Motley Fool Hidden Gems Investing - Motley Fool Money: 08.03.2012

Episode Date: August 3, 2012

The government reports stronger-than-expected jobs growth.  Our analysts discuss the employment numbers and delve into earnings news from Procter & Gamble, General Motors, Kraft, Abercrombie & Fitch, Gap, LinkedIn, Blue Nile, and Zip Car.  Plus, David Kuo from The Motley Fool UK weighs in on the business of the Olympics. 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, and joining me in studio this week from Motley Fool Inside Value, Joe Mager, and from Million Dollar portfolio, Charlie Travers and Ron Gross. Gentlemen, good to see you. We have got the latest on General Motors, LinkedIn, and a whole lot of fashion retailers. We will go to London for a look at the business of the Olympics. We'll give you some betting tips on the summer games, as well as a look at the stocks on our radar. But we begin with the big macro. Guys, kind of a mixed bag in the monthly jobs report. 163,000 jobs were added in July. Charlie, that's the most since February. It was more than was expected. And yet the unemployment rate did tick up to 8.3 percent.

What do you think? Well, it's better than losing jobs, Chris. And for the year, there's been average job growth of 151,000 per month. It's about the same as what happened in 2011. And that sounds like a good number on its face and that it should mean the economy is growing. But as you mentioned, the unemployment rate is still at 8.3 percent. And what's going on here is that that's just not fast enough job growth to make a ding in that unemployment rate because the labor force is also growing. Over the past year, the labor force has grown by 138,000 a month, which is new people looking for jobs. And so we're basically in a treading water mode right now. Can't some people just retire to make that number go down and incentivize retirement?

Yeah, the markets loved it. I mean, they really reacted favorably. I'm not buying it. Would love to buy it, but not. Things are weak. The real unemployment rate, it ticked up to 15%. That's a lot of people not working who would like to work. The Fed's going to have to step in, I think. But you know what? The Fed really can't do much anymore. So where do we go from there? You tell me, Christopher. Actually, I'm going to kick it to Joe. What about that? How... I never underestimate the Fed's ability to print money out of thin air. I was just going to say, does this make it more likely that we're going to see some QE3

coming in September or October? It's kind of a tweener. I think that if we have a couple more months like this, you might see more Fed action. But ultimately, I don't think everyday investors should get too caught up in what the Fed is going to do next. Instead, they should be thinking about the long term and buying well-run businesses. And yet, to your point, Ron, we did see professional investors get caught up in this. The Dow hit a three-month high on Friday. So clearly, some people were taking some good out of this. Yeah, the Fed came out and said the interest rates would remain low through, I think they said, 2014. Not really surprising. I think

people are hoping they're going to come in and continue to prop up asset prices. It's good for the stock market. Those are not fundamentally investable issues. That's playing games, and that's a house of cards waiting to crumble. Speaking of the Dow, a couple of Dow stocks reporting earnings. Procter & Gamble's fourth quarter profit up 45%, thanks in part to the sale of its snack division. Joe Mager, This is a company that you watch closely. What did you think of P&G's quarter? It was pretty good.

I mean, P&G is really suffering these days from some mistakes they made years ago when they started charging too much money for the likes of 18-blade razors. And they pushed through some really aggressive price increases, and they're basically paying for that today. 18-blade razors? Okay, five. Five. I do love the razors.

You couldn't let that go. You know that's in development, though. You know somewhere in a lab. Some R&D folks are working on that. Well, while we're being picky, you just said House of Cards crumbling. I'm just saying, it's not a cheese wheel. Anyway, they overplayed their hand and a lot of premium brand companies did this too. Diageo did the same thing. They got really aggressive when times were good and now they're having to pull back a little bit in order to maintain

share. I think that's okay and I think they're adjusting well, but a better news is that they're going to buy back some stock. You can probably thank Bill Ackman for that. He's an activist investor who stepped in and I'm sure has given management a little bit of pressure to do more right by shareholders. Yeah, what about that, Charlie? Because back in June, P&G said they had no plans to buy back shares. Now they come out and say, actually, we're going to buy $4 billion worth of shares over the next 12 months. Is that really driven by Ackman? It must be. Back in June, when the share price was far lower than it is today, it would have been a better idea at that time. But now it's a great idea because Bill Ackman says so.

I mean, he has great hair, so who am I to argue with him? Shares of Kraft Foods hitting a 52-week high on Friday after second-quarter earnings. Ron, what's the story there? People just buying a whole lot more mac and cheese? Love that mac and cheese, which I've actually never had. That's a crime. Truth be told. That's a food crime.

Yeah, I apologize for that. Kraft is doing a nice job getting through price increases where they need to do so. They have nice overseas distribution that they actually acquired when they got Cadbury back in 2010. That's helping them overseas. They have, obviously, the split between the new Mondelez snack division and the grocery business, which is kind of like the slower growth, higher margin business. So they're doing a fine job. Third Point's Dan Loeb just took a big, fat position in Kraft, which is interesting.

We'll see if he makes any noise. But the company's doing well. Joe, what do you think of these two companies in terms of their stock price, their valuation? Because, again, shares of both were up on their earnings news. Are they undervalued, fairly valued, or dare I say overvalued? I prefer P&G. Kraft is always in a restructuring mode. I think they've done more than $100 million in restructuring charges, seven out of the last eight years. So they might as well just stop calling them restructuring charges and just call them costs.

And for those who are chasing yield, P&G does have a somewhat higher dividend at 3.5% versus, I think, 2.9% for Kraft. General Motors reported a 41% drop in second quarter profits. Joe Mager, as we talked about earlier in the week on our Market Foolery podcast, kind of a familiar tune here. Did well in North America and Asia, not so well in Europe. Yeah, well, GM's my worst performing recommendation in inside value. Not that I'm bitter about it. The European business has lost money every year since 99,

and that doesn't look to be changing anytime soon. It's really tough to cut costs because of powerful unions in Europe. The economy is soft, and I think you're going to see a lot more of that. So I'm waiting for the sunny side to start here. But I think when you look at what's ahead, they're going to refresh 70% of their brands in the U.S. this year and next. So a lot of new cars in the showroom, and the expectations are so low for the stock right now. The good news is that even mediocre news is very good news. So I'm banking on mediocrity.

I was going to say, Ron, this reminds me a little bit, as you've talked about in the past with respect to Microsoft, that there have been times over the past year or so where you've looked at Microsoft and said, according to your valuation models, this is basically priced for no success whatsoever. So even if they do a little bit well, it's going to be fine. I mean, when it comes to Europe, is that how investors should essentially regard Europe? Probably. You've got to be careful, obviously, with things like this between a value and a value trap. So you need to have a really good handle on the situation to say, OK, mediocrity

will be fine. And if we get mediocrity, that actually makes the stock cheap. But if you're off there, especially with regards to something that's almost impossible to analyze like Europe, you're in a trap. And so that's the game. So back to GM stock, is it a value play? I still think so, but it obviously has not lived up to my expectations. Coming up, one internet company shocked some investors this week by actually making money. Details shortly. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Joe Mager, Charlie Travers, and Ron Gross.

It's time to hit the week in fashion retail. Let's start with the good news, Ron. And Gap and American Eagle both reported same-store sales growing around 9%, 10% for July. That's obviously good news for them. The bad is that shares of both Aeropostale and Abercrombie & Fitch were down this week after each company cut their guidance. Help me out here, because I'm not a fashion guy. If there's anything I know, it's fashion. Absolutely. So here we go.

All right, so first of all, let's take the big picture. The 18 retailers that Reuters follows had average same-store sales for July of about 4.6%, a relatively healthy July, which is a very important indicator of the economy. So I was actually surprised that it was that high, and we saw things like Gap, which surprised me. So everything looks pretty good, except if in case you're a teen retailer, and then look out below, specifically with Abercrombie and Aeropostale. American Eagle, surprisingly, did fine. But Aero and Abercrombie were completely punished. Traffic to their stores were down. They had a lower guidance, and the market just crushed them.

It's very hard to draw conclusions from just one month, but it's all about fashion assortment. What do you have in the stores? What do people want? How promotional do you have to be? What happens to margins as a result? So I can't say what's going to happen next month just from this month, but there are really some fashion challenges at some of those teen retailers. Wet Seal is another.

I was going to say, it seems like this is one of those industries that the risk factor increases the more a company is really trying to broaden their appeal. It would almost seem like if you're a niche apparel maker, I mean, you could make the argument that Under Armour is an apparel maker, and with their sportswear, they're obviously very targeted. But getting back to more fashion oriented apparel, a company like Lululemon, it's much more targeted, it's more niche. Also, should that just be a big red flag if you're targeting teenagers? I mean, I have a teenager in my house, and I would not want to invest anything in terms of her whims. Yeah, it's a tough business, and we own Aeropostale, a million dollar portfolio,

and are getting smacked around as a result of the weakness. It's a tough business, there's a lot of competition. Even folks like Target, obviously, sell nice cheap clothing to teenagers. So you've got to get it right, and Aeropostale does a little bit more knocking off at cheaper prices, but lately they've started to put that fashion word in there. Uh-oh. Scares me a little bit when you start to try to develop fashion versus just knock off a t-shirt here and there. So it is a very tough business. But when you get targeted, like Lululemon, you better get it right, or then look out below. Do you have a regrettable fashion decision?

Well, I'm sure you do. Oh, please. What's your most regrettable? All right, let me take you back to the age of Michael Jackson. Everything was kind of leather and zippers. Oh, God. And I had this shirt with zippers all along the shoulders and the sleeves, and I was proud of it. It was good stuff.

Joe Maker, regrettable fashion decision? I own some whitewash blue jeans. Of course. A while ago. Acid wash? Acid wash. Nice. Charlie?

I was a former hockey player, and in my high school days, I had the Jaromir Jagr hair. So it was not just a mullet, but a permed mullet. I've seen photos of that. I think I've seen a photo of it. And you live to tell. Thankfully, this predated the digital social media age, so these are only Polaroids. How about you, Chris? You're pretty dapper.

I was just going to say, pretty much every day of my life is a regrettable fashion decision. Let's bring in our man from the other side of the glass, Steve Broido. I mean, you're dapper now, but back in the day, did you have a regrettable fashion decision? I remember rocking a vest for a little while. Was it a suit vest, be cool guy? There is nothing rocking without a vest. Please tell me you actually had a shirt on underneath it. Oh, of course I did.

Oh, okay. I've got to admit, I actually bought a vest a couple weeks ago. They're back. They're back. I hope so. Apparently Steve thought they never went away. Moving on, LinkedIn, the business networking site, reported earnings this week. And Joe, profits were down, but revenue was up 89%.

That's some numbers that I think the people at Facebook would envy. What do you think of LinkedIn's quarter? Oh, it was another great quarter from these guys. And LinkedIn is really social media done right in that there is an actual niche that's being filled and it's valuable to users. But there's also a business model built around it that's sustainable and unique. Like, HR departments love LinkedIn because it's a way to hyper-target job candidates. We use it here at The Fool. It's now become one of our biggest spends in HR.

And I think they're just going to keep eating up share in the same way that Google has done with online advertising. And they're just kind of creating a whole new niche market here and just eating up a lot of dollars. So back to Facebook, because clearly there is money to be made in this industry. Is this something that Facebook needs to get into? Because when you look at the member base they have, I think the number for LinkedIn is somewhere around 175 million. Even if you back out the 83 million that Facebook this week said, oh, those are duplicate accounts, you're still looking at a base of about four times what LinkedIn has. Well, I'm sure they would love to. LinkedIn is growing their revenue per user at an amazing rate.

It's up 30% year over year, and Facebook's is almost flat. The thing is, I don't think Facebook can actually muscle their way in here. And it's because, you know, when you started out as a user with Facebook, you kind of did it on the terms of I'm only sharing what I'm interested in and I'm sharing it with friends and family and creepy people who I just accept invites from. Whereas with LinkedIn, you're doing it on the premise of this is a professional relationship and I'm only sharing information in that context. I think people would have a really tough time going from I'm going to use Facebook in a social way to I'm going to use Facebook in a professional way. And I just don't know that they're going to be able to bridge that gap in terms of users sharing that information. Video game maker Activision Blizzard's latest earnings fell almost 45% for the quarter. Charlie, what's the story here? Not enough people playing World of Warcraft?

It does look that way, Chris. Activision Blizzard is the best-in-class game company. They have the top three titles in North America and Europe through the first half of this year, including Diablo III, which is the fastest-selling PC game of all time with 10 million copies. They did raise their revenue and earnings guidance for the year. However, the problem is World of Warcraft is selling off, and that spooks people. They dropped from 10 million subscribers at the end of the first quarter down to 9 million subscribers. The party line out of management is that some of those subscribers left to go play Diablo III

and that they will come back this September when the next World of Warcraft expansion comes out. Sure they will. That has been the historical pattern, but the market is clearly playing wait-and-see with Blizzard right now. Shares of Zipcar fell to an all-time low on Friday after the car-sharing service reported horrible earnings and cut guidance for the full year. Ron Gross, how banged up is this car? It's a tough week for a million-dollar portfolio. We own this one as well. So, the big picture is this is a growth story, a relatively early-stage industry, and it's all about growth. And the company is not putting up the growth numbers that investors want to see.

They gained fewer members, new members than expected. And they had some poorly performing marketing campaigns, lower than expected revenue, brought down guidance. So the market just does not want to see that with the growth story. And they decided to take off a third of the company's market cap. We need to now dig in and say, is a third an overreaction? And we'll have to figure that one out. Joe, what do you think? I use Zipcar and love it.

It's great for D.C. where it's a really dense city and parking is expensive. It's difficult to have a car. But that's not true of most American cities. And what's always bothered me with Zipcar is that even though it's a great service, once it had gone public, they'd already blanketed all the major cities in the U.S. And so, you know, extending out from that was going to be very difficult. And I think that's what you're seeing right now is that they're just having a hard time posting the growth that is baked into the stock price. Shares of online jeweler Blue Nile up more than 30% on Friday after earnings came in higher than expected. That is a huge jump, Charlie.

What is going on at Blue Nile? It is a huge jump, Chris, but this is a stock that's also been cut in half over the last three years. So it's finally some good days for some shareholders. So they had room to run. Had some room to run. Blue Nile, this is an old-school internet business, and the story was that they would disrupt bricks-and-mortar jewelers. That hasn't really happened. And I think one of the reasons is that consumers looking to drop a couple thousand dollars on an engagement ring might actually like to have it in their hands and see it first.

So this is a company that just has not been able to deliver the growth over the last five years. However, under new CEO Harvey Cantor, it looks like they're bucking that trend. And they're guiding for this year for 50% earnings growth. And I think that's why the stock is up so big today. I think it's over 30% right now. I realize that the price to acquire this company is now higher. But does it make a good acquisition target for an Amazon or someone else? I think it would for Amazon.

Historically, I have come from the opinion that Blue Nile did not want to sell and was happy to be a standalone business. But with a new CEO, that can always change. And finally, guys, the restaurant chain Hooters is undergoing a makeover to appeal to a wider audience. It has revamped the menu to include salads and has a new TV ad campaign featuring, I'm not kidding, owl finger puppets, which led to my favorite headline of the week on a restaurant blog. The headline was, Hooters Plans to Lure Women with Puppets, Salads. What could go wrong, Chris? What could possibly go wrong?

All kidding aside, let's give a little advice here. How can a business like Hooters broaden its appeal? What do you think, Ron? Don't broaden your appeal. Stick to your knitting. Do it better. Make better food. Improve the wings a bit to compete with the people who are doing it better, and that's the business.

Joe? Improve the wings a lot and keep doing what they're doing. We're rolling out some healthier options and marketing outside the core demographic of just dudes so that women feel comfortable going there. Charlie? That's not even taking a half step in the right direction. If they really want to change the image, they've got to change the attire of the waitresses. And if they want to make it more appealing to women and families, they've got to tone it down a bit. Vests.

Vests. Exactly. All right, guys. We'll see you later in the show. Coming up, we will go to London for a closer look at the business of the Olympics with The Motley Fool's David Kuo. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money.

I'm Chris Hill. With the 2012 Summer Olympics in full swing, the eyes of the world are on London. So we turn to our man at Motley Fool UK in London, David Kuo. He is a regular financial commentator for the BBC, and he's the host of Money Talk with David Kuo, the most popular business and investing podcast in the UK. David, my friend, always good to talk to you. And you, Chris. In the world, by the way.

In the world, we are the most popular. Really? Because I think Motley Fool Money is pretty popular, at least here in the States. Yeah. Well, maybe in my universe, it is the most popular. Yes. I want to get to the business of the Olympics in a moment. But let's start with the ongoing debt crisis in Europe.

When you look at it from your view in London, what has surprised you the most over the last six to 12 months or so? I think it is really just the lack of urgency that these European leaders seem to attach to the eurozone problem. I mean, take, for instance, just recently, Mario Draghi, the president of the European Central Bank. What he said was that it is unlikely that anything will be done until after September. And I scratched my head and I thought, we are in August now. A whole month is going to go past before you actually decide to do anything. Why is that? Well, the reason for that, Chris, is because August is holiday month in Europe.

So everybody's gone fishing, right? Everybody's gone on holiday. They've got great big signs outside their doors. Nobody's here, so don't bother us. So that's the kind of urgency they have with regards to this eurozone debt crisis. Holidays are more important than trying to solve the crisis. It is despairing, really. And I suppose on some level they figure, well, there's nothing we do today that's going to fix it in the next month.

So this can wait until September. Well, that is partially true. But I think the other thing is, again, just recently, we had Mario Draghi. And he managed to get on board Angela Merkel, the German chancellor. He also managed to get on board the French president, François Hollande. And the three of them said, right, let's sing off the same hymn sheet. In other words, we will do everything possible to save the euro. And everybody seemed quite happy with that until somebody pointed out that the most important person that you need to get on board is, of course, the Bundesbank.

And nobody asked what the Bundesbank was going to say with regards to this idea that we're going to do everything possible to save the euro. In other words, print as much money as they possibly can and go off and buy these distressed Spanish and Italian bonds. And then when they asked the German president, well, he was on holiday, by the way, but they managed to actually track him down somewhere. And they said, what do you think about this idea? And he said, nein, I'm not really keen on this one. So that is the problem that you have in Europe. There are just too many people, too many interested parties. And while they can get everybody on board, the one person they need is, of course, the Bundesbank.

And the Bundesbank will not play ball. So when everyone gets back to work in September, what is the next shoe to drop? What is the thing that investors who are looking at the EU debt crisis and trying to factor it into their own investment decisions, what is the thing that investors should be watching next? The one thing to watch is, of course, Spanish bonds and to have a look at those Spanish bond yields. When it hits 7%, it is very difficult for Spain to go out and borrow money again, simply because if it had to pay 7% interest on those bonds, it would be unaffordable. And what is really happening and really bizarre, Chris, that is happening here in Europe are these negative interest rates. There are six countries in Europe that have negative interest rates. And just to give you an example of how that works, if I were to lend you $10 and at the end of one year you gave me $9.90 instead of $10 plus some interest,

and then I come back to you and say, would you like to borrow some more? I haven't lost enough money yet. And this is what is happening in Europe. Switzerland, Germany, Austria, the Netherlands, Denmark and Sweden have negative interest rates. And that has not deterred people from lending these countries money. So if I were Germany, I would say, yes, just give me some more. Because the more you actually lend me, the less I actually have to give back to you. It's bizarre. We were talking recently here at Motley Fool headquarters in the States about bonds in the U.S. and some of our colleagues raising the question of, you know, when is the bond bubble going to pop? What is the bond bubble situation like where you are? Well, it is absolutely desperate because, I mean, people here in the U.K. are prepared to lend the U.K. government money for less than the rate of inflation. That is what I mean when I say this situation is really sort of quite crucial and the need to do something about this. And essentially, I mean, those six countries that I referred to, what they're trying to do now is to print more money in order to try and get away from this idea that they want people to come and lend them money at these negative interest rates.

It is a ludicrous situation. And I think the sooner something is done about this, the sooner we can get back to some kind of normality and then people can take their money out from bonds and start buying shares. I mean, I'll give you an example. You have a look at a country like Switzerland. I can name two companies off the top of my head in Switzerland that are strong companies, strong global companies that pay a dividend, right, a decent dividend. One of them is Nestle's. You might call them messles, but, you know, they make things like milk and food and all kinds of things, you know, that people would want to buy. And another company is called Roche, and it's a big pharmaceutical company.

So you have these two great Swiss companies, and yet people are reluctant to invest in them. But instead, they're quite happy to lend money to the Swiss government for a negative interest rate. You're listening to Motley Fool Money, talking with David Kuo from Motley Fool UK. Okay. Let's talk about the business of the Olympics. First and foremost, how are folks holding up in London? Because here in the States, we tend to hear of two categories of people. One is people who just can't wait for the Olympics to be over so that all of these tourists will get out of town, and other people who really seem to be reveling in it, enjoying that the world's spotlight is on London, and they're enjoying themselves. How's the city holding up, and in

which category do you sit? Well, let me give you an insight about London. It is actually quite a big city. So therefore, most of what is going on is happening over in the east end of London. It's happening in this place called Stratford, not to be confused with Stratford-upon-Avon, which is in the Midlands of the UK, where Shakespeare was born. So anybody that's coming to the UK, make sure you go to Stratford in East London rather than Stratford up in the Midlands. It's an easy mistake to make but anyway everything is happening over in the east end of london which was once uh quite uh quite deprived and so consequently a lot of building has been going on there and it's regenerating that eastern of london which is great news now a lot of the tourists who traditionally

come to the uk who come to the west end of london where all the theaters and all the restaurants are well they're not coming to the uk at all because they've been put off they've been deterred from coming to the UK because they're so terrified about these millions of Olympic tourists coming to London, our city. So as a result of that, London city, London city center, the West End is dead. It's quiet. Whereas the Eastern of London is, of course, you know, thriving right now and it's benefiting greatly from the Olympics. I have to point out that, as you probably know, the majority of cities that have hosted the Olympic Games have lost money. So with that in mind, how are you feeling about the long-term economics of the Summer Games for London?

I think, you know, it is a marathon rather than a sprint, just to use a racing analogy. And I think as far as London is concerned, many of the people who have never been to London before are coming to London, experiencing it for the first time, and I think they are enjoying themselves. So hopefully these tourists will be coming back to London over and over again and enjoying the other parts of London rather than the east end of London where the Olympics are going to be held. So I'm actually quite hopeful that London will benefit from the Olympics, not only in the short term, you know, from the boost that the east end hotels and the east end restaurants are getting right now. But I think they will also benefit, you know, from the long term when people realize, you know, what London has to offer. Now, these days, you're a highly respectable financial commentator for the BBC. You host this incredibly popular business and investing show.

But once upon a time, you were, well, I guess I should say a highly respectable bookmaker. So with that in mind, with the Olympic Games going on, I have to ask, how is the action and is there a particular event I should be betting on? Or conversely, are there just a lot of suckers bets out there in terms of the Olympics Games? Well, you know, I mean, anybody who bets on any event is really a sucker, ultimately, because, no, seriously, whatever event you bet on, because the bookie always makes money. I mean, here in the UK, we have this saying that if you go into a bookie's, you will find three windows in which you can place bets, but only one that pays out. And that just tells you how much money is going into the hands of the bookies

and how much actually sort of comes out. But if you are looking for some good bets, I've actually got an insight for you about the events that happened here in the UK and how Britain is going to fare in some of those events. Please do. Okay. Now, if you have a look, Britain always tends to do well in what I call sit-down sports, right?

Anything that doesn't require a great deal of exercise and activity, we do very well in. To give you an example, horse racing, right? It's a sit-down sport. We do very well in that. Rowing, we do very well in rowing as well. Cycling, that's another one, another sit-down sport. kayaking yachting anything that requires uh athletes to sit down on their bottoms they do

very well in so have a bet on those kind of races so uh for all our listeners bet accordingly uh we talked uh on last week's motley fool money about the events themselves and i asked the the guys on the you know around the table to put on their analyst hat and as we look at stocks and think of them in terms of their valuation being overvalued or undervalued, I ask them to do the same for Olympic events. So since you are right there in the heart of London, I will ask you the same thing. Is there an Olympic sport or event that you think is particularly overvalued or undervalued? Well, I'll give you one of each. Overvalued sports, archery, right? Otherwise known as bows and arrows, right? I mean, what is the point in archery these days when you have a

look at the equipment that they've got? They've got stabilizers, they've got dampeners, they've got extenders. I mean, that isn't a sport, is it? I mean, a sport is when I remember playing bows and arrows, and my arrow was about as straight as a corkscrew, and you had to actually sort of aim at this target, and you had no idea where it was going to go. You were more likely to hit your friend who was actually on your right-hand side than the target right in front of you. So archery, as far as I'm concerned, is grossly overvalued. And undervalued? Undervalued beach volleyball now anybody who's actually no seriously anybody who's tried to run on the beach will know how difficult it really is and jumping on the beach jumping on sand is almost an impossibility

so i would say beach volleyball everybody laughs at beach volleyball and says oh you know that's not really a sport you try jumping on sand you try running on sand just to see how difficult it is so i think beach volleyball is grossly undervalued so you're saying that the comments regarding the wardrobe of the female volleyballers aside, this is, we're not giving them nearly enough credit for their athletic ability. I have no idea what you're talking about, Chris,

because I'm actually watching the sport. I don't know what you're watching. We will wrap up with a round of Buy, Sell or Hold. Let's start with this production produced by Danny Boyle, the director of Slumdog Millionaire. Buy, Sell or Hold, the opening

ceremonies for the London Games. Oh, definitely a buy. Definitely a buy. Yes, it was a great showpiece, I think, you know, for the world. His valuation in the UK is probably a bit lower after his recent visit to London and his comments about the Olympics preparation. Buy, sell or hold? Governor Mitt Romney. A sell, definitely. He doesn't understand that British love to queue up for things. So you were just waiting for him to make a comment so you could pounce? Definitely, yes. Absolutely.

He doesn't understand. You know, the Brits love to queue up for bread, for milk. We just love to queue up for everything. This has gotten a lot of good buzz lately. Buy, sell, or hold the Galaxy S3 smartphone? I sell. I am an Apple fan. Really?

Yes. Even with the good reviews? Yes, definitely. You see, I am a one-product man. The moment I like a product, I will like it until it disappoints me. And so far, the Apple iPhone has not disappointed me at all. There were reports this week that the next iteration of the iPhone is coming out the week of September 9th. What does it have to have on it?

What is the upgrade or feature that you're looking for the most in order for it to be a hit in your eyes? Tea-making facilities. It's got to be able to make me a cup of tea when I'm actually not playing on it. And finally, her valuation is pretty rich on the heels of her Olympics performance. Buy, sell or hold, Her Majesty the Queen. Oh, definitely a buy. I mean, anybody that can jump out of a plane with a parachute at that age, definitely a buy. I have to say, I was impressed by her comedic turn with Daniel Craig, who plays James Bond.

I'm also impressed by the fact that reportedly they filmed that in February and just kept it a secret this whole time. And what is even more impressive is she was wearing the same dress then as she did for the opening ceremony itself. Now, how is that for planning? David Kuo is the host of Money Talk. And if you are looking for some insight on the economy in the UK, investing in the UK, there is no better source. You can get Money Talk on iTunes and you can listen online on the Motley Fool UK's website, which is just fooluk.com. David, my friend, always good to talk to you. Thanks so much.

And you, Chris. Have a good day. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and back in the studio with me, Joe Maeger, Charlie Travers,

Ron Gross. Ron Gross. Guys, it is that time once again, time to give the stocks that are on your radar. And we will bring in our man, Steve, from the other side of the glass. Steve, you must be comfortable on the other side of the glass, because last week we had the live show in front of an audience. You were just out there in the open like everybody. I know. I feel far more at home here. All right, Ron Gross, you're up first. What's your stock? Steve, I got Crocs for you, ticker C-R-O-X. It is a misunderstood company. Investors think It's still just about those ugly clogs that everyone wears, but it's not.

Fifty-four percent of sales comes from other footwear. So other ugly. No, they're very nice. Check it out. Strong Q2 results, raised guidance, stock is 16, should be 25. What do you think, Steve? Talk about the acquisition of gibbets. What could go wrong when you acquire a company as strong as gibbets?

It's all good there. It's all just incremental. Just explain what gibbets are. I was going to say, so gibbets are like those little things that you plug into the clogs. They're the accessories. You're focusing on exactly the wrong thing, Steve. It's not about gibbets. It's about other footwear.

You good with that, Steve? I'm good. I love Crocs. We just bought some for our son, so I'm very excited about Crocs. Did you buy some gibbets? I did not. He's a little small for those. I was going to say, yeah, that's good.

Wait until he gets to the point where he can't swallow them. Joe, what do you got? Starbucks. The stock's just been hammered. It's down 30% from where it was in April. Same store sales still grew 6% last quarter. They're doing well internationally. Still a long runway there.

And unlike most restaurant chains, business is very consistent. People come in every day. I know we waste plenty of money at Starbucks on a regular basis. Great business selling at a fair price today. I prefer to think of it as investing money at Starbucks. But, Steve, what's your question? Should Starbucks be spending more or less time focusing on coffee? More.

I don't love the juice trend that they're going on. I think they should stick to their net in. Charlie, what do you got? Verizon. This is a stock that's done very well this year, but I think it has a long room to run. The company has an incredibly strong competitive position, and the wireless business is the real cash cow here. Not a surprise to anybody who sends them a smartphone check every month. What they're going to benefit from is the transition from people on old-style feature phones over to smartphones.

Right now, only half of their subscribers are using smartphones like an iPhone or an Android phone, and the benefit there is they get higher revenue per subscriber out of those people, and they are stickier. So the stock right now is trading for seven times cash flow and you get a four and a half percent dividend. Before I turn it over to Steve, I want to ask you, because we talked recently about Verizon coming out with their plan earlier this summer where they basically said, look, it's unlimited text, it's unlimited calling, and we're going to make all our money off of the data. And that's basically their only option, you know, is basically the play is, look, you have your choice among these plans, and that's pretty much it. Is that something that

you think is going to be successful to the point where others like AT&T start to go that route as well? I think there will be matching across the competitive space, and the wireless business in general is unbelievably profitable. It's 40% profit margins for them. All right. Steve, what's your question? Which area of Verizon's business has more potential? Do you think it's Fios or the wireless? Definitely wireless. They've cut back spending on Fios entirely because they just weren't making enough money doing it so my dream that they would actually bring files to my neighborhood is dead mine as well chris i i have it pretty good sorry guys thanks for rubbing that in thanks for rubbing that in all right steve roido crocs starbucks verizon what do you like

of those three i think i might have to go with crocs because uh i know it's been beaten down and i think uh every time i see a pair i just smile i think they're just horrible little shoes I think it's great. I mean, you got some for your boy, right? Yes, we did. He's nine months old, so they're very tiny Crocs. Do you have some for yourself as well? I do indeed, yeah.

They last so long that the replacement cycle is not that favorable for a company like Crocs. But luckily, we get them young, so they have to keep getting them as they grow up. Isn't that sort of a red flag? It is a negative. You can't have everything be positive. I love a business motto of get them young. I was going to say, I would argue that Starbucks has that business model as well, don't you think? And addicted. Young and addicted.

Yes. Do you own Crocs? I do not. Wow. So you're not- You mean the shoe. The shoe, yeah. No, I don't. All right. Ron Gross, Joe Meager, Charlie Travers. Guys, thanks for being here.

Thank you. Thanks to our guest this week, David Kuo. You can check out his podcast, Money Talk with David Kuo. It's on iTunes. It is the number one business podcast in the UK. So I know we've got some podcast listeners out there. Check it out on iTunes. That is 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.