Motley Fool Hidden Gems Investing - Motley Fool Money: 08.17.2012

Episode Date: August 17, 2012

Facebook and Groupon hit new lows.  And Home Depot hits a 52-week high.  Our analysts discuss those stories and delve into earnings news from GameStop, Sears, and Target.  Plus, Pawn Stars star Rick Harrison talks about his book,  License to Pawn: Deals, Steals, and My Life at The Gold and Silver. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to the show. Thanks for being here. I'm Matt Greer. And joining me in studio this week, Joe Mager from Motley Fool Insight Value, James Early from Motley Fool Income Investor, and Ron Gross from Million Dollar Portfolio. Guys, welcome. Hello, Matt. Chris Hill is tied up in the closet still? Chris Hill is not tied up in the closet. He's actually getting a vacation, a much-deserved vacation.

So he'll be back in the saddle next week. I want to lower guidance. This is the part of the show. Lower expectations? Lower expectations. Okay, guys, a lot on our plate here. We're going to talk to the star of Pawn Stars, and we're also going to be talking about Facebook hitting a new low.

But let's begin with Walmart. Ron, the earnings look good to me. Yeah, sure. $4 billion in profit. Revenue up 4.5%. Same-store sales in the U.S. up 2.2%. Same-store is up internationally 6.4%. And yet, the stock sells off. What's going on here? Yeah, so, solid quarter, not stellar. They missed sales forecasts, a little bit under analyst guidance. Good news is, U.S. business, fourth consecutive quarter in a row, same-store sales increase. The bad news is, although international is growing nicely,

it's starting to see some slower growth. And for most people, the thesis of Walmart is the international growth story. So they're bringing the growth down purposefully in China and Brazil. They have to do it in Mexico because of the ongoing bribery scandal. So this kind of impacts the thesis, the valuation, stock sells off a bit. Joe? Yeah, I've always been a little surprised people frame Walmart for the international growth story. I get it, but it's still only 30% of sales.

And I know the optimist side of that, the glass half full, is there's a lot of room to run. On the other hand, I wouldn't buy Walmart because it's doing well internationally. And now it's just doing well, not doing awesome. Yeah, this is a great stock, a great company, I guess. I'm not jumping out of my pants just to buy it because of the valuation.

Thank goodness. For the past 10 years, it's been battling expectations. And 10 years ago, it had grossly overblown expectations. It's finally kind of lived up to those. And now the public, the investing public, is trying to dial in on what to expect going forward. I do give them credit for recognizing that they messed the U.S. business up, and they're right-sizing it, and it actually seems to be working.

So, you've got to give them credit for that. We sold the stock over a million-dollar portfolio around the time of the Mexican bribery scandal. We thought it would just be an overhang. We just really weren't interested. The upside potential wasn't enough for us to hold through all the nonsense. So, the stock ... How'd that work out for you? The stock is up nicely since then, I'm sorry to say. So, I'm alongside you.

So, yeah, the stock's up 40% over the last year. So, going forward, if you're looking at Walmart today, Ron, what do you think of the stock? I mean, it's priced just like you would think a blue chip would be. 16 times P.E. ratio, 8.5 times EBITDA or cash flow, proxy for cash flow. So, you know, it is what it is. It's not dirt cheap. It's not real expensive. If you get that extra jolt from the international growth, maybe you still have some upside here.

Okay, Joe, let's move on to a company near and dear to my heart and to your heart, Target. Yes. Target reporting big earnings, better than expected earnings. They're really investing a lot in their groceries, and they also said that they were, quote, very pleased with the results from their first three city Target stores. Those are smaller stores in Chicago, LA, and Seattle. What do you make of it? Yeah, well, Target's been on a roll. Same-store sales up 3%, the stock's at a five-year high. There's a Target in D.C., and it's the first one that's there, and I live about a

block away, and it's a relatively small footprint, but it just does insane traffic. And groceries are a big hit there. It gets people in on a regular basis and makes you a regular shopper. Groceries are a bit of a loss leader, but once you come in and buy the groceries that they're not making much money on while you're there, you'll buy some random t-shirt that you don't need, but it has a cool graphic. They walk away with some decent change on that. All in all, they're doing very well. Not too surprising that the U.S. results are kind of mirroring Walmart's, but doing slightly better. Joe, the stock's up around 30% over the past year, but it's trading where it did

around five years ago, so it's been a bit of a roller coaster. What do you make of the stock? I'm not too excited about it. I'm not a big fan of big box retail, especially ones where the shares have run up. O' Okay, guys, this is for everyone. Over the next five years, Walmart or Target, where do you put your money? That's tough. I'm going to admit right here in a nationally syndicated radio show that I've actually never been in a Walmart. O' You have never been in a Walmart? I've actually never been in a Walmart, but I happen to love Target. On that basis alone, taking valuation out of the picture,

neither are screamingly cheap. I'm going to go with my beloved Target. I can't believe you never heard of it. What would get you into Walmart? It's not that I've avoided it. It's that there just have never been any near where I've lived. If they carried dressage stuff or ascots, what would it take to get you in the door? It's not that I'm against it.

I just have never come across one. Okay, James. I'm going to go with Walmart because I'm more familiar with Walmart. Target is a great company, too, but Walmart, I think, is just more robust. Joe? Yeah, I'd go with Walmart. They're great capital allocators, very disciplined. And next up, we've got Sears. James, Sears reporting a smaller second quarter loss, same-store sales declining by 2.9% in the U.S.

They also own Kmart, same-store sales there declining 4.7%. What do you make of Sears? Well, Sears was supposed to be this big turnaround in Kmart, financial engineering story, held by Eddie Lampert, this billionaire hedge fund manager. He's a brilliant guy. And there have been some ups and downs, but I think the moral of the story here, Mac, is that Sears is still Sears. And it's just not a desirable offering. So you can twist it, you can flip it, you can do whatever you want. They are going to spin off some of the hardware concepts, some other stores. Not Land's End yet, to my knowledge, but you can only work with what you've got.

They should have been far more aggressive in downsizing, but they haven't been, and now they're paying the price. And Joe, one of the headlines on Yahoo, a great headline, quote, Sears done pretending it's a retailer. What does that mean? Well, Bulls have been saying that Sears, for a long time, has been a financial engineering story, that what they really saw the value in was Eddie Lampert's ability to sell off real estate and brands and license some of the brands they've got. Craftsman, for example, is a pretty popular brand. Really, though, when you get down to it, the market values this company like a retailer, and when you have the retail side of the business floundering,

and I know a lot of people say they've got great assets, but to me, most Sears locations are just classy anchors and rundown malls. I think it's going to be a lot more difficult than people think to get value out of this. And I would like to mention, I have been in a Sears. You had to go to the bathroom? Dig yourself out. Okay, James, let's get back to the stock. Sears shares down more than 20% over the last three years, down more than 50% over the last five years. I'm still not buying. I'm not buying, no way. Okay, next up, Home Depot. Ron, Home Depot reporting better than expected earnings this week. They They also said that they're seeing signs that the housing market is improving.

Yeah, that's the big story, I think, here. Home Depot continues to do really well. The stock's probably, I think, the highest it's been in 12 years. Not too shabby there. Sales growth, there was growth. It was kind of weak. But what was interesting was, profit growth was much stronger. And that's because gross margins were up and operating expenses were well-controlled. So, they did a really nice job on the bottom line, better than the top line would have indicated. They continue to buy back a ton of stock, $2 billion so far this year. Going to buy back another billion later this year. Doing well. And Joe, I was talking to my wife last night about Home Depot versus Lowe's. Yes,

excitement in the Greer house. It was crazy. It was great. And she made the point, you know, I just go to whichever one's closer. And yet, if you look at the stock chart over the last couple of years, Home Depot- Home Depot must be a lot closer to people. Yes. It has smoked Lowe's. So, why is Home Depot doing so much better than Lowe's? Well, Lowe's got way out in front of Home Depot for a while, and this is Home Depot catching up, but Home Depot's really doubled down on improving their merchandising. It's a more welcoming experience, and they've invested a lot in customer service. For a long time,

HD was known for having wonderful customer service, and they lost that reputation, and they lost a lot of customers to Sears, or I'm sorry, not to Sears, to Lowe's, especially women, and that's where Lowe's kind of moved in, but Home Depot's fought back there, and they've just done a remarkable job of turning around the business. Trying to out-Lowe Lowe's. Yeah. Yeah. Okay. Well, next up, Cisco. Shares of Cisco up big on Thursday after the company reported better

than expected earnings. And James, they also increased their dividend from $0.08 a share to $0.14. So, that's respectable. That's a 3-point-something percent yield now, Matt. Yeah, there you go. So, Joe, what do you make of Cisco's earnings? I can't believe I'm saying this, but Cisco had a great quarter. They beat estimates. Margins held up. The services business is doing very well. And services are great because they're high margin and it's sticky revenue. It's a repeat. All in all, I'm pretty impressed. I love the dividend increase for no other reason than I don't really trust management to put that cash to good use. All in all, I'm not

a big fan, but I like them more today than I did a week ago. And James, more ugliness for Facebook. The lockup period ended on Thursday. That means insiders could start selling their shares. And well, sell they did. The stock was down. What do you make of Facebook's latest woes? Remember, Mac, this is the smart money getting out now, too, which is not a good sign. I think 60% more shares hit the market. In other words, a 60% increase in shares outstanding, so we're getting better price discovery also from people who know a lot. But, look, it's just desserts. I mean, it's supply and demand.

Facebook, I wouldn't feel so bad if Facebook wasn't such an arrogant service in the first place, but it is. I think people thought that they were going to, you know, and the investors thought they were going to make all this money and cash out. But there's not a lot of long-term thinking here. That's what I see from the business and from the investors. Did Shares Outstanding go up, or was it really just the float that went up? The float, I'm sorry. Shares Outstanding. True or false, you have never used Facebook.

That would be true. I have never. I'm not on the Facebook. I'm not on it either, James. I quit. You're not? I quit the Facebook now. Oh, you were on it, though.

I don't trust them. I'm not like putting my pictures. I don't trust it either. You don't know anything about me. Yeah, yeah. You've got to go on to monitor your children at some point when they get to be that age. You know, you go to a Walmart, and then you come back and talk to us. Wait until Facebook comes in November when another billion shares come off of lockup.

That's going to be, you know, look out below. So what does Facebook need to do to change the storyline? Because it's amazing how, in basically three months' time, this has gone from being an incredible success story to a company that's just flailing on the public markets. I hope that they're not focusing on the stock much at all, which is probably impossible to do as a new company. But you've got to run the business.

You've got to focus on mobile and get that right. Otherwise, there'll be no business here to worry about. And Max's question was the question that they should have asked themselves a year or two ago. So before they had gone public, they should have actually gotten a legitimate, long-term, steady business and then tried to go. Right, but remember, they were forced to go public. You're right. They had 500 shareholders, so they were going anyway. They weren't forced to price it 23 times sales.

That's true, but you know, if somebody offers you a lot of money, you usually take it. I would have done this. Coming up, Groupon gets crushed, so is it a bargain? Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Matt Greer sitting in for Chris Hill this week, joined by Joe Mager from Motley Fool Inside Value, James Early from Motley Fool Income Investor, and Ron Gross from Million Dollar Portfolio. Guys, are you ready for some more?

Oh, yes. Okay. Shares of Groupon getting crushed this week after the Daily Deal site reported weaker than expected revenue. Joe, shares of Groupon down around 80% since the IPO, but this is still a $3 billion company. What's going on? Getting smaller by the day. Growth keeps slowing and sales look great year over year but sequentially against last quarter was pretty weak overall wall street hates the story and the company just isn't delivering management keeps sticking its foot in its mouth earnings quality is shaky i mean i love the balance sheet it's actually very strong and ironically ironically yeah cash is almost a third of the market cap

now which is not something you would expect for a company that we recently went public like this But, you know, all in all, I don't like the story. And if you're Google or you're Facebook or you're Amazon, do you make a run at this company? I mean, Google, you know, reportedly wanted to buy Groupon when they were private for, what, $6 billion? Yeah, I don't think that's their style. I think Google would leave them to twist in the wind. Yeah, let them die first. And what's the benefit of buying it?

There's not, like, a particularly strong brand. Yeah, I always thought there was a business here. It just, the valuation was just absolutely absurd. I'm kind of pulling back a little bit from there is a business here. The business model is not great. I think it probably can still make money. You scale it down. You've got to run it a little bit differently.

If you got a Groupon for Walmart, would you go? I've purchased several of these Groupon living socials, and I'm one of those guys that never uses them. I bought a skydiving living social one time. Oh, that's scary. Budget skydiving. Well, Joe, we talked about this a little in the Daily Podcast. I mean, a lot of consumers are very passionate about Groupon,

but for merchants, it seems to be more of a mixed bag. Is that fair? Yeah, Groupon isn't for everyone, and I know a lot of people want to try it, and it's kind of a hot thing to do. I'm in an improv troupe, and we've recently put on a run of shows, and someone was like, maybe we should do a Groupon. I was like, maybe not, actually. That doesn't really make sense for us. And I think there are a lot of people kind of going through this phase where they're testing and learning with it and finding that it's not working so hot. So how far does a stock have to fall to get you interested?

A lot farther. Okay. GameStop, a video game retailer, reported declining profits and a 9.3% decline in same-store sales. Joe, that does not sound good. It's not good. It's bad across the board. I like that they raised their dividend pretty considerably, but I don't like seeing the used game sales fell 12%. That's faster than overall revenue.

The problem there is that that's actually their cash cow is selling used games. You know, you go in and they'll buy games off you and sell them to other people, And that's just going to be a continuing trend, I think, as games progressively move online and move away from physical retail locations. And we talked earlier in the week about Staples. Staples is in a bit of a similar boat to GameStop. We've got declining same-store sales at Staples. They're really investing in their online business. What do you make of what's playing out with Staples?

Give Staples credit for being great at execution. And online, they're actually huge. They're the second biggest retailer in the U.S. online behind Amazon. I don't think most people realize that, because we're not businesses that buy a lot of paper and stationery, but there are a lot of companies out there that do that, and I think they're doing fair enough. I wouldn't buy the stock. I think they're doing better than GameStop, though. Okay, Ron and James, you're entirely too quiet, so I want to open it up here. We've talked Staples, we've talked GameStop, and in the past, we've talked about Barnes & Noble,

another one of these companies trying to make the transition online. So, a headhunter calls you, and they offer you one of those three CEO positions. What are you taking? I'm going with Staples, Mac. As Joe said, the big retailer, their business model best transfers online. They have the most cash of those three by far, and I think they pay like a 3.8% yield, so definitely Staples. Joe?

Assuming retirement isn't an option, I'd take Barnes & Noble. I'd sell the stores to private equity and try and find some more partners for the Nook. Ron? I don't like either of the choices, but in order to be a hero to my son, I'm going GameStop, getting discounts on games. We're all good at the gross household. I love that. A family man through and through.

We've got reports, guys, coming out that Microsoft's Surface tablet and keyboard may sell for $199. We've also got reports that Apple may be coming out with a smaller iPad. Joe, your thoughts? I think this is a smart move with Microsoft. They're not going to get in the game pricing at $500, and they've got $62 billion in cash, so they can afford to take a chance and sell this at a slight loss. I think the real risk is to Apple, because they're the ones who make all the money on the hardware sale. Ron? I think that's right. I've seen a breakdown of some estimates of what it would cost to

manufacture this, and it does seem like they would lose money at $199, perhaps even $50 a unit. That's a decision they have to make, decide whether they want it so bad that it's worth doing. I think they probably would say yes. I think it's the smartest price point they can do. They have a lot of cash. So the only thing is, this would work better if they were trying to fight against smaller competitors because they could use that balance sheet to outlast them, to drive them out of business. But they're fighting against Apple, which also has a lot of cash. So it's going to be a tough battle. And speaking of Apple, what if Apple comes out with a smaller iPad? What does that mean for Amazon and its Kindle Fire? What does that mean for Barnes & Noble

and the Nook? Well, it's bad news for both, although I think you're just going to see an escalation of a price war, and that's not a win for Apple. Okay, guys. Well, as we wrap up, here's the question. We're talking about tech innovations here and kind of hot tech rumors. One innovation that you'd like to see. Ron Gross. Well, I have a pretty lousy commute to and from the office, so I would love to see me some self-driving cars like the ones Google are putting forth and are testing because that could significantly change my daily life, and that would be great.

And you don't have any reservation about just giving up that control? I do. I certainly do. I'm going to ease into it. Okay. James? Mac, for reasons I'll keep confidential, I'll first say that in-ground anchors for Jiffy Johns to guard against tipping by overzealous friends would be a great idea. But more seriously, I would love to see cooking more institutionalized. I'm just keeping going. More institutionalized.

So if you live in an apartment complex, it should be like a dorm where you have a dining hall. Because it's very wasteful to cook for yourself. Everybody does their own thing. Just some communal food preparation, even with municipal plumbing that pipes food paste into your apartment. A lot of plumbing thoughts. I would totally go for that. Okay, on that note, Joe. Lightsaber.

Oh, wow. Oh, that's a good one. Boom. That is nice. Nice. How does the beam know to stop at a certain distance? What do you got, Mac? I don't know.

Short and sweet. You, Mac? You know, I was thinking that I've got tired of just taking the time to eat breakfast, so I would like a breakfast pillow that feeds me throughout the night so then I can wake up and just have my coffee and be on with the day. That just sells itself, doesn't it? Steve, what do you think? I would like for the Segway to have really taken off and for Segways to be used daily

by everyone all the time. They just, it's so sad. It's a great innovation, and I don't know what happened to it. We can always dream, can't we? Okay, James Early, Joe Mager, and Ron Gross, guys, we'll catch you later in the show. All right. And coming up, we've got Rick Harrison, one of the stars of the hit show Pawn Stars. Stay right here.

This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Matt Greer, sitting in for Chris Hill this week. And now, time to revisit an interview that Chris did with Rick Harrison, one of the stars of Pawn Stars. What do you get when you mix a Las Vegas pawn shop with the History Channel? Television gold. Pawn Stars is the highest rated show on the History Channel and one of the highest rated shows in all of cable television. And one of the stars is Rick Harrison, the owner-operator of the world-famous gold and silver pawn shop

and author of the new book, Licensed to Pawn, Deals, Steals, and My Life at the Gold and Silver. Rick, welcome to the show. Thanks for having me. Now, your pawn shop really is a family affair. You work with your dad, you work with your son. How did you get started in this business? When we first moved to town in 81, my dad went broke in San Diego. You know, in 1981, he sold real estate at 19% interest rates.

You can't sell a lot of houses. Yeah, it wasn't going too well back then. And he'd always bought and sold gold and always wanted a pawn shop, so he figured, what the hell, I moved to Vegas. For people who have seen your TV show, obviously a lot of what they're seeing is the selling, people coming in to sell items. Where does it shake out in terms of selling versus pawning? What percentage of your business at the shop is selling versus pawning? Oh, I do much more pawns than I do people selling the stuff. But there was a stigma attached to the whole pawning thing, and there's not really to selling something.

So the people who pawn stuff never want to be on television. I mean, and after two and a half years of filming, I've more or less given up even trying to get those people on television. And for those who don't know, could you just give a thumbnail sketch explanation of what are the dynamics involved in pawning? How do the economics work? The economics are pretty simple. It's the oldest form of banking. I mean, it's literally in the Bible. You bring in a piece of merchandise to me.

Say it's a wedding band. I offer you $100. If you accept it, I give you $100. I take in your merchandise. I put it in an envelope. I put it in my safe. And I hand you a pawn ticket. And say you come back in 30 days.

You give me $115. I give you your merchandise back. And that's the end of the transaction. Here in Nevada, the laws are that I have to hold this stuff for a minimum of 120 days. So if after 120 days you don't pick up your merchandise, it becomes mine, title, 100% transfers to the pawnbroker. Now I can put your wedding brand in my showcase and put it out for sale. I can scrap it. I can do whatever I want with it.

Nothing goes on your credit report. I don't sue you. I don't go out there to break your legs and get my money back. Thank you. That's the end of the transaction. Now, one of the things that you write about in your book is that one of the ways you can track the economy is by looking at the number of pond items in your backroom that are there for more than 120 days without being picked up. So, what is the gold and silver backroom indicator telling us about the current state of our economy? Oh, it sucks.

I mean, don't mince words. I mean, no. I mean, I'm being 100% honest. You know, when the economy is good, it's close to a 90% redemption rate, and I'm like 75% right now. Las Vegas was a hit a lot harder than other places. Even the tourists aren't picking their stuff up like they used to, because a lot of tourists end up pawning their stuff, and I just mail it out to them. That's basically the situation with the economy right now.

In Mexico, believe it or not, the government owns a lot of the pawn shops in Mexico. I mean, they own the largest pawn shop in the world in Mexico City. And it's one of their economic indicators, their pawn shops are. You're listening to Motley Fool Money. Our guest is Rick Harrison, author of License to Pawn, Deals, Steals, and My Life at the Gold and Silver. How has the success of the TV show Pawn Stars changed your business? I went from having 70 to 100 people a day in the pawn shop to 4,000. So that seems like a positive trend.

um yeah it does um it's been pretty good but are i mean are those people you're getting a lot more people in the store but are you seeing the same percentage of people who are looking to transact or are some of those people just tourists like hey i saw the tv show i just want to say i went to you know the gold and silver pawn shop i mean it is um i mean i am getting more transactions at my pawn counter, and I'm buying more things. It's not equivalent to the increase of business. I mean, the amount of buys and pawns haven't gone up 40 times. But I do a really great business in t-shirts and bobbleheads nowadays, though. Merchandise. They love the merchandise.

Oh, yeah. We're definitely merchandising the heck out of it, yeah. All right. Let's talk about a few of the items that you've carried and that you write about in your book. One of them, the battle plans for the attack on Iwo Jima. Yes, there was a lot of people who had those prior to the invasion. No one kept them, though. You've got to remember the mindset. It's the 1940s. People didn't really think about things like that. And there was actually one guy who was a landing craft operator who kept the entire set of plans in his inside coat pocket for the entire war. And his son ended up selling them to me. One of the other items you write about is a pimp's ring that's shaped like a king's crown.

Yes. What is the story behind that? Being in the pawn business my entire life, I have seen every single walk of life. I have talked to pimps, prostitutes, single moms, politicians, and billionaires. So you get to know every aspect of society. And back in the day, up until like 10 years ago, every pimp had to have a crown ring. And if you read the whole book, you'll realize that pimps always have to have a lot of jewelry. When a pimp is generally arrested, he's arrested for pandering. So any cash he has on him will be confiscated for evidence. But the jewelry won't. So when he gets arrested, the jewelry is impounded.

He sends someone down to pick up the jewelry, which can be taken back to the pawn shop so that they can get money for bail. And that's also why pimps always buy their jewelry in pawn shops, because if you buy something in a pawn shop, generally the agreement is you can always pawn it back for half of what you paid for it. You're listening to Motley Fool Money. Our guest is Rick Harrison, author of the new book Licensed to Pawn, Deals, Steals, and My Life at the Gold and Silver. In terms of the pawn shop, what's the best deal you've ever made? The best deal I've ever made was back in the early 90s. This is pre-internet. A lady came in with four photo graves. I could tell right away there were photo graves. It's a late 1800s,

early 1900s photographic process that was really expensive to do at the time. They were of American Indians. I knew they had to be worth something, but they were worth, I had no idea. So I took a shot, I gave her 50 bucks for them. And I used to have to go to the library like once a week. There was all sorts of weird things I'd buy and I had to do some research on them because I found out, I mean, a long time ago, if you put a story behind something, it's a lot easier to sell it and you get a lot more money.

So I go down to the library, I start looking everything up, And I find out that in the world of American photography, you have Ansel Adams and one step. And the next one down is Edward Curtis. These were all photographs by Edward Curtis. And the negatives were in the Smithsonian. Wow. And I got $20,000 for the for the photographs. Now, unfortunately, I have to ask you the flip side of that, which is what's the worst deal you've ever made?

The worst deal I've ever made? This was like two years ago, and the guy was actually filmed doing it. Wow. I bought a pair of earrings off a guy in a suit with receipts, everything. I gave him $40,000 for the earrings. The next day, the police came down and took the earrings. They were fakes? No, no, no, they weren't fakes.

They were stolen? They were stolen. And when that happens, I lose every dime. Now, what's the, I got to ask, because just in watching some of your show, there's some pretty interesting items that people come in with. I'm just curious, in all the years that you've been running the gold and silver, what's the strangest item you've ever seen? The strangest item has got to be is I actually had a guy come in with a scroll. It was right around 210 years old from Japan, and it was an instruction manual. it's called a shunga scroll it was an instruction manual for a young girl

before her wedding night it's also called a pillow book and obviously designed to scare the living hell out of her um where everything all is exaggerated and it's correct down to the fluids wow yes uh yeah it is definitely different now are there ever times where you or members of your staff won't buy something because it's too personal? Or is this a job where you just can't allow sentimentality to enter the equation? A pawnbroker with a heart is a pawnbroker out of business. Fair enough. Yeah. So, you know, I'm not here to judge any money or anything else like that. The way I look at it, thank God you had your mother's wedding ring so you could actually punt it or sell it to make rent. It's much better than the other guy who

didn't have anything and it's not on the street. Now, one of the things you write about in your book is learning to negotiate by watching your father negotiate. For our listeners out there, what's one thing we should keep in mind when we're negotiating? Okay, first off, never give the first price. I mean, why throw out there the first price? I mean, why tell someone you'll pay them $1,000 for something when you can say, how much you're looking to get out of it. They say $500. I mean, the second you give the first price, you're always negotiating against yourself. The second number one rule I always have, never fall in love with it. I mean, if you have to have it, you've already lost.

Always be willing to walk away from a bad deal. But I'm guessing in all the years you've been running this shop and all the items you've seen and acquired, there have got to be some items that you've fallen in love with. Yeah, I got some really cool stuff in my office. such as uh such as i'd love like uh bill graham concert posters from the late 60s have you ever seen these things i mean you literally got to be frying on acid to read some i love that kind of stuff this is the kind of stuff in my office right now i'm just looking around um i have illuminated books uh if you don't know what those are those used to be very popular and very expensive even over a hundred years ago when they were made yep all the

illustrations of the book are actually hand painted by an artist i uh collect atomos clocks which uh are really bizarre clocks that they started making in the 1930s you never wind them you never put a battery in them you never pull the weights or anything they run forever um they're the closest thing in the world to perpetual motion they run off um atmospheric pressure and temperature change actually winds the clock and they just go forever. I have a clock sitting here that still keeps decent time and it's been running for 10 years. You're listening to Motley Fool Money. Our guest this week is Rick Harrison. His new book is Licensed to Pawn, Deals, Steals, and My Life at the Gold and Silver. He's also the star of Pawn Stars,

which can be seen on the History Channel. Rick, before we wrap up with a round of buy, seller hold. Two questions. One, for our listeners out there who are investors, how does Rick Harrison invest his own money? A few different ways. I mean, I have my own business here, so I got to invest a lot of my money back into that. Right now, I absolutely love silver really i think oh yeah um as opposed to gold more than gold more than gold well i mean the whole thing is is gold it none of it's disappearing um it's just accumulated and the pile gets bigger and bigger as opposed to silver where it seems like every other day there's a new industrial use for it and the piles around the world have just nothing but gotten smaller

and smaller. I mean, up until in the early 80s, the U.S. government had 3 billion ounces in inventory. They have none now. They're a net buyer. As far as an economic play in the dollar falling, I like that. But the fact of the matter is, supply is not going to keep up with demand on all the industrial uses of silver. So the price has no way to go but up. You're listening to Motley Fool Money. Our guest is Rick Harrison. The book is Licensed to Pawn, deal steals and my life at the gold and silver. All right, Rick, we're going to wrap up with buy, sell, or hold. Let's start with the founder of PayPal recently started a $2 million fund aimed at getting college students younger than 20 to drop out of school and start a business.

You dropped out of high school. You've been very successful. So buy, sell, or hold the value of a college education. The value of a buy. If I knew everything that I know now, I knew it a lot earlier, I'd have been a rich man a lot earlier. One of the stars of your TV show, Pawn Stars, is Chumlee, your employee. Buy, sell, or hold Chumlee-branded merchandise. Oh, buy, buy, buy. Now, are you saying that just because you make a profit off of that, or is that really the most popular stuff? Oh, 50% of my merchandising is Chumlee. He is a rock star. He tweets that he's going to be at a nightclub.

A thousand people will show up. Women flock to him. I don't get it. I don't get it whatsoever. All I know is it works. And finally, you have now got both of these things. Buy, sell, or hold fame and fortune. Buy.

It beats the alternative? Oh, definitely, definitely. My girlfriend just thinks it's the greatest thing in the world because every time we go to the strip or a restaurant, they go, oh, Rick, right this way. The book is Licensed to Pawn, Deals, Steals, and My Life at the Gold and Silver. It is already a business bestseller on Amazon. Pick it up for Father's Day. It is a great read. Rick Harrison, thank you so much for being here.

Thanks for having me. There's a pawn shop on the corner in Pittsburgh, Pennsylvania. Coming up, some stocks on our radar. Stay right here. This is 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 Matt Greer, back in the studio with Joe Mager from Motley Fool Inside Value, James Early from Motley Fool Income Investor, and Ron Gross from Million Dollar Portfolio. Guys, are you ready for the stocks on your radar? Oh, yeah. Okay, Ron, go. All right, so just today, one of our analysts here at The Fool pitched me on Coach, ticker symbol C-O-H. I think most people know it's the high-end bag and accessory company. The stock got smacked just a couple weeks ago, 20% in one day after reported earnings that were lower than expected.

It has rebounded nicely, but not the full way, and there could be an opportunity here. The analyst that discussed this with me today really pointed out the international expansion potential. It's a very, very well-run company and has been for quite some time. So I need to dig in on valuation and make sure that that growth is there to support the stock price. But it looked interesting to me. Steve, your question for Ron. Ron, what is the product you'd be most likely to buy at a Coach men's store? I know they have men's stores specifically.

Either a wallet or a belt, I think, is where I would go there. Would you go to Walmart if they sold those? Not by the man purse, Ron. I can see you. I'm not going there. No, not me. Does anyone wear a belt? I don't wear belts anymore.

With a suit. I'm wearing a belt now. You're wearing a belt now. Yeah, but you go to like a Bonobos or what's that? Oh, yeah. Fancy pants. Okay. James, what's your stock?

I'm going with a company called Deluxe. DLX is the ticker. Deluxe is the nation's leading maker of print checks. Like you write checks. Ron might like this from a value standpoint. You think, oh, checks are terrible. They are in a secular decline. That's about 60% of Deluxe's business.

They're actually having pretty good business and printing invoices and doing some different business services. But the operative thing here is this company is not afraid to cut costs and pare down assets to maintain profitability to shareholders. And that's a commonly missed point in investing, that you can actually shrink if you shrink profitably and still enrich your shareholders. 4.2% yield, too. Wow, I had no idea that was a public company. Yeah. I learned something today. Thank you, James.

Steve? It's my pleasure on any day. Steve? What about the danger of switching costs with a business like that? Those would seem very high. Well, part of it, I would say, helps Deluxe because it's the incumbent. So if you already have a relationship with Deluxe, you're a customer, you're more likely to buy their invoice forms, you're more likely to buy their internet services.

They have a bunch of similar services, so you can come to them as a one-stop shop. Joe Mager. I'm going with the small burrito chain, Chipotle. I hate restaurants. I have heard of that one. I hate them, but this is a great concept, and the stock is down 32% since April. You know, comps last quarter were still pretty solid. They were up 8%.

Overall revenue was up 23%. I mean, the story isn't over. I also love the Asian Concept Store they've got over in D.C., DuPont Circle Shop House. It is so delicious. You know, I don't think the stock's a screaming buy, but it's a good business at a fair price. And ticker CMG.

Steve? I have to full disclosure, I'm a shareholder. My question is, when can I go to Chipotle where there isn't a line around the block? Never. Actually, one thing I'd recommend is ordering your food online or using the iPhone app. But they do a great job of getting that line in and out pretty quick. Your personal shopper doesn't have to wait long. Okay, Steve, I'm going to have you recuse yourself from the Chipotle piece of it.

So between Ron and James. Well, I chose that partially because I could game Steve. So where are you going, Steve, between Ron and James stocks? I think I'm going to have to go with Deluxe. Oh, yeah. Steve and I have this understanding with each other. I like Coach, but I just don't see it. Guys, any big plans for the rest of the summer?

Ron? Actually, tomorrow, headed to the beach with my extended family. Going to spend some time with my parents. Really looking forward to it. James? I have no plans. I just came back from the beach, so I'm just going to relax. Joe?

I'm headed up to the Boston Improv Festival. All right. I think Joe wins. Are you performing? Yep. Nice. Okay. Well, excellent.

Well, everyone wish Joe good luck. That's it for this edition of Motley Fool Money, guys. Thanks. Thank you, Matt. And thank everyone for listening. Chris, we'll be back in the saddle next week. So save those angry emails. Chris will be back. And we'll be back on Monday with our daily podcast, MarketFoolery. We'll see you next week.