Motley Fool Hidden Gems Investing - Motley Fool Money: 09.05.2014

Episode Date: September 5, 2014

Apple deals with problems in the cloud.  CVS goes on a health kick.   And Twitter gets ready for some football.  Our analysts discuss those stories and Motley Fool Asset Management's Bill Mann talks investing overseas.   Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody needs money. That's why they call it money. The best things in life are free. But you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Hill. Joining me in studio this week from Motley Fool One, Jason Moser.

From Motley Fool Supernova, Matt Argesinger. And from Million Dollar Portfolio, Ron Gross. Good to see you as always, gentlemen. How you doing, Chris? We've got the latest results for restaurant stocks, health stocks, tech stocks, and more. We will answer your questions as we dip into the Fool mailbag. And as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the big macro.

The U.S. economy added 142,000 jobs in August. The unemployment rate fell to 6.1%. And, Ron, when you look at the reaction on Wall Street, this seemed like one of those, meh, jobs reports. It was a little seesaw-y. Before the market opened, we got a pop, and then it kind of went away. I don't think these numbers are great. I mean, it breaks the streak of six months of 200,000 jobs created or more. So that's not great.

However, it's just a month. I don't think anybody's panicking over a month. We did create jobs. The unemployment rate did tick down. Those are both good things. I think a lot of traders are hopeful that this means we get a little bit more leeway in terms of easing from the Fed, and that interest rates will stay lower for a longer period of time. But I really don't think the Fed is being influenced by one month of data. It's just one

data point, and I don't think it overrides all the other data we have. All right, let's get to company news, and we'll start with the biggest public company of all. Apple had planned to spend this week building buzz for their event on September 9th, when they will unveil the iPhone 6 and the much-rumored iWatch. But instead, Apple spent the week mired in the celebrity photo scandal. CEO Tim Cook said that iCloud accounts were compromised, but that none of the Apple IDs and passwords leaked from the company's servers. And, Matt, he was kind of doing a balancing act.

I almost felt bad for him because, on the one hand, he had to acknowledge the problem here, But he also had to deny that they were taking any sort of a lax approach to security. Right. I mean, ultimately, this is about just assuring people that if you buy an Apple product, an iPhone especially, that your username and passwords are going to be secure. The ultimate question here, does any of this, do the celebrity photos that have been spread around, that have been hacked, is that going to prevent people from buying Apple products? In my opinion, no way. I mean, I certainly don't have any nude pictures in my iCloud. At least I don't think I do. And even if someone hacked in right now and stole a bunch of those pictures, I still love the iPhone product and I love the Apple products.

It's not going to prevent me or any of the average show from buying. I completely agree with that. I would like to see how it does shake out, though, because we're still a little bit fuzzy. It wasn't the iCloud. It was the iCloud. People were perhaps victims of phishing attacks and are themselves in a certain way to blame for themselves getting hacked. I would like to know exactly what's going on because as they implement new security procedures for iCloud, it certainly seems that they are recognizing vulnerability, but yet they're claiming it wasn't their fault. Well, and Jason, if the reports we're seeing about what may be included in the iWatch are to believe, one of the features may include the financial sector where people can use the iWatch to hook it up to their credit card accounts.

It seems like they're just bringing more and more data into their devices. Yeah, there's no question. We talked about this earlier in the week that I think these are the kinds of things that will help sort of dictate how consumers pay for things. And I was using just myself as an example. More and more of these stores that I go to, I don't want to use my debit card anywhere anymore because if that information is compromised and someone gets a hold of my checking account, they can drain that thing and then I'm stuck in a cash crunch. If I just use my American Express card everywhere, I can pay that online as I use it, but at least if that information is compromised and someone starts using that card, well, it's not a cash crunch. It's just someone's running on my credit card, and that ultimately is American Express's problem. They'll deal with it. But yeah, I don't know that I'm necessarily jumping in to put my information all into a device just so that I can pay for it as opposed to using a card.

I don't think it's – there's not that much friction there yet. Well, I think what Apple is always optimized on is usability versus security. And I think, honestly, I think that's still going to win in the consumer mind. I think if something's usable, it's easy, it's efficient. I mean, if I can buy a new smartwatch and I can go into a Starbucks and with a flick of my wrist I can pay for a coffee and walk out, that is certainly a convenience I want to have. And the secondary thought of whether someone's going to steal that data from me is way down the line. No question, because the consumer's perception, and it's the right one, is it's ultimately not their liability, right? How much do you think they have riding on this event next week?

Because it really does seem like more so than the usual iPhone upgrade, this one has a little bit more pressure attached to it. I do. I mean, we were talking before the show, you know, the thing with the whole idea of iWatch and wearable technology is that there really isn't a market yet. And I think what a lot of people are thinking, and especially a lot of Apple's competitors are thinking, is that this is Apple's opportunity to define that market. And so, if they come out with a successful iWatch, something that people are going to be excited about, it could actually create a new market that could be big. Yeah, I think there's a lot riding on this announcement, which is a shame, because they always disappoint on these announcements, except for back in the day.

They've got to come up with something big. The stock will take a hit in the short term. But we're not short-term investors. We're long-term. So, we probably can ignore that short-term noise, see what the products are, and invest for the future. Back in February, CVS Caremark announced it was going to stop selling cigarettes and other tobacco products on October 1st. This week, the company announced it is ending the sale of those products one month earlier than they had planned, as well as a brand new corporate name, CVS Health. And Jason, shares hitting an all-time high this week. Yeah, I mean, I know there was a lot made of this initially. I mean, let's look at this for what it is, though.

I mean, cigarettes, tobacco products represent about 1.5% of CVS's total sales. So this is just a drop in the bucket for them. And really, I admire the company for making this kind of a move. They're making a statement. This is what they stand for. And so eliminating things like cigarettes, which are obviously sort of at odds with the other sort of health products that they sell and prescription drugs and whatnot, I think it makes sense. Probably people will get a little bit granular with it and start looking at all of the things that they sell that still may not be perceived as quite healthy. But they still rely primarily on prescription drugs for their sales.

I mean, that's 70 percent of their sales on an annual basis. So I think this is just a move in line with what they really want to stand for, and they're standing behind it. And I admire them for doing it. Even though cigarettes represent a relatively small percentage, as you said, I'll be interested to see if there's bleed over. You stop in for a pack of cigarettes, you also pick up a drink, you also pick up a pack of gum. There's ancillary purchases that go on, especially for people who are stopping in almost daily, if not weekly. They're repeat consumers because they're addicted, quite frankly. So it'll be interesting to see if there's a bleed over.

That's a good point there because those purchases ultimately in total are about 14.5% of their total sales. So beyond just cigarettes, those drinks and other sort of general merchandise items are more significant. So that'll be something worth keeping an eye on. Shares of Yum! Brands down this week after the parent company of KFC, Taco Bell, and Pizza Hut announced that same-store sales in China fell 13% for the latest quarter. due to a health scare with some bad chicken. And Matt, Yum! Brands called this issue with their poultry supplier a one-time issue. This happened just a couple, less than two years ago. This has happened at least a couple of times.

I feel like we were last year having almost the exact same conversation. You know, there's a thing in investment analysis. We tend to call them recurring, non-recurring problems. And I think that is exactly what Yum! Brands has. They obviously have not figured out this supplier problem. You mentioned the 13% same-store sales decline in China. They were down 11% last year, so they're lapping that this year. And so it just shows you what kind of problems they have.

I know they've talked about spinning off the China unit. But as an investor, as an analyst, you look at this and you say, well, you know, there are bigger problems. There are management problems here. They've not figured this out. There's relationship problems. There's contract problems. And this is certainly not – I mean, Yum! Brand's total revenue hasn't budged really in three years. And so, you know, take a very skeptical eye to this company.

There's some problems here that are bigger problems than just one-off supplier problems. And we talk all the time about companies that have big opportunities in China. But in the case of Yum! Brands, China is hugely important. More than half of their total sales come from China. It's huge. And so, obviously, they've got problems there. But you know what? Even as a U.S. consumer, when I hear things like this, it doesn't make me want to go to Taco Bell or KFC or Pizza Hut right here in the U.S.,

which is still obviously a good chunk of their sales as well. So it's a huge overall problem, and it's becoming a brand and a marketing problem for them, too. Coming up, are you ready for some football? One company sure is. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hiller here in studio with Jason Moser, Matt Argersinger, and Ron Gross.

Guys, the NFL season has officially begun, And this week, Twitter unveiled a new feature called NFL Timelines that makes it even easier for people to follow their favorite teams. As someone on Twitter and a fan of pro football, I appreciate this, Jason. But how's this going to help the business? Well, I mean, that's really just it. This is a play for the domestic market opportunity that stands in front of Twitter. And that really, the domestic market is their most profitable. I mean, to put that into context, when you look at the international RPM or the impressions per thousand ads there, international, which is by far and away their biggest base, it comes out to about $0.61.

Domestic, though, is about $3.47. So domestically speaking, this is going to be the more profitable opportunity. And this has sort of been the challenge for Twitter is to grow that domestic base, that active user base. They're playing into one of our biggest passions here with the NFL, right? And, I mean, I think that if what they did with the World Cup is any indicator of what they can do here with the NFL, then this is going to be a big, big success. Because, you know, I looked at the World Cup and I was relatively apathetic towards it. I didn't really care too much about it. As a sporting event.

As a sporting event, yeah. I mean, I just didn't really care about it. What Twitter did, that actually piqued my interest in it. And it made it accessible to me anywhere at any time. And I used it. And so, you know, I certainly was following the game along last night on Twitter. I think it's just going to be something that gets better and better, and I suspect we'll see the result is more engagement, more users, and that's good for Twitter. Well, as a former golf pro, are you going to encourage Twitter to hook something up with the Ryder Cup to get you a little bit more excited?

I am absolutely certain that the Ryder Cup will have a presence on Twitter. And, you know, like the Golf Channel alone does a really good job of promoting that stuff. I don't know that it will be something quite as big as the World Cup, but, hey, I mean, a guy can hope, right? Radio at Fool.com is our email address. That's Radio at Fool.com. Let's dip into the Fool mailbag, guys. From Ken Furlong in Virginia, I was wondering if you could spend some time addressing the issue of performing research online.

Which sources are most accurate, critical differences in reporting metrics, and so on? It's obvious there are a lot of pitfalls one might encounter given the complexity of researching a company and its stock. Ron, good point there, because not all sources are accurate. Not all are up to the same standards. Yeah, we have so much information available to us because of the Internet. It's an amazing thing, but it also can be dangerous, and you have to know what you're looking at. So you can obviously go to companies like Fool.com and punch in a ticker symbol.

What a shameless plug. And get great information. I think Yahoo Finance does a great job. If you want a snapshot and some key metrics, some key financial information. I think Morningstar does a really good job as well, whether you subscribe to their premium product or just use their free website. But I think, importantly, if you have the time and you're really interested in learning about companies and making sure you know where the information comes from, go to the source documents themselves on the SEC website, sec.gov. Companies, by law, public companies, have to report quarterly and annual data, tell you how their business is doing, give you their financial metrics. and you know it's coming right from the horse's mouth, and I think that's the cleanest source.

Yeah, and the plus there is they have the enforcement of law on their side. Yeah, there you go. I will add, whenever you read commentary, not just numbers, but you read commentary on a site, take it with a grain of salt because you don't know if the author has a conflict of interest or not, and I think more often than not, they do. Email from Arash Rad in California. He writes, I have investment in stocks, and now I'm thinking about expanding into real estate. However, I find investing in real estate a bit challenging. Are there stocks I can invest in

that would mirror real estate? What do you guys think about REITs? Matty, great question. Pros and cons of real estate investment trusts? I think generally, I'm favorable to investing in REITs. It is a way for an individual investor to invest in real estate. The thing with REITs that you have to be a little careful of is over-leverage REITs because they're required by law to pay out 90% of their income in dividends, and they get tax benefits for doing so. The only way they really raise capital is either by issuing stock or raising debt. And so, just make sure you check your debt-to-equity ratios. Make sure that your company isn't over-capitalized. Look at debt versus market cap.

And of course, you don't want a REIT that's constantly issuing new stock and just diluting existing shareholders. A couple that I follow, I come to mind, I look at, and I think actually it's in the MDP portfolio, to give Ron a little plug here, is Retail Opportunity Investment Corp. Very well run REIT. ROIC is the ticker. They do mostly strip mall commercial real estate on the West Coast, a good one. One that I follow that I've actually pitched to our Rule Breakers team several times is, the ticker is A-R-E, and the name, the company is escaping me, but it's one of the largest real estate companies owning biotech laboratories and medical science type of buildings and stuff. Very, very stable.

One caveat I'll throw out there is what will likely be a rising interest rate environment at some point in this country is typically bad for REITs. So they could come under pressure at some point, certainly not in the near term, but over, let's say, the next three to five years as interest rates rise. But, Matty, to something you touched on earlier, the dividends that REITs pay out – and I don't own any REITs, and I'm – like our listener, I find real estate sort of challenging to evaluate. But I will say that is a really powerful sort of emotional thing almost where it's like, well, wait a minute. What is the dividend they're paying out? Nine percent?

Ten percent? It just draws me in every time. Well, and another risk factor, by the way, the name came to me. It's Alexandria Real Estate Properties. ARE is the ticker. One of the things you should look out for is if you do see a REIT which has a 7%, 8%, 9%, even 10% yield, usually that is a leveraged security REIT vehicle, which means that REIT is taking on leverage and investing in mortgage-backed securities or commercial-backed securities.

Those are much more riskier. Even though the dividend looks great, just certainly up your risk tolerance with those. Email from Neil Fletcher in California. Since I started renting Volkswagen diesels on vacation in Europe a decade ago, I've been a big fan of their performance and frugality. I'm happy to see a new crop of clean diesel cars for sale here in the U.S. Can you recommend a stock to capitalize on growing diesel car ownership in the U.S.A.? Thanks.

First of all, kudos to Neil for the vacation in Europe. And the use of the word frugality. Yeah, that's a good 50-cent word. What do you think, Jason? So, you know, I think there's probably a bigger opportunity in the electric vehicle market, But diesel certainly is out there, and it's seen as a very viable alternative fuel. I would be looking at the company that comes to mind here first and foremost is a company called Cummins, and the ticker is CMI. It's a company we cover here at The Fool, actually, and they do a lot in the building of the engines for these diesel vehicles.

It's a bigger company, $25 billion or so market cap, so it's relatively stable. A smaller name in the field that's less about diesel and more about natural gas is Westport Innovations, WPRT. And then the third one I would throw in there is playing into another alternative fuel. It would be clean energy fuels, which is really – that's the one building out the natural gas stations for the trucking industry. So I kind of look at those three and think they make a neat basket of alternative fuel holdings there, giving you some good exposure to some market leaders, companies that are definitely shaping that space. So it's certainly worth a look. Mattie, we've got about a minute left. Jason mentioned the electric car space.

I'd be remiss if I did not mention that Tesla Motors made it official this week. The $5 billion gigafactory they're building? That's right. Sparks Nevada. Hey. Hey! And they got $1.25 billion, I guess, kicked back from Nevada to do it. We've talked about it in the past. This is Tesla's big step towards becoming, certainly not just a great electric car company,

but a battery company, which has a lot of different optionalities related to that business. But yeah, certainly they made the decision. Nevada was sort of the rumor all along. That's going to be a big development for the state of Nevada and for Tesla for the next few years. All right. Thanks, guys. Keep the emails coming. radioatfool.com is our email address, radioatfool.com. Take me riding in the car, car, take me riding in the car, car.

Take you riding in the car, car, I'll take you riding in the car. Up next, we're going to look for investing opportunities in Russia and Japan. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Phil Mann is the Portfolio Manager at Motley Fool Funds, and he joins me in studio now. Thanks for being here. How are you doing, Chris?

I'm doing well. There is a lot going on around the world that I want to get to. The last time you were here, we were talking about your upcoming trip to Japan, which you've now taken. No longer upcoming. No longer upcoming. We will get to that. But let's start with Russia and everything that's going on with Russia and Ukraine. And as someone – Who could have seen this coming? What do you think when you're watching this?

I mean you've done business in Russia. Putin is a leader that you've watched very closely. What goes through your mind as an investor as you watch all of this play out? So I think that the biggest thing for us – and I am very much an adherent of John Templeton who was really the pioneer of international investing. So who after World War II went and bought every European company he could find that traded at less than one U.S. dollar per share and did pretty well because he was buying things at a point in time in which people are panicking. It may not seem like it makes me to be a great American, but we're actually looking at Russian companies now more – we're more interested than we have been in years. Tim Hanson, who's my co-portfolio managers, and I went to a Russian conference in early January or early February, I should say, and came away with a couple of ideas of companies that we would like to buy, companies that actually didn't seem like they were stealing from shareholders, which is kind of a thing. I mean, if you're going to set a baseline, step one, not stealing from us is pretty good.

So if nothing else, it must be interesting to look at international companies and come away with the thing, you know, say what you want about the United States and Wall Street. That's right. But we're pretty good on the corporate governance relative to the rest of the world. Yes. Yeah. And some surprising places. But you know what is always the case? And you can think about it in the United States as well.

You go, well, that's obviously true, is that corporate governance is driven by corporations themselves. I mean, obviously, countries, there are certain countries where the level of, you know, where the standards are a lot lower, and there's countries where standards are higher. But you can't look at every American company and say their corporate governance is the same, because it's not. And the same is exactly true of Russian companies. And, you know, we've identified a few and had identified a few that we actually thought were, you know, were being run for shareholders, which is quite a concept. And so we – again, from a world citizenship basis, maybe it doesn't make me the greatest person, but we actually are pretty interested in some of these companies right now. It's interesting because you and I were talking earlier this week, and I think I was complaining or possibly even ranting about some of the people who are going on the financial media networks and saying the market is going to drop. And the reason being, there are all of these hotspots around the world, but it sounds like you guys are taking the opposite tack, which is, no, not that it's necessarily great for stability in any one particular region, but it does create opportunities for investors. Now, so let me say something that is something that I have observed, and it's just a fact. A lot of markets are at all-time highs. So I think a lot of people have failed to react to some really interesting and really horrifying geopolitical issues out there.

And you look at a country like the Ukraine and it is actually not that systemically important. So you don't really expect the, you know, issues in the Ukraine to to impact the stock market, for example, in the United States or Canada or even Western Europe. But there are so many different things that are going on and it doesn't seem like markets have reacted. But where markets have reacted is in places like Russia, which is directly involved. So I actually – the folks who have gone on to CNBC and said the markets are going to crash, they basically could have been playing that same clip from 2010 on, and they were not very right then. Eventually, they'll be right, and so that's good news, I guess. I do expect that at some point markets will react to a lot of these things because there are a lot of things that are going to require reactions, and reactions on a geopolitical basis are sometimes not very good for companies. I don't want to discount the effect that this growing and consistent noise – because you're right.

These are people who have been making predictions like this for a while, and eventually they'll be right. And we'll hear about it. I was right. But I don't want to discount that for the average investor, sometimes that noise takes its toll. Of course. And what do you say to someone? It does for us, too. I mean, we're human beings, and it's depressing to turn on the news.

And when you're depressed, it's not a very logical decision and not a very logical reaction to say, well, I'm going to invest more money. because when you are depressed and when you are sad about things or when you're concerned about things, your instinct is to pull in. It's to lower the sails. It's to wait out the storm. But time and time again, it has been shown that the time to really get involved in the markets is when there are crises. You're listening to Motley Fool Money, talking with Bill Mann, portfolio manager at Motley Fool Funds. The last time you were here, we talked about how for the month of August, you and every member of your portfolio team, you guys were fanning out literally around the globe. You went to Japan.

I did. I'm still jet lagged. Can we take a break? See if we can get you some coffee during the break. Not your first time to Japan. What struck you in terms of changes since the last time you were there? So the really interesting thing about Japan is that it is, by some measures, the second largest and some measures the third largest market by value in the world. But it really does play small. I mean, you go to Japan and they're in the process of debating things. For example, you know, talk about corporate governance, a requirement or a guideline, not even a requirement that companies have one outside director on their boards.

The companies, one. Wow. Yeah. So most Japanese companies, not only are they generally all Japanese people on the board, which is fine, but they are generally speaking all employees. Now, let me ask you something. If you're an employee and the CEO is on the board, how are you going to follow your responsibility as a board member when you could get fired for those duties? I was going to say, I think in politics, the phrase that comes to mind is voting the party line, voting the party line. Exactly. Exactly. Don't rock that boat. So the really interesting thing in Japan and one of the reasons that I went is that we had gotten rumblings through 2013 that this time things actually really were different. Japan has been in what can only be described as a slumber for the last 20 years.

There's a lost generation of employees. The market is still down about 60 percent from its peak. And stop and think about that for a second. What kind of a panic would there be here if the market 20 years later has still failed to undestroy that much wealth? That would be – It would be massive. I'm just trying to think of the longest sustained period of a down market and it would be unprecedented. It's unprecedented and yet you go to Japan and Japan is still one of the most important consumer markets for very high-end goods makers.

And it's – there's no panic there. And it's always kind of made me wonder why. Why has there never – if it was Greece, everything would be on fire now. Japan. OK. So what do you attribute that to corporate? Just just the general culture. I think culture has something to do with it. But I also think that people outside of Japan have misunderstood what has been going on inside of Japan. And let's you know, let's let's not say, hey, we thought it's bad and it's actually really good. It has been bad. But Japan still has an unemployment rate, which is the envy of the world.

You know, it's not like France, where if they get down into single digits, they're going to declare another national holiday. In Japan, it's remained in 6% range. But what they haven't been able to do is figure out how to make the economy grow again. And they have, in Japan, a demographic time bomb that's coming up. It is a population that is shrinking. The labor participation is actually shrinking. So they're trying to figure out how to make the economy grow so that they don't end up with the promises that they've made to their citizens drowning the national budget. So you think they might actually be turning it around? You think it's different this time? What makes you think that?

Well, they're doing things now. So if you're in a country where the stock market has gone down 60% and has never recovered, you might do what the average Japanese person has done, which is to put your money into cash. And not only cash, they leave it in a passbook account that generates zero income, but it's not losing money. So you feel good. So the government is doing everything it can do to get people to start to take some risks with their money, including doing it for them. The government is actually getting ready to take some of the pension funds that they control and invest them in the Japanese stock market. They are – there's 126 million people in Japan, give or take, and they want to do everything that they can do to make inflation – bring inflation to Japan, 2 percent per year or they're going to die trying. And I really think that they're going to do it. I mean they have tried everything else at this point. So I am hopeful for Japan for the first time in at least 10 years. Now, for someone listening who hears market's been down 60%, but it might be turning around and is thinking to themselves, hey, I don't really have any investing exposure to Japan. What is a way for a beginner to at least explore their options of investing in Japan?

Yeah, I mean, there are mutual funds out there that are focused on Japan or are focused on Asia. You know, there are very well-constructed ETFs. I mean, I think there's probably 30 different ETFs that point to different parts of the Japanese market. And, you know, the thing that I would say about that is that if you want to get exposure to the Japanese market, you don't necessarily want to be exposed to the largest companies. So if you look for an ETF that focuses on Japanese small caps, that's probably where you want to be. Before we wrap up, we are now kind of in the home stretch of 2014. I'm curious if there is anything in particular you're watching over the next four months, maybe something that you're hoping for. I don't know about you, but I'm pleasantly surprised at the market's performance to this point.

I think back to my mindset in January, and I really was sort of bracing myself for, this is going to be one of those years we're just going to have to get through. In general, it's been a lot better than I expected. It has been good, yeah. I'd say that the biggest thing to keep in mind when you're talking about the U.S. stock market is that most of the gains, and not all of them, because I don't think it's valid to say, well, the PE ratio of the S&P 500 is X because a lot of companies within the S&P 500, particularly a lot of the financials on an accounting basis are losing money. They may not be, you know,

they may not be losing money on a real basis, but on an accounting basis, they are. But it is still important to note that a lot of the gains have been because of multiple expansion as opposed to actual growth in earnings for the companies. So that doesn't necessarily mean that the market is wrong. It is anticipating, and the market is a very, very efficient anticipating machine. So it is forecasting more earnings growth from American companies than it had in a long time. Is there any particular industry that you think presents an opportunity or – I know because we've talked about this before, as someone who at its core is a value investor, in general, you're looking at a market where there's not a ton of cheap stocks to be found. Right. I still think that financials are kind of hated. I mean every time you turn on the news, one of the big banks has had some multibillion-dollar fine.

But you know who's not getting fined is the smaller banks. You know, and when you when the average investor who's investing thematically says, I want in or out, they don't necessarily say, I want out of the big financials, but into the little ones that just say, give me out of financials. And so I would say that that if you are an enterprising investor, which I desperately hope that many Motley Fool, you know, many of our listeners are that you start to look at some of the small banks. You can read more from Bill Mann and his colleagues by going to foolfunds.com. Sign up for Declarations, which is their free monthly newsletter. Just go to foolfunds.com, type in your email address. Thanks for being here, man. It's good to see you again, Chris.

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. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger, and Ron Gross once again.

Guys, before we get to the stocks on our radar, ever have one of those times when one of your kids takes your smartphone and then spends hundreds of dollars buying things without your permission? Ron, did that ever happen? Maybe once or twice. This week, the Federal Trade Commission announced that Google has agreed to pay $19 million to consumers whose children did just that. It turns out the Android App Store may be just a little bit too easy to shop in.

Not the first time this has happened. Earlier this year, Apple paid $32.5 million in a similar settlement. That's never happened to you? My son is guilty of using up my data, which is expensive as well. But, I mean, I think that's a supervision issue, as I do think this is as well. I'm surprised the FTC holds Google and Apple responsible for stuff like this. Although if you don't need parental permission to start racking up the bill, I don't know. It's not password protected?

All of our stuff is, like with Amazon and whatnot. I mean, everything, you have to enter a code before the purchase can be finalized. Or the fingerprint. Those young whippersnappers, you know, they just know how to get around. They hack their way through that. Just like the iCloud. They're hacking everything. You know who this is going to be a problem for in just a couple of years?

Our man behind the glass, Steve Broido, because his little boy is getting older. And, Steve, another one on the way any moment. That is correct, yes. And our son has done this exactly. Yesterday we were playing with the Talking Tom app. I don't know if you're familiar with that. But that thing basically begs you to buy a lot of other things. Is that what Tom talks about?

Pretty much. Get your parents' wallet, and Ron, what's on your radar this week? All right, I'm going to go back to a deep value opportunity, Crocs, C-R-O-X. They recently received a $200 million investment from the Blackstone Group. They're reorganizing to improve profitability. They're reducing their store count. They're cutting 10% of the workforce. I think there's 33% upside easily to the stock right now as part of the reorg,

so I think it looks good for those that like a good deep value. Steve, question about Crocs? Crocs seems like one of those companies that's been in and out and in and out again. I just can't figure out what to make of this. My question for you is, can they please move beyond shoes? That is certainly their bread and butter. And they're actually going back even more to their bread and butter, these plastic injection molding. They're kind of moving away from fashion, which didn't work, and doubling down on that good old clog and some of the derivatives of the clog.

So I can't help you there, Steve. I've got two words for you. Crocs. Smart watch. Think about it. There it is. I was thinking they'd go after Coach and maybe go the briefcase route. Matty Argersinger, what's on your radar?

Sure. Tile Shop, ticker TTS, has piqued my interest lately. It's one we own in the Supernova portfolio. Home improvement retailer, they just cracked the 100-store mark. The stock's been cut in half this past year. They had some short reports that came out about sourcing issues in China. There's also been some negative trends in the existing home market that's affected spending there. But the one thing that's really caught my eye is that the executives, a lot of the directors and executives at the company, have bought roughly $3 or $4 million in stock over the past few months.

And whenever I see that, especially that amount for a small company like Tile Shop, it certainly has my attention. Steve? How should investors think about a company that's making a product like this that seems unlimited in scope? Unlimited in scope? I mean, just the fact that you can make all kinds of different products. Well, I would say that the best thing about Tile Shop is the fact that the variety is just enormous. I mean, if you go to Home Depot, you might find two or three brands, and half of them are broken in the boxes. But if you go to Tile Shop, really, any color, any type of stone, imagine that.

And the showroom experience is a big deal. Jason? Yeah, I know I've always said golf is not an investment that I would want to touch, and typically that's the case. However, a recent IPO, Club Corp Holdings, ticker is MYCC, See, these guys actually have a very interesting position. They own a bunch of golf clubs around the country. And essentially, this is an industry where scale is crucial. So the more clubs they own, the more they can wring out that cost structure and become profitable.

And they bring the costs of being a member at a club down, so it opens up opportunities for people to join clubs. So take a very close look at this one. Steve? One tip at the golf team. Do you play golf, Steve? I don't. Okay. Well, I don't think you deserve a tip, though. That's going to do it for this week's show.

Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. We'll see you next week.