitous shots in there because we own Microsoft. But anyways, IBM's doing quite well. They are making a big move into the cloud. They are going to merge soft layer technologies into their own smart cloud offering.

So if you think of things like database management or security management programs, you want to host off-site instead of internally in servers, which is definitely the trend that companies like Amazon, Microsoft, and Google are all trying to get a piece of. And what IBM is aiming for is $7 billion in cloud revenue two years out. For a company that does over $100 billion in sales a year, that's still a little bit of a drop in the bucket, but it will help them grow, and it helps them build out their own offerings here. There's an awful lot of companies betting on the cloud. The cloud better be really big.

It better be good, right? Is there too much money being thrown at this, and there only can be a few winners, or is there enough room for everybody? I think you're right on the money, especially with Amazon and Microsoft. It's really cutthroat, driving the prices down to zero. You wonder if anybody's really going to make any money here. For the past few years, speaking of Amazon, Amazon has been quietly testing an online grocery delivery business, and they are now planning a major rollout of Amazon Fresh. Ron, they've been testing it in Seattle.

It's coming to Los Angeles. It's coming to San Francisco. And by 2014, maybe as many as 20 markets. It's this seems like an ambitious bet and a complex bet. Is it a smart one? It's so confusing because delivery groceries is notoriously a tough business to get right. Now, Amazon does a lot of things really well, but this is tough. The question is, are they going to attack this as a moneymaker or is it going to be in a sense one of those lost leaders or something with very, very thin margins that they're using just as a way, you know, they'll deliver other things to your home with your groceries.

It just won't be groceries. Is it to capture market share away from Walmart, Costco? I don't think they necessarily care about pulling market share away from the grocers, which they will do. So it's hard to get it right. But if they're not doing it for it to be a huge moneymaker, if they're content with the thin margins that it invariably will be, perhaps it's a bet that that will work. Would you yourself opt for Amazon groceries? I have had groceries delivered through the Peapod service here locally. And I've never stuck with it for too long because there's always just something that I don't like about it.

So it doesn't seem like it would be for me. But I think, you know, obviously it worked in Seattle or they wouldn't be rolling this out to additional markets. If I was someone like Costco or Walmart, I think I would be a little bit nervous. But the grocery stores themselves have such low margins off the bat. If you add in delivery, then to your point, it must be harder. So I assume you need a prime membership to do this delivery. Would that be what they're trying to drive at? That's interesting.

So you could drive revenue that way through everyone having to be forced through a Prime membership. That would be a good way to go. However, that's a lot of infrastructure to put in place just to sell Prime membership. Right. And so I am a Prime member, and I love ordering those 40-pound bags of dog food and getting free shipping on that. They can't be making any money on me. James, I think it's been well established on this show that there are plenty of retailers that Ron will not set foot in. Oh, no, no.

You said that's too overly stated. You've never been in a Walmart, right? I've never been, but it's not out of some kind of- You had to text your wife, and she said that you almost went into a Kmart one time. No, I was in a Kmart once. Okay, but you were almost in the Walmart. It's not because I'm against it. It just has never happened.

I see. But he's a gourmet. I feel myself turning red and sweating. He will shop for his own groceries. Coming up, more trouble in Farmville. Stay right here. This is Motley Fool Money. Hey, it's Chris here.

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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. Welcome back to Motley Fool Money. Chris Hill here in studio with James Early, Charlie Travers, and Ron Gross. Guys, late on Monday, Zynga announced it is cutting 18% of its staff, and shares fell 12% in the final hour of trading on Monday. Charlie, CEO Mark Pincus says this is a necessary move they have to make if they're going to move forward.

What do you think? Well, when they're losing money, they kind of got to do something to rein in their costs. This will save them $70 to $80 million a year. And the reason is that a lot of their gaming franchises aren't really doing that well. Farmville remains their bread and butter. That's doing quite well. But games like Running with Friends, Draw Something 2 aren't pulling their weight. Shocking.

Yeah, I know. With compelling names like that, it's almost hard to believe. I've never heard of either one. When you're running a free-to-play model and trying to get people to buy in-game goods, it's not really a surprise that they're not pulling in the money they need. And the bottom line is this is an incredibly competitive industry. There's no barriers to make video games. They do, on the bright side, say social gaming is a $9 billion market,

and they have over $1 billion of that. So it's not that there isn't room for them to do well if they can keep their costs in line with the revenue they are generating. But they're in a tough industry here. Where do you think Zynga is a year or two from now? Is this a company that you think, well, you know what? If they make the right moves, if they get smaller, they get smarter, they can continue to be a standalone company? Or at some point, does Facebook just write them a very small check and say, we'll buy you for this tiny amount of money?

Well, gaming at large is very hard to make money, especially so in the social gaming spot they're in. But they do have a big balance sheet. They have a lot of cash. I think the tangible book here is $2 a share on a stock that's not even $3. So there is hope here for the stock if they can rein in some of these expenses. I think the real money gaming that they just launched in the U.K. does have potential. They said it's not going to move the needle for them this year, but in the long run, that could be something to count on. We had talked recently about McDonald's and the story that they were considering serving breakfast all day long.

Ron, I know you were adamant against that. You thought it was a bad idea. There are reports this week that McDonald's has been testing an after-midnight menu, which is a combination of breakfast and dinner items that they will serve between midnight and 4 a.m. So I turn to Night Owl and Gourmet. James Early, what do you think? They're making it easier to gain weight around the clock now. My son is going to be a cardiologist.

I think I've said this before. He's four years old, but it's going to be a growth industry. I have it planned already. You know, this really points to just how cutthroat the restaurant, the fast food and fast casual restaurant segment is getting. I mean, McDonald's has their operations pretty well dialed in, and they're just trying to squeeze every drop out of the lemon now. I'm fascinated by what we've seen in this space over the last couple of years, because it seems like ever since Taco Bell came up with the Doritos Locos taco and the huge success it has, Now, all of these fast food restaurants are looking for the next game changer.

There was a report that one Wall Street analyst upgraded shares of Wendy's simply because of this bacon cheeseburger there that they've got coming out that has a pretzel bun. That sounds good. It's a single food item, though. But is that – I mean, maybe I shouldn't be surprised. It's no McRib. Well, nothing's the McRib. Why is the McRib so evocative? I mean, it's the most disgusting thing I've ever seen.

I don't know what evocative means, but it's very popular. It's the scarcity effect, I think. But, I mean, Charlie, does that surprise you that a single food item can just be such a game changer like that? It did surprise me when it came out. But now that they've had success, you're seeing the imitators come in. I'm still waiting for the Krispy Kreme hamburger partnership to come, the donut burger. That's another one. Isn't Dunkin' Donuts coming out with a glazed donut sandwich now?

Egg in the middle. That's a crime against humanity. I mean, I can't even think about it. That might be overstated. Your cardiologist son will have lots of clients. Yeah, yeah, it's great for him, great for him. I should mention Friday, National Donut Day, which I just assumed that was something that Dunkin' Donuts came up with as a promotional measure. I was happy to find out that there is a nearly 100-year-old history behind National Donut Day.

During World War I, the Salvation Army sent volunteers to France where they made donuts for soldiers on the front lines. and in 1917, they dubbed the first Friday of June National Donut Day to commemorate the volunteers' goodwill gesture. That just makes me feel better. What a history lesson on Motley Fool money. It doesn't make a donut anymore okay. Have you heard of the Cronut? It's croissant dough fried like a donut, shaped like a donut.

It's the new rage in Soho, New York, and I'm looking forward to it. How do you know this hipster thing? I came across it. You can say croissant a few more times to me, please. People are black marketing them on the line for two and three times the price. You can make them market anywhere, I guess. Before we get to the stocks on our radar, and we will bring in our man, Steve Broida, from the other side of the glass, but also sitting on the other side of the glass, we have some special guests today, Stacy and Pete Chittick,

who are here because of a silent auction. They won a taping of Motley Fool Money, and we'll be having lunch a little bit later, But it benefits the Lyle's Crouch Elementary School Here in Alexandria So we want to thank them for coming And for supporting the community Thank you guys Steve, are you ready to join in

On Little Stocks on our radar? You bet Ron, you know how it works You're up first What do you got this week? Steve, I've got Ulta Salon Cosmetics and Fragrance The specialty retailer They report next week

The company has been searching for a CEO A new CEO for quite some time We own a small stake here have been reluctant to go higher until we see what kind of CEO they can attract. So next week's call will be really important. And the ticker symbol? U-L-T-A. Steve?

So my question is, what is Ulta exactly? It looks like you can get your hair cut. I've seen them. You can get your hair cut there, and it's fragrances. Right, exactly. They do have salons as part of it. Not every single one, I believe, but they do have salons. But it's a specialty retailer of cosmetics and fragrances.

Sephora would be a comparable company, perhaps not as high-end. You're looking for a new place to get your hair cut? Well, you never know. I mean, it's nice to know there's more opportunities out there. James, what do you got this week? I'm going with Giant Interactive. The ticker is GA. This is my Chinese video game company, and it's been a great performer in my Income Investor Newsletter,

but they just did a secondary offering, and it's whacked this stock down like 15%, 16%. So I think it's undervalued. I think it's a good time to buy. Do you play any of the games? You know, I have not played video games in ages, Chris. I see that other people do, so I figure it's a good thing. I see that other people do. Steve?

What is your favorite video game of all time? James Early. You know, I used to play Pac-Man a lot. I'll go with Pac-Man. Way to go on the limb. Q-Bert. Q-Bert 2. Q-Bert.

Good pull. You've got to see Wreck-It Ralph if you haven't, because that is just a throwback to so many great video games. Charlie, we've got about a minute left. What do you got this week? I'm going to stick in the gaming theme with Electronic Arts, tickers E-R-T-S. What I like here is that after losing money for four years in a row, they returned to profitability in 2012, and their stock is up 75% over the last year. It's outpacing Activision Blizzard and Take-Two Interactive.

And what we have to look forward to is the E3 gaming conference next week, where we'll see some of their new franchises coming out for the PlayStation 4 and the Xbox One this holiday season. So I think this is a company that is building some momentum after a few rough years, and it's one to watch. And the ticker symbol? ERTS. Steve, question about Electronics Arts? What does their sport line of games look like, let's say, 10 years from now? I know they do a lot of basketball and hockey, a lot of different... And they have FIFA soccer as well.

I think they're going to keep those franchises locked up for a very long time. No one's really bidding against them anymore because the cost ran up too much. So it does cost a lot of money to get that Madden franchise. Steve, related to Pac-Man, were you a fan of the song Pac-Man Fever? I don't think I've ever heard it. I'm sorry to say that, but I may have to look it up after the show. Look it up on the YouTube. Delightful.

All right. Charlie Travers, Ron Gross, James Early. Guys, thanks for being here. Thank you, Chris. Up next, Motley Fool co-founder David Gardner weighs in on Tesla Motors, the market's recent highs, and the next innovation he's keeping his eyes on. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money.

Hi, I'm Chris Hill, joined in studio now by David Gardner, co-founder of The Motley Fool, co-chairman of the board, and the guy who runs several of our services. Thank you for being here. My pleasure, Chris. It is always a pleasure. We've been doing this on and off for something like almost two decades now, it feels like, but maybe at least one decade. Exactly. Well, you know what? We're going to get into how long we've been doing all of this in a moment. it. But before we get into some of the companies that you follow most closely, I want to start with just sort of the market in general. There's the old saw of sell in May and go away. Last year, if you'd done that, that probably would have worked out for you, whereas the market actually

dropped in May. This year, did not work out at all. But more importantly, I think you have, at this moment in history, a lot of people on the sidelines looking at the stock market, looking at the market hitting new highs every other week, seemingly, and just sort of getting scared and saying, should I jump in now? Just sort of battling with their own human nature. What do you say to investors who are on the sidelines and are reluctant to get in? Well, I think you have to play the game differently because you're right. I feel the same thing. That's human nature. We all feel like when the bus left without us and went to a good destination, we feel left out. But the good news is that the bus is just going to keep going to

more and more destinations. And you can take a quick plane and get ahead of it to the next one and get on the bus because investing and profiting through the stock market is definitely, for me, not about guessing the short term. You're right. One may. It's a good idea to be out and the next it's not. And if you start playing that game and get yourself in that cycle, I think you're just going to be guessing. And more often than not, you're going to end up in a bad place, I think, or a suboptimal place. So my whole approach has been and will be to just continue plowing as a net saver at this stage of my life, in my 40s, keep plowing money into the market every two weeks. And certainly in our Motley Fool Supernova Odyssey One portfolio, for those familiar with

that service, that's the whole idea. We have new money coming in every two weeks. We just plug it in the market, whether June is going to be, 2013 is going to be as bad as June 2012 was, or better, or where the market ends, 2013, really not concerns to people who have the mentality or wearing the glasses that I am as we look at the future of the stock market. It's all about what's going to happen next, not just what happened. Let's talk about Tesla Motors, because that's a company you follow closely. It's a stock you've recommended. November 2011 before it was cool before it was cool and by the way it didn't do anything for

about a year so we had it in November 2011 think come on now this is this is a great company by November 2012 I think we were still underwater but boy the last six months have been amazing it has been amazing is it also just a little bit crazy though when you look at this because it I mean having worked with you for as long as I have you know somewhere approaching 20 years I think back to other companies sort of in similar stages that you were an early adopter of, Amazon, in the late 90s. But to my recollection, Amazon didn't have the number of people betting against it that seemingly Tesla Motor has. Now, maybe my memory is flawed on that, but it seems like at least part of what has fueled Tesla, the stock, over the last few months has been short sellers taking a bath and closing their short position. Does that at all give you pause with respect to Tesla, the stock?

Well, I guess, again, in the short term, that may well be true. Although I guess I'd like to point out that the act of short selling is selling a stock in the first place. So while short squeezes can propel stocks higher, think of it this way. The stock was kept down for quite a while by very forceful. In fact, when Elon Musk came to speak at our company, he came to speak at Fool HQ in 2011. he was talking about as the third most shorted stock on the NASDAQ at that time. I don't know where it is today or where it was five months ago before its tremendous run. But think of it that way, and you start to see that it's a little bit more balanced

than maybe the crazy volatility that we've seen looks like. All that said, we are invested for this company. I'm looking three years forward, and I think it has a tremendous future. We'll see. Certainly, Elon Musk has put up a lot more than any Motley Fool member, I think, to buy his own stock in the 90s here, so in the very high 80s. So, you know, you have a lot of confidence from somebody who has a lot of swagger and a lot of achievement to back that up.

So we'll see. I want to get to Musk in a second. But first, when you look at the news coverage of Tesla, it seems like over the last couple of months, in some ways, the dominant story are these state-by-state battles that the company is engaged in because Tesla Motors is a direct-to-consumer business model. And there are a lot of states, Texas, North Carolina, Virginia. These are not tiny states.

We're not talking Delaware and Vermont here. These are big states where the auto dealers are working with members of the state legislature to essentially, effectively keep Tesla Motors out. To what extent does that concern you over the next three years? I guess it's obviously concerning because it undermines the business momentum of a company that is hoping to keep growth going, going, going for really a persistent number of years going forward. So that does hurt. But I think it's kind of like short-selling Tesla. It's sort of like the business world trying to short-sell Tesla.

It's not going to work in the end because while there are certainly powerful constituents with a lot of money and a lot of, well, existing infrastructure to support their view of the world. Sure. The way that David beats Goliath is by playing the game differently. That's always been the case for thousands of years now. And that's what Musk is doing. And, you know, when you see that 90 percent of the citizens of those states would like to be able to buy something directly just like they can on the Internet. In fact, you and I have talked about this a little bit. I bought a Tesla, and I just clicked a button on the Internet, and it showed up about a month later, and there was no rigmarole to it.

So, same thing with, by the way, when I buy something off Amazon. Right. It shows up, you know, not a month later, I'm happy to say, sometimes a day later, but, you know, that opportunity is too compelling to too many people. Chris, I do want to say that, you know, a lot of the view of the traditional car makers are that they're going to sell you the car at or near cost, and then they're going to make their money at the dealership, of course, on service, service and parts going forward. Please understand, I think you do, that Tesla has a very different model.

They're trying to sell you a car that you're not going to need to service. You do still buy a service contract, a service agreement, which I did buy. But if they're doing their job right, there's nothing like any kind of a tune-up. There's no gears. There's no fluids except for the washer fluid. So when you think of the economic model of that, it's even more disruptive than we realize. It's not really just about selling your car or can I sell it directly in North Carolina, one of my home states. And I think the people of North Carolina need to really think a lot harder about the future that they want for their state.

Or, you know, so it's not just the direct sales. It is that bring your car back, and that's how we're going to profit off you over time, that Tesla is also going to be subverting. And I think that's a better world, and I think in the end we all kind of vote our way into a better world. So I predict those things crumble. Yeah, it does strike me as one of those things that is a short-term gain, and I don't own a Tesla and I don't own the stock. But I just sort of try to think in terms of, well, where is the world going and where are we going to be in 20 years? And it seems almost inevitable. You know, nothing is inevitable, but, you know, I guess except death and taxes.

But it seems almost a given that we are collectively moving in the direction of a Tesla Motors. But maybe it's going to be more of a struggle state by state than certainly Elon Musk would like. Well, I think what you're doing there is what institutions have a hard time doing, because you're looking ahead and you're thinking about, play it forward, what kind of world it's going to be. And I think that often government and bigger institutions, including large corporations, have a hard time really planning or being able to evolve into what the world is going to want from them. And so I think it's a concern. But we as individuals can do that pretty well, and that's what entrepreneurs do as well. So I think the wind is at the backs of those who look forward, and I think the wind is in your face for those who want to look backward.

Last question on Tesla Motors. How does it drive? It's a beautiful car. It is truly unlike any other car that I've ever driven. I will say that I think my line about it is that it is the most responsive and therefore kind of the most natural extension that you could ever have of yourself out there on the road if you were a superhero. Because it is remarkable.

Have you had a chance to drive one? So Tony Stark is driving a Model S, or perhaps should be. You know that Iron Man 1, I think Elon Musk appeared in the movie, or maybe it was Iron Man 2. Iron Man 2, Elon Musk's, one of his, not his distribution center, but one of his warehouses was part of the set. Yeah, I think they even called him out by name somewhere, because I think Jon Favreau is a friend of Elon's. But anyway, I think there's some crossover there.

Coming up, more with Motley Fool co-founder David Gardner. We'll talk Apple, Amazon, and the coming of our robot overlords. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill here in the studio talking with Motley Fool co-founder David Gardner. Let's talk about Apple. Starting on Monday, the Worldwide Developers Conference begins. And there seems to be a lot of anticipation for a number of reasons, not the least of which is CEO Tim Cook's recent comments that Apple still has more game changers. Those are his words. We

still have more game changers in us. I said on our MarketFoolery podcast at the time, I thought that was a pretty extraordinary thing to say out loud to the media. It just just seems like a raising the bar kind of comment. When you look at Apple, both the company and the stock, where do you see it right now? Well, I mean, first of all, I admire the company, and I think we all should, because it has risen through essentially consumers buying their products to become one of the largest and most successful companies in the world, a great brand name. And I thank my lucky stars every day for Apple products that surround me and my family and have made my life a great deal easier. It's also been a great stock. It hasn't been a great

stock for the last 12 months. But I mean, again, trying to get outside the incredibly narrow focus of so much of the coverage of American business. I think that Apple remains an amazing story. And so one of my maxims is that past performance is often the single best indicator of future results, which obviously I have fun with because that's the exact opposite of the financial disclaimer that is ubiquitous in our world. So I would expect that they do have more, quote, game changers, end quote, ahead of them. And I think we're at a stage where there are so many people doubting the company.

And I don't exactly know how that came about because most of their numbers are at or near all-time highs. There has been some slowing of growth, and of course, anytime you get that big, it's hard to keep churning out 30% top line kind of growth. And I realize that competition is catching up, but I believe that Apple remains the innovative company that its competitors are simply following. And as much as I love Google, the Android has largely mimicked the success of the iPhone. I mean, the iPhone is the real game changer and has been for quite a while. the iPad showed up and created a market. And those are just only just a few years old. The iPad didn't exist five years ago. So if we just try to dial out our perspective, maybe just fly

10,000 feet higher than the rest of the world, I think that we're going to see that Apple is a great company and likely has really great things in store for it ahead. Let me just add that it's not the only great company. In fact, I'm sometimes worried that we talk on the Motley Fool website And in our stuff, too much about Apple. I mean, I realize it's an interesting topic, but it is just one company. It's just one stock. As investors, we have thousands of choices. I also happen to love Google, and they're perceived as competitors in lots of ways.

But these companies are all kind of winning together, in my opinion. You mentioned Amazon before news this week that Amazon is going to be rolling out a grocery delivery business. Amazon Fresh. Webvan 2013, baby. I was just going to say, and I'm a longtime shareholder and a big fan of the company and a huge fan of Jeff Bezos. This seems, though, like part of me wants to call up Jeff Bezos and just say, why are you doing this? This seems like an ambitious bet, or is it not? Well, I love it.

I mean, wait, you're worried about it? I'm not – I just sort of look at it and say, is this the best use of additional resources? Is this the best move you can make? Well, I think in some ways it's very consistent with what they've been doing because it involves same-day delivery and it involves having distribution centers. And instead of filling them with books, CDs, and ladders and one million other objects, they're also just bringing in food and fresh food. And this is just being test marketed. So they've had it in Seattle. The news, as you were saying, Chris, is that they're going to take it to a couple more cities. Test and learn, baby. I mean, that's the nature of innovation. And you got to love Bezos. I love Bezos. The guy has, again, added incredible convenience and happiness and simplicity to my life. and I would never doubt him. I would always start from the position

of believing in what he's doing and he would need to, I would say, innocent until proven guilty. He would need to prove to me that he's doing something really stupid and keeps scaling it. By no means do I think that fresh groceries are stupid.

I think it's very disruptive and my only worry about Amazon is that they try to fight too many battles on too many different fronts. That said, if you'd had that worry at any time in the last 5, 10, or 15 years, you would have missed one of the better stocks you could have owned over the last 5, 10, or 15 years. So don't be a hater. I'm not hating.

I know. You're a shareholder. I'm a shareholder who's just asking questions. As we've discussed many times. I'm just asking questions. And you are. It's a totally fair question. But I'm giving an answer which is based, I think, on probabilities, which is how I think about things.

nothing's ever a sure thing. And, you know, I think it's been the right bet to bet with Jeff. Whenever you come on the show, I always like to ask you this question. So I'll ask it again, because you, more so than most people that I come across, are an early adopter of new technologies, new innovations, that sort of thing. What is on the horizon or what is in your purview now that particularly excites you well i think that um i i i'm thinking a lot about how um machines are going to get better at talking to other machines um so you know there was b2b back in the day business to business and you know that's a timeless concept but um m2m is how i'm thinking about the world some people call this the internet of things and i i everything from

you know how you don't have to you can take that whatever it is fast pass or in different neighborhoods. You just blow right through the toll booth. The easy pass. The easy pass. So basically, you've got that opportunity now for your car simply to talk to the toll booth and you just blow right through. It costs a little extra, I guess. You're paying an extra few pennies each time. But it adds convenience. And that's just a simple, banal example of what machine to machine can mean. I'm wearing today a Jawbone Up. So this is simply, on the face of it, it looks like one of those Livestrong bracelets that Lance Armstrong made popular, this one being light gray. But this is actually a small computer. It's got a motion sensor, and it has the ability

essentially to see where I'm going and count my steps and see how well I'm sleeping, that sort of thing. And I can pop the cap off this and plug it into my iPhone and sync it so that I have my health information in my iPhone. And this is a cool product. It's still new. It's an early version of it. And there's good competitors out there, Nike, FuelBand, and others. So, Chris, I think that this is an example of a little machine talking to another machine and making my life easier, doing things that I would never want to do, like count the number of hours of sleep I get, otherwise I wouldn't be sleeping. So those are a couple examples of how I think our world's going to continue to evolve. I think we're moving into a world where machines add a lot more

convenience to our lives and accelerate what we're doing. So that's how I'm thinking about things these days that all sounds great until they just decide to take over and then it's they gain consciousness i understand arthur c clark predicted that in uh i think you know he was an incredible futurist and a sci-fi author who died right around the year 2000 he predicted by 2020 uh machines i think autonomous machine intelligence would equal human intelligence so we're about and he's he was pretty good with his predictions over the decades so we're about seven years from that point we're getting close uh we got about a minute left uh next month will mark 20 years since uh you and your brother tom sat down cranked out the first motley fool printed

newsletter 37 subscribers uh here we are 20 years later did did you ever imagine this at any point in that first year or so did you did you envision a company with hundreds of employees with this presence on the web with just literally hundreds of thousands of members? No. We were writing a newsletter for our parents' friends. We sent it out to about 1,000 people, our initial mailing, and 37, only 37, these are our friends and family, 37 stepped up. Somebody in the marketing industry said, that's actually a great response. You guys got 3.7% response. That's way higher than the industry average of 1%. It didn't feel promising it all the time. But the big move for us was to realize, I think, quite early, the beauty of

online services and the internet and what it could do for investors like us, reducing the cost of investment research, allowing us to share information with each other through discussion boards over the internet, and really educate each other, investors helping investors beat the market. We definitely did not foresee that in July of 1993, when the first issue of a newsletter for our parents friends came out but thanks for asking well here's to the next 20 years oh yeah david gardner co-founder and co-chairman of the board of the motley fool thank you for being here thanks chris fool on that's going to do it for this week's motley fool money our engineer is steve broido our producer is mac grayer i'm chris hill thanks for listening we'll see you next week