Motley Fool Hidden Gems Investing - Motley Fool Money: 08.20.2010

Episode Date: August 20, 2010

GM announces plans for an IPO. Intel buys McAfee. And Target buys some controversy. On this week's show, we talk about some of the week's business headlines, share some stocks on our radar, and talk with David Kirkpatrick, author of The Facebook Effect.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Because we have your number. everybody needs money that's why they call it money from fool global headquarters this is motley fool money welcome to the show thanks for being here i'm your host chris hill and i'm joined by motley fool senior analyst seth jason james early and Charlie Travers. Guys, good to see you. Good to see you, Chris. On this week's show, GM is going public, American Airlines is going for your wallet, and Donald Trump is going after tea drinkers. All that, plus we'll talk with bestselling author David Kirkpatrick about Facebook, and we'll give you an inside look at the stocks on our radar. But we begin with the big macro.

Stocks fell late in the week when the Philadelphia Fed Business Index, which tracks factory activity in the mid-Atlantic region, contracted to its lowest level in more than a year. And if that wasn't enough bad news, first-time jobless claims rose to a nine-month high. Seth Jason, I'm not seeing a silver lining, are you? If it pleased the listener, I would like to begin with a tedious metaphor. I woke up at 5 a.m. and was running speed work on my treadmill this morning, eight miles. And about mile six, I felt like I just wanted to collapse or shoot myself in the head. I think that's about how this economy feels to me.

You get the sense that we're going to get to the end, but it is really uncomfortable right now. What we see in the Philly Fed Index is something that is not completely unpredicted. We talked in the past about kind of an inventory bounce, and this news is consistent with the idea that that inventory bounce is now going away. Not a lot of good news. The jobs news was also bad. But it's tough to be enthusiastic, but I remain hopeful. James Early, what did you make?

You know, Chris, my bigger concern is this news of the Fed monetizing the debt. You know, people might have seen it in the headlines. The idea is that the Treasury issues debt to investors as per normal, and then the Fed suddenly goes around and buys that debt back again, leaving that money back into the system, but the debt just made a round trip. So we're sort of buying our own debt, self-dealing. Putting money from one pocket into another? Exactly.

So some people are furious about this. I see it as more of a step, not a leap in the wrong direction, because this money is coming from principal repayments from these mortgage-backed securities the Fed bought to prop up like $1.5 trillion worth or so to prop up the economy during the credit crisis. So, you know, I see it as a little bit bad, not super bad yet. But monetizing the debt has never really worked out well, to my knowledge. Charlie Travers? I think I'm going to pile on the doom and gloom parade here.

Unfortunately, sorry to be a bearer of bad tidings. But Fidelity just reported this morning that they saw the biggest spike in 401k withdrawals for hardship reasons in five years. So it's about 2.2% of their customers. And the reasons people were taking money out were to prevent evictions and foreclosures, to pay for college, and to buy a house. Obviously, the latter two reasons are not bad, but it's the prevention of eviction and foreclosures when you combine that with the unemployment numbers, which is a bit concerning. One of the things we've talked about in the past is the fact that companies are sitting on a lot of cash. What needs to happen for companies to start spending some of that cash and start doing some hiring? Well, they need to believe that there's going to be increased demand for their products in the future.

And a little later in the show, we're going to talk about a couple of indicators that that might be happening in certain sectors. But overall, they're still pretty skeptical. Companies are very slow to hire and very slow to fire. There's definitely a lag because you don't want to jerk people around, or at least most companies don't. So I think it's going to have to be solidly better, really, before we see hiring. And to Seth's point, that Philly Fed report did show that firms were reporting a decline in the prices of their products sold, which really isn't giving them the confidence they need to pick up the hiring. The world's biggest mining company is trying to buy the world's biggest fertilizer company.

BHP Billiton made a $39 billion offer for potash this week. According to reports, Chinese companies may enter the bidding as well. China has a limited amount of potash, which is a nutrient crucial to raising crop yields, or at least that's what my research tells me. But, James, you're our resident environmentalist. And tree enthusiast. Yeah, so potash comes from arguably the process of burning wood, taking the residual ash in the pot and using it as fertilizer because it has potassium.

Potash comes from basically organic sources like that, and it controls what are called guard cells that help open and close stomata in plants. These are the water-absorbing and holding cells. So it's more of an enhancement. It's not a super essential fertilizer. It's basically a luxury item, but you're right. China does not have a lot of it, and they're going to want it going forward. Well, and just so we don't confuse our listeners, Potash is the name of the product, and it's the name of the company.

That is correct. So it's like a company that makes tissues, and the name of the company is Tissues. Charlie, Potash is reportedly looking for another bidder. Why? I think to make more money, which is the pretty simple reason. Potash is actually a name that had been out of the news for a while after being all over the place in 2008 when its stock took a hockey stick upwards. This was one of the best performing stocks of the last decade, and you made about 15 to 20 times your money if you bought this stock 10 years ago.

So obviously people are a little attached to this when you come out ahead like that. And they did not like BHP's $130 per share offer, and they immediately instituted a poison pill, which we kind of frowned on at the Fool. But with the stock trading at $148 now, the market's kind of saying a better offer is going to come along. That's the bet they're making. And the idea is BHP wants to, not just

own Potash because they think it's good, but I think they want to better control the pricing of Potash. Apparently it's not entirely market-based right now, and they want to change it. And I think if they own the big player, they can have more weight or something. Some kind of a weird reason, but we'll see what happens.

The next deadline is the middle of October when the tender offer expires, so we'll see from there. On Wednesday, General Motors filed papers detailing its plans for an IPO. No date was given, but reports are saying the offering could happen as early as October. GM earned $1.3 billion from April through June, its second profitable quarter, which is awesome, until you remember that GM still needs to pay back $43 billion to Uncle Sam for that bailout last year. Charlie, as an investor, how excited are you for GM's IPO? Not at all, Chris. Generally, I would advise investors to

stay away from companies coming out of bankruptcy, and that is doubly the case with an automaker, especially one with GM's history. There are a lot of lingering problems at this company, even though they just reported two profitable quarters in a row. They have massive pension shortfalls. They need to restructure the European operations. And one of the strong points for the company had been china uh but there's kind of rumblings now that that's getting a little shaky as well they've also got a truth gap can i rant a bit we were driving across country we ended up we had a diaper blowout we had to pull off the road and the nearest exit was right by a huge gm plant in ohio and so we ended up ended up going around this gm plant to get back on the uh the

tollway afterwards they had this big giant sign outside claiming that they had you know repaid all the money to the American public, et cetera, et cetera. And of course, that's not entirely, that's not true at all. Not even close to true. Not even close to true. So what are you going to make of a company that is just willing to lie like that in a giant billboard right outside its factory? GM has lost more money for shareholders over its life than it has made.

I mean, I don't think they're going to improve until they, well, I think they should have just liquidated. The government could have given that money to the former employees. They would have been a lot better, and somebody more efficient would be running these operations. But they fundamentally have to make cars that people want, and they still don't. Well, we had another automaker IPO earlier this summer. Tesla went public at about $17 a share. Don't get us started.

Well, it shot up to $24 the first day, and now trades around $18, $19 a share. Do we think GM stock will do better or worse than Tesla? Charlie, you get the first grade. Yeah, I think they both go back to zero. James? I say worse. I saw a Tesla. It did look sexy.

You know, I'll admit. The $100,000 battery. The $100,000 battery is going to go about 30 miles. Exactly. And you're stuck. Seth, what do you think? You know what? GM limps along because there are people out there who will just buy and hold GM stock.

They're trying to buy a piece of America or something. Tesla, I think, goes down to the zero after that sedan flops, and they just become a boutique maker of high-end sports cars. Coming up, Target reported earnings this week, but that's not why the company is making headlines. We'll tell you why right after this. In the middle of the year, you used to be so mean. You were in a hole, and you continued to dig. There's still Kenny Chevy.

Stick around. You're listening to Motley Fool Mode. Welcome back to Motley Fool Money. Chris Hill here in the studio with Seth Jason, James Early, and Charlie Travers as we dig into some of the companies making headlines this week. Intel is buying computer security software maker McAfee for more than $7.6 billion. It's the biggest acquisition in Intel's history. James Early, McAfee shareholders are getting a 60% premium for their shares. Should Intel shareholders be just as happy about this deal? You know, Chris, Intel is a stock that's gone nowhere for the past decade, unlike my hairline. And, you know, it's paying a dividend.

It pays a nice 3% yield. I think before dividend taxes go up, it should have just paid this money in the form of a special dividend. I think this is just a classic example of a hardware company just trying to grow. Semiconductors are pretty much a commodity business now. If you look at Intel, you look at the Taiwanese makers, you know, the stocks are flat. I mean, they're trying to latch on to some growth, arguing that they can embed security into the hardware, into the chips, in other words. Which is not that new an idea, and it really hasn't caught on. It might work, but I don't know that it's worth the 60% premium.

Seth, I mean, you've got your entire house wired. What do you think? Well, my notes here have the letters WT and then another letter and a question mark in a circle. So you're saying the Intel purchase of McAfee didn't make sense to you? It doesn't make a lot of sense to me. It sounds like a company that is really straining for growth and is wasting cash. And that's a bummer because I was looking at Intel as a possible personal portfolio buy recently, but not now. That's a classic empire-building move.

From chipmaker to computer makers, HP and Dell both reported earnings on Thursday. Both companies reported increased revenues compared to a year ago. Seth, the earnings were pretty much in line with Wall Street's expectations. What did you make of the results? Well, remember my foreshadowing earlier in the show? There's actually decent demand for computers from businesses right now, and I think that's interesting. While it's interesting to tech investors in general

because it means that there's a fairly solid upgrade cycle, so at a time when a lot of other businesses really aren't doing much spending, they seem to be spending on technology equipment and computers, so that's good. But maybe it bodes well for the economy in general in the sense that you have to have people using these computers for something. And it's interesting to see what's going to happen to HP. I don't know if you guys have followed, but Mark Hurd, the former CEO and lover, as we know now, he was really good, to his credit, as a CEO, as a businessman.

Let me clarify that for the record. I'm just going to laugh. Created a lot of shareholder value as CEO. So the stock has dropped. I don't know. It might have been double digits since he got basically ousted. And as I conclude this, alleged lover in the HP case. Mark Curtis admitted to some improprieties, but we do not have specifics there.

Let's just say alleged. We don't have the specifics, but if there's video out there that someone has, they want to send us. We'll play it right here on the show. Just drop us an email, radio at fool.com. Target, the second largest retailer in America, reported a 14% profit gain in their latest quarter. But, James Early, sales were softer than Target had expected, and the profit was due more to their credit card business. I'm going the Seth Jason route on this question. You know, Target and Walmart have been sort of right on the balance of where the economy is at.

When Walmart is putting out better news, as it has been, generally the economy is worse because all SQL people might prefer to shop at Target. If you look at Target's actual sales, not that great. This is, like you said, credit card revenue, which is better than nothing. But, you know, I'm taking this as a contrary indicator. Target also made headlines this week due to a political contribution the company made. Target gave money to a pro-business group in Minnesota, who in turn gave some of the money to a Republican candidate who, among other things, wants to ban gay marriage.

Target is now taking heat from special interest groups. How big a mistake do we think this is for Target? I just assume that every large business is giving money to Republican candidates. They want lower taxes, and that's what the Republicans tend to promise. Well, and this is in the wake of the Supreme Court decision in January to allow unlimited donations for political activities. Really, what could go wrong if companies could just give as much money as they want to get people elected that they like? But, you know, in this case, it's interesting because Target did this, and Best Buy did the same thing. Target is seeing a backlash at the grassroots level, but Best Buy isn't.

Does that really speak more to Target's brand? I think it's interesting. You know, Target is sort of an everyday life kind of company, and maybe that's why people think of it like this, whereas Best Buy is more, you know, electronics specific. But, Chris, as you and I were talking before the show, what's interesting, I think, as you were mentioning, is that the institutions are sort of equally upset at both. I mean, they see it, you know, they don't really want to get involved in this sort of thing, but I think maybe you're right, on a personal level, Target is something that resonates more than Best Buy.

Yeah, I think people don't identify with Best Buy. People kind of skitter into Best Buy, hope to avoid the people in the blue shirts, get their video game and get out without too much trouble. People, for some reason, identify with the bargain hunting at Target. So I think when the Supreme Court made that decision, there was a sense, at least by some people in the media, that this is just going to open the floodgates. That companies, public companies, are just going to start flooding the political system with contributions. Is this a sign that maybe they're just going to stay out of it, that it's not worth it to them? You would hope some common sense would kick in and that they would see this target example as a reason of just because you can do something, maybe you shouldn't. Because if you give your money out to a group and you don't know where it's ultimately going, you can find out it ends in the hand of like a reformed seal club or something else equally offensive.

Yeah, and if you're looking, and this is the problem with politics, this is why I'm not a very political person, because there are so many aspects to any political party or political candidate that Target might support one but might not support another. Or, you know, if somebody's looking to be offended by a donation, they can find something, I think, with most people. So I expect companies will be very cautious going forward. Good news, travelers. American Airlines has found another new fee it can charge. American Airlines will charge more for, quote, express seats, the seats in the first few rows of coach that include bulkhead seats. Depending on the length of the flight, the seats will cost anywhere from $19 to $39 more.

I don't know. I mean, is this a good move? I mean, if you're an American Airlines investor or employee, are you psyched about this? Wow, I was in favor of this before I heard the name. That's totally lame. Yeah, in related news, they're also going to charge you $5 to get out the emergency exit in case of emergency. You know, the airlines are looking for any way to make a few extra bucks, so I don't really think this is all that bad. And if it can keep them from raising prices on all the other seats, then maybe it's just fine. Should they just start adopting variable pricing across the board? So, like, you know, I mean, sitting near the bathroom, should they charge more for that or charge less?

Depends on what they're serving in the in-flight meal. Well, what else? I mean, let's expand our minds here, guys. I mean, what else can we be talking about? Because personally, I'll say this. I don't mind sitting in front of a toddler who's going to kick me, but I think I should pay less for that. What do you think, Charlie?

That's completely fair. How does a toddler kick you if they're sitting in front, though? If I'm in front of a toddler and they're just wailing away on my back, you know what? I'll take that, but I want something for it. I want to pay less for something like that. They're not even going to give you a free drink. You should try and wheedle one out of the toddler's parents, however.

Steve Broido, what do you think? You got any ideas here for the airlines? They're looking for any way they can to make more money. I do. In fact, I think that Steven Slater, the JetBlue flight attendant who lost his mind on the flight, I would pay to fly with that guy. He sounds like a lot of fun. I would pay extra to fly with him.

He should be doing in-flight stand-up on every flight he can. So more entertainment? Absolutely. I mean, I want to party with that guy. All right. Drop us an email, radio at fool.com. We want to know your best ideas for variable pricing on airlines. And frankly, now that Steve Broido has raised the issue, we want to know who you want to party with.

And you can choose Steve Broido. Yeah, exactly. Steven Slater, is that the guy's name? That is, indeed. I just looked it up. All right. Well, I'd rather party with you, Steve. Much rather party with you.

But I'm certain, honey, that life would be sunny with plenty of money and you. All right. The guys will be back later in the show to talk about the stocks that are on their radar. But coming up, best-selling author David Kirkpatrick talks about why Google has 500 million reasons to be scared of Facebook. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Facebook has more than 500 million users, but does it have a business model for the future? Joining me now to shed some light is David Kirkpatrick, the author of the best-selling book,

The Facebook Effect, the inside story of the company that is connecting the world. David, thanks so much for being here. Good to be here, Chris. Thanks for having me. So, Mark Zuckerberg, the founder of Facebook, said his goal was never just to create a company. What was he trying to create? A movement, perhaps? A world-altering phenomenon, perhaps? I think when he said that, and he did say that quite some time ago, which I quote him doing in my book, He used the word just, which did not preclude creating a company.

Of course, he did create a company literally and figuratively, and in every sense it's a real company today. But that has never been, and still is not, even though that quote is old, Mark's primary motive or goal. He really is, in effect, a kind of social revolutionary who uses software as his manifesto, in a sense, And it's kind of a behavioral form of revolution that he's kind of pulling hundreds of millions of people along with the way he thinks the world ought to change, which is kind of an amazing thing. Facebook is a private company, so obviously there's a lot we don't know about their finances.

Is Facebook profitable? It probably is pretty close to profitable right now. Now, it's one of those companies that's growing so fast that profit is a strange concept because while at any point they could sort of tune back the growth lever, pull back the growth lever, and turn up the profit lever, their priority is growth unequivocally. And one of the other things Mark Zuckerberg believes is that Facebook is something that should be used and could be used by literally everyone on the planet. So the fact that they have 500 million-plus members now may seem impressive to you and me, and of course it is, but to him, he doesn't really sit back and, you know, put his feet up on the desk when he hears that number. He feels it's a population of almost 7 billion people in the world.

He wants to keep driving toward a much, much larger number. So, you know, that's a goal. And I think, you know, there is going to be a lot of revenue this year, probably close to one and a half billion dollars, most of it in advertising dollars, but there are other forms of revenue. And, you know, if they were to stop building data centers, if they were to stop hiring new people, if they were to stop, you know, building policy offices around the world in order to try to explain themselves to governments in all the countries where they're becoming

a social and political and cultural force, you know, they could be profitable today. And I think actually, you know, they probably are close to that even still, despite the hundreds of millions of dollars they're investing in data centers and all the many people they're hiring. You're listening to Motley Fool Money. We're talking with David Kirkpatrick, author of The Facebook Effect, the inside story of the company that is connecting the world. Let's dig into a couple of the numbers you just mentioned. And as you said, Facebook recently crossed the 500 million member mark. Revenues somewhere probably in the range of $1 to $1.5 billion in 2010. How does Facebook make, and obviously that's a lot of money, that's big money. How does it make even bigger money?

I would say it's number one to do a better job with advertising. And in fact, it is a large number, $1.5 billion if that's the right figure, and it's definitely close. But on a per-user basis, considering that they have 500 million members, you know, to have $3 a year in per-user revenue is pretty, you know, crummy, let's face it. And in fact, there are plenty, plenty, plenty of social networks and other web businesses around the world that have a dramatically higher per-user annual revenue rate. And I think that's one reason why, on the private market, Facebook stock is currently trading in the vicinity of $27 billion as a market cap, because many, many investors believe that Facebook does have the ability to radically increase its per-user revenue and, as a result, its profits. But, you know, advertising can be improved dramatically. It has not been until fairly recently that high of a priority inside the company. And as I said earlier, it's still not a huge priority for Mark Zuckerberg, but he has done now something very important, which is bring in a team of extremely accomplished people who are experts at it and for whom it is a priority, most notably Sheryl Sandberg, who's his clear number two and is the COO at Facebook, who came from Google. She has now brought with her from Google David Fisher, who's head of advertising, who was a very, very senior guy at Google in advertising.

And the two of them, you know, as Cheryl was when she was there, those people are two of the world's most knowledgeable and aggressive ad sales and development people. So they are putting all their efforts on taking the system that Mark develops in order to give that sharing capability to hundreds of millions of more people and layering on top of it a monetization engine. And if I could quickly just tell you why I think that's very promising, Facebook is the most targetable ad medium in history. And the reason is that Facebook members articulate data about themselves voluntarily

that is enormously valuable to Facebook when it decides to display advertising. So whereas, you know, most Internet advertising in some fashion is intended to be targeted, But the way most of that targeting happens is by what we would call inferential means. They guess that you're a man and your age and where you live. They kind of know where you live through your ISP probably. But there's a lot of things about you that they're guessing. They're guessing you're a man by whether or not you go to car websites as opposed to cooking websites. And let's face it, there are a lot of women who like cars and a lot of men who like to cook.

So a lot of times those guesses are going to be wrong. But Facebook doesn't have to guess because on Facebook you say what your gender is, you say your age, you say whether you're married or not, what kind of relationship you're in, what music you like, you know. I mean, endlessly more and more information about yourself. And Facebook can then show an ad to someone who lives in a certain neighborhood, is of a certain age, and is interested in certain things, and you can make it as fine-grained as you want.

No other service on the planet really has that ability. There have been stories and rumors about Facebook selling to a variety of companies. Zuckerberg just selling the company outright to Yahoo, to name one company. In terms of the research that you did for your book, what are the companies that made really serious offers, and how close, I guess, what is the closest Mark Zuckerberg came to selling Facebook? Well, actually, I think, you know, Motley Fool listeners and readers, this is the part of my book that they would find extremely interesting,

because I spend a lot of time talking about the efforts to purchase Facebook book and why they failed. In fact, one criticism that some more general readers of my book make is that it has too much of the business story, but it's just so delicious that as a longtime fortune writer, I just simply couldn't leave out these amazing tales of these huge offers that got bigger and bigger over time, and which Zuckerberg continually turned down. But the two times they came, there's only one time they really came close to being sold. And that is in the summer of 2006, late summer of 2006, when Yahoo was offering to buy them and had offered by the end of the process probably over a billion dollars.

They'd made it clear they would be willing to go higher than a billion to buy the service outright in cash. And the reason that Facebook and Mark Zuckerberg were contemplating maybe they should accept that was because Facebook had made some half-hearted efforts to break out of the student demographic and open what it called work networks to allow adults through their workplace to join Facebook, and that had been an abysmal failure. So there was concern at the company that maybe Facebook would not work for adults. And if that was the case, then its growth perhaps had already topped out

because they'd already essentially penetrated and blanketed all the high schools and colleges. So the question was, could they grow in the adult market? And if they couldn't, they probably should sell now, and they would never get such a high offer again. But then at the end of September, before they made that final decision about Yahoo, they did what they called open registration and made an open ability to join Facebook for all adults just based on where they lived. It had nothing to do with their workplace.

And that, within days, proved to be extremely successful. The numbers were very high. And at that point they said, okay, we're not going to sell to Yahoo. And that was over. But there was one other time that has to be mentioned, if you don't mind. A year later, a little bit like 13 months later in October of 2007, Microsoft CEO Steve Ballmer decided that Microsoft ought to buy Facebook. And even though Yahoo had only offered a billion dollars a year earlier, Microsoft was so intent on buying it that they, as I explain in detail in my book, were willing to pay $15 billion for Facebook. And Ballmer flew down to Palo Alto, took Zuckerberg for a walk around the streets, as I explained,

and made this offer, and Zuckerberg basically just stared him blankly in the face, in effect. I mean, he didn't even seriously consider it, even though he was only 23 years old, and he personally would have probably taken home something like $5 billion as a result of that deal. I mean, that's just an extraordinary story, in my opinion, that I think that alone was worth writing my book about, a 23-year-old who turned down $5 billion. You're listening to Motley Fool Money. We're talking with David Kirkpatrick, author of The Facebook Effect. And David, just so you know, as soon as you offer me $5 billion, I'm saying yes. Well, I've asked every audience I speak to about the book, I say, Did anybody here know any 23-year-old that would turn down $5 billion for any reason? I've never seen a hand.

You also write that Zuckerberg has been spending an increasing amount of time with Steve Jobs, who's someone that he admires. You've written about Apple and Steve Jobs before. Are there parallels that you see between Jobs and Zuckerberg? Well, there's parallels in terms of the scope of their vision and in the obsessiveness of their commitment to their company. I think, obviously, Zuckerberg admires Jobs tremendously. Ironically, Steve Jobs does not seem to be that interested in social stuff

to the degree that almost anybody else in the industry is. And, you know, Apple has historically and consistently been among the least social of major technology companies, which is interesting considering we think we live in a social age, and yet Apple is the computer company, the technology company with the highest market cap. It's sort of an odd, disjunctive fact that's worth meditating upon. But I'll tell you something they do have in common that's very important, and that is that the Facebook application is by far, and I say that as loudly as I could

except not to hurt the ears of your listeners, the most important application on both the iPhone and the iPad. Without the Facebook application, my own opinion is the iPhone would never have become as important as it is. It is the single most widely used application. It is so heavily used compared to other apps that I have been told by someone who thought he knew the data. This is highly secret data, and I don't know the actual numbers. But I've been told by people who claim to know that more than half of all usage of the iPhone of apps, other than those provided by the phone itself, like telephony and e-mail, is coming from Facebook. And on the iPad, too, it's just a huge, huge part of usage.

So in a way, Apple and Facebook are joined at the hip. And I think that's one reason why Zuckerberg and Jobs have been spending time together. The book is The Facebook Effect, the inside story of the company that is connecting the world. It is a New York Times bestseller. David Kirkpatrick, thanks so much for being here. Thanks, Chris. Really enjoyed talking. them to write on my wall. Take a look. You will look. On Facebook. Facebook. Facebook. Facebook. Take a look. On Facebook. Book. Book. Book. Book.

Coming up, we'll give you an inside look at the stocks on our radar, plus We'll tell you what Donald Trump is selling next. 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. Don't buy or sell stocks based solely on what you hear. I'm Chris Hill, and back in the studio with me, our trio of senior analysts, Seth Jason, James Early, and Charlie Travers.

Guys, time to welcome another new affiliate to the Motley Fool Money family, WHAN AM 1430 in Ashland, Virginia, starting this weekend. This is our first Virginia affiliate, guys. We're a Virginia company. That's awesome. We've got to be psyched about our first Virginia affiliate. All right, we have a few minutes here before we get to the stocks on our radar. One well-known business leader that we rarely talk about is Donald Trump.

Donald was in the news this week because he's teaming up with Talbot Tees to put his name on a line of teas. Trump Tees will be available this fall. Trump also has his own line of steaks, which you can wash down with a glass of Trump vodka. Let's just go around the table. What else for the Donald? I mean, apparently the guy can put his name on pretty much anything. What do you think, James? Hair gel would be the obvious one.

Oh, yeah, hair care products. Hair oil. Some kind of hair oil. Coloring, or is that still his natural color? Maybe even a wig, too. Is it a wig? I don't think it is, but you could have Trump-like wigs. Yeah, comb-over wigs.

I like that. Seth, what do you think? Bankruptcy forms. This is a guy who's a terrible, terrible businessman. He's a great grasper of money for himself. I believe he began with dad's fortune, but he's not been very successful with his public companies, and investors have been hosed every time. So Trump and brand bankruptcy forms would be great.

Now, forgive my ignorance, but are bankruptcy forms, aren't those like a government form? So would he need to team up with the federal government? They need the money, too. They need the money, too. Charlie, what do you think? It's amazing. He even has a brand that people want to attach themselves to anymore. I would think this guy at this point would be putting his name on 2 a.m. infomercials.

I hear there's an opening for ShamWow. But don't you think that Trump has sort of passed the point where he's like William Shatner? Shatner knows he's a joke. I don't think Trump knows he's a joke. No, no. That's the key difference. The Trump meat photo is particularly scary, Chris. Oh, yeah.

By all means, listeners, go to Trump.com, click on the merchandise button, and you will see Donald Trump leaning over an enormous plate of steaks. I don't want Trump's. Yeah, but please don't give this jackal any of your money. All right, let's talk about the stocks that are on our radar. Charlie Travers, let's start with you. I've had my eye on Research in Motion, a very popular stock and not in a good way. Their most latest entry into the smartphone market, the Torch, is apparently doing lukewarm sales.

So I wouldn't say it's the nail in the coffin for the company. It's a bit premature to come to that conclusion. But all the same, if you're a RIM shareholder, you've got to be extremely worried about Android, which is on fire, and the always strong Apple iPhone offering. I wouldn't make a bet that RIM will be around in five years. In five years? Yeah. I think it'll happen very quick. They're the next palm, definitely.

And the ticker symbol? R-I-M-M. James Early, what's on your radar this week? Chris, I am going with Kimberly Clark. This is sort of a consumer products company, makes things like Kleenex, toilet paper. I mean, who's going to use less of that in a recession? I mean, these are long-term, well-branded products that are essentials. There's a 4.1% yield, 41% return on equity, and 12% of its sales convert into free cash flow,

which is a very, very good margin. Now, I don't want to go too far down the scatological path here. Sounds like you do. It seems like you're intimating that during a recession, people use more toilet paper. No, not more per se. I mean, how are you going to cut back on that? You're not going to stop by. I guess you could if you tried, but it's not something you want to think about.

Don't they do diapers, too? They do diapers. They do Huggies. We've got one on now. Huggies, I thought, yeah. Huggies, there you go. Seth, Jason? I have been running some numbers on accounts receivable, which sounds really boring,

except it is often an indicator of which companies are not going to do well on their sales in the future, I'm sorry. I'm sorry. I just dozed off there. Did you say accounts receivable? Yeah, that's the amount of money that a company is owed by its customers. And a company that is failing my test currently, I'm looking at it on my screen, is Adobe. Everybody knows Adobe, right? Well, accounts receivable for the last quarter grew at a much higher rate than did the revenue. And that's not good. So I wonder what's going on at Adobe. I'm not going to predict a quick downfall but i think that they they may be making uh either kind of pushing some sales or offering them on on two generous terms and i'd be a little bit worried in case you slept through counting 101

and i couldn't blame you you know it was not an interesting class but the difference here is sales or the actual revenues of the company but if come to find out not all of those people have paid you the people haven't paid you yet that counts as accounts receivable so if you sell 100 bucks but 20 of those dollars you haven't actually received, that could be a problem. And Adobe, as Seth points out, is not strong in this area. Yeah, so if you're looking at the most recent fully-filed quarter, which I have, revenue's up in the 30%, 40% range, accounts receivable. The graph has so many numbers it's hard to peg it exactly.

But up there, close to 70%. That's a 30 percentage point difference. That is something that needs an explanation. And the ticker symbol? ADBE. I think this is the first week we've had two stocks on the radar for a bad reason. It must be the economic mood. Is that it? Is that what listeners can look for?

We're all just hating. We're just looking to short more stocks, is that it? Yeah, I'd like to be cheerful. Not enough Trump vodka this morning. All right. Seth Jason, James Early, Charlie Travers. Guys, thanks so much for being here. Good to be here. Thank you.

Good to be here. Thanks to our special guest this week, David Kirkpatrick, author of the New York Times bestseller, The Facebook Effect. If you missed any part of the show, you can find it at our website, motleyfoolmoney.com. At fool.com, the flagship website of The Motley Fool, check it out every Monday through Friday for our 11 o'clock stock, 50 stocks in 50 days. That's fool.com. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.