Motley Fool Hidden Gems Investing - Motley Fool Money: 09.18.2009

Episode Date: September 18, 2009

Fed Chief Bernanke says the recession is "very likely over."  Warren Buffett says he's buying stocks.  Facebook reports a profit.  And France wants happiness to count as part of GDP.  We'll tackle those stories, debate the relative merits of mega-author Dan Brown, and share three stock ideas. Learn more about your ad choices. Visit megaphone.fm/adchoices

This family is on the brink of civil war. On September 18th, Mobland, the hit original series, is back on Paramount+. We are the Hartigans. Don't know them yet? Then Google us. From the underworld of Guy Ritchie... Do you want to step up the ladder? I want Comet dead. Starring Tom Hardy, Pierce Brosnan, and Helen Mirren.

Do I have to do everything myself? You want more? I'll give you more! Mobland, new season hits September 18th on Paramount+. welcome to motley fool money i'm chris helen i'm joined in studio by motley fool senior analyst seth jason james early and shannon zimmerman guys welcome good to be with you chris as ever we're taping on thursday because we just couldn't wait it's my fault parents are coming to town baby to show off i gotta take tomorrow off so this is it sorry it's all about seth i hope nothing important happens Friday. Fingers crossed. On today's show, we'll look at the

latest big numbers for Facebook. We'll get happy with the GDP. We'll debate the relative merits of super author Dan Brown. And as always, we'll offer up three stock ideas. But we begin with the big macro. Earlier this week, Fed Chief Ben Bernanke said the recession was, quote, very likely over. New claims for unemployment continue to fall. Manufacturing numbers are getting better. And Warren Buffett told a conference in California this week that he was buying stocks because he's getting, quote, a lot for my money. As of today, guys, the Dow is up more than 50% from its March low. So investors have been feeling bullish for a while. Shannon, I'll start with you. Are you in a buying mood? Well, if Buffett is, I guess I should be,

right? It's interesting. You're just a zombie blindly following him. If I have to blindly follow anyone, it would be Warren Buffett. And it's interesting to me that he is buying stocks now. At the end of the second quarter, he had been selling certain positions, dialing down significantly his exposure to Moody's and to ConocoPhillips as well, and buying treasuries and corporate debt. So if he's buying stocks now, and he says that they're bargains, they probably are. Of course, even as we've discussed here before, even in a rally that's seen the Dow rise by 50% from its March lows, there are always individual bargains to be found if you know where to look and how to look. So I'm not surprised that Warren Buffett's

It all depends on the stock. Yeah. When I hear all this talk about the recession maybe being over, I mean, my question is, and all this affects me how? I mean, look how long it took before the economists declared that we were in a recession. It doesn't really matter whether we're out of one or not. I mean, if you look at business cycle theory and market cycle theory, the business cycle moves first. Excuse me, the market anticipates the business cycle. So somebody following that would say the time to buy financials is already gone, and we've kind of seen that.

and now might be a good time to load up on tech and industrials, but this might not be your typical cycle. I think it could be flat. Oof, I don't know about tech. We were buying that a few months ago before that was cool. It all depends. And remember that even if the recession is over, the recession for consumers is going to lag and continue.

The recession for commercial real estate is going to go for who knows how long. So just because technically the economy is growing again, And it shouldn't give anyone the idea that suddenly every stock is going to go up anymore from here because the people who buy things and power the earnings are going to be hurting for a while. 70% of GDP. Yep. Right, so the dumb money's been made, so now you've got to be smart like Warren. There's no hope for us.

One year after the collapse of Lehman Brothers, President Obama told Wall Street this week that some are ignoring the lessons of Lehman. And James, we just learned one of those lessons this week. If you're trying to get a message to Warren Buffett, don't leave it on his voicemail. Yeah, the story out is this. Barclays president Bob Diamond had talked with Warren about rescuing Lehman like a joint effort. Buffett said, get back to me with more detail. Bob did, apparently via a voicemail on Warren's cell phone that Warren didn't know was there even.

So 10 months later, his daughter somehow uncovered it for him. So the story is maybe Buffett could have stepped in to rescue Lehman with Barclays had he been able to check his voicemail. Um, I don't know. Yeah. So how did his daughter teach him, dad, that flashing red light on your phone indicates that there's a message waiting to be listened to? I don't believe this story. This thing sounds too good to be true.

I read something else and it was deal breaker, quoting somebody else, quoting somebody else about how when he was asked about this, he pulled out a phone and gave kind of a sly grin. I think this sounds just too good to be true. I think Warren Buffett knows how to get his voicemail. And let's be honest, if you need to get hold of Warren Buffett, you can find other ways. If he really wanted to get back to you, he would. Yeah, it's tempting to call it an urban legend, but I don't think Omaha counts as urban.

Yeah, no. Not a top 50 market, so, yeah. I see some nasty emails. That's right. Shannon Z. No offense. Omahaans. Is that what they're called?

Omahaans. Omahaans. He doesn't even know. Facebook announced this week that it has registered 300 million users worldwide and is now making a profit. Facebook CEO Mark Zuckerberg says the company is set up to be a, quote, strong independent service for the long term. Seth, if Facebook were a stock, would you be friending it? Oh, no. I mean, what else is that kid going to say? Of course, he has to pretend that this

underpants known business model of theirs is going to work out. This is, perhaps there's a small profit, but they need people to throw money at it. And among these users, there are lots and lots of them like me who signed up and then said, oh, what a waste of time and we'll never go back. So I would be really hesitant to read anything into this. I think this is the Friendster, the GeoCities of the flavor of the day, and I don't really think it lasts. The profit's coming from somewhere, though, isn't it? I mean, this is money coming into the business.

Well, you can call it a profit no matter how small it is, right? And if you back out the amount of capital you have had to obtain in order to scratch out that profit, you'd be underwhelmed. I guarantee it, you, Mr. James Early, Mr. Dividend Stock, would be really underwhelmed. I'm not saying it's my kind of company, but this thing is, it just seems so, I'm not on it, but it just seems huge. You know, people are clicking and seeing these ads. Yeah, I don't disagree with the assessment of the profitability.

I mean, so we don't really know. It's not a public company, so we don't know how profitable it is. But I disagree that it's a useless service. I mean, a lot of folks are using it as a content, personal content aggregator. And for that purpose, it's a helpful thing. I don't think it offers enough use that people are willing to pay for that it would work out for investors. Yeah, there'll be alternatives that people can go to that will remain free. So how much should happiness count for?

French President Nicolas Sarkozy says it should count for a lot, and he wants it to be included in the GDP. This comes after a panel of international economists proposed new measures of economic output. James, should happiness count? You know, this is an absolutely... And if so, do we have to back out melancholy? Net happiness. It is a ridiculous idea, but it's strangely interesting, too. Happiness should not count in GDP.

That should be a strict measure of something financial. But there is some merit to it. Now, he thinks the French are trying to angle this around, you know, whatever metric will benefit them. But there is some, you know, I was talking with some people who had come to the U.S. from Africa, And they were saying, look, you guys have all this money here and it's great, but you've really got to hustle for it. You know, back where we come from, you know, we have a lot more time to spend with our friends and our families and et cetera. Now, you know, I don't want to open this up to a huge philosophical debate, but there is, you know, there is a tradeoff to everything. And I think it is in some way worth trying to look at.

I don't know how well we can measure it, though. Are you saying those Nigerian email scammers are happier than we are? uh you know i i think that's right that the the french are looking for a data point that would serve their purposes and what's wrong with that and maybe they're happy and i know this is a bit of a puff piece but maybe they're happy because they only spend 11 of their gdp on health care compared with our nearly 17 they rank at the top of the world health organizations uh list of health care systems in the country we don't even make the top 40 or barely make the top 40 so i think that if you know as a fan of uh of paying less and getting a better product i too would be

happy so maybe the french are happy cheapskates oh come on you would be happy if you were sleeping with carla bruni that's why i was not gonna get on that one i mean if you're nicholas sarkozy i can i just point out that's a happy place of the country that is home to the people in the black turtleneck smoking the cigarettes pondering the meaninglessness of life being the one that's trying to the president of those folks it's like a peppy lepew cartoon yeah it's like trying to trying to trying to measure happiness measuring happiness is great i think we should do it but but you can't put a financial value on it and then pretend it's the same

as all this other financial stuff you're measuring. Measure it somewhere else. You're right. It's practically illegal to be gleeful in France. It's just not that kind of place. Here's one for all you Kindle haters. Dan Brown's new book, The Lost Symbol, is apparently selling better on the Kindle

than in hardcover on Amazon.com. No small feat when you consider that the book broke one-day sales records for adult fiction. Seth Jason. Adult? Kindle user, what does this say about the Kindle? And what does it say about your man, Dan Brown?

I'm narrowly going to avoid a Dan Brown hate, rage, tirade. As a guy who studied a lot of art history, he lost me when he invented the symbologists to take over for a group of people who already existed, iconographers. But anyway, I was really surprised by this, mostly because I thought the Kindle market was really much smaller and much more narrowly focused on Uber nerds, the kind of people who would not read Dan Brown.

So if they're selling this much Dan Brown on the Kindle, either I don't understand their end market at all or there are a lot more of them out there than anyone knows. Or maybe Dan Brown's just more popular than we want him. Maybe it's a value play. They're probably paying a third or two-thirds less than they would for the hardcover. I think it's 50% less or something like that.

They still have to buy the Kindle. The point is that there are this many Kindle owners to exploit this value play, which is intriguing. Yeah, I'm surprised by that, yeah. All right, so let me push back a little bit. I don't necessarily disagree with Seth's take, but because it's Seth's take, I am going to disagree. Of course. So, you know, there is an art to negotiating a mainstream, and it is a novel of ideas, you know, like it or not. And a lot of people aren't going to read John Ruskin on the stones of Venice, and maybe they'll actually learn something about Gothic architecture from Dan Brown.

What's so wrong with that? No, but you actually, that's the thing, is he doesn't just mix in something that you can learn. He mixes, even the stuff he doesn't make up is so brainless that it hurts more than it helps. Don't get me started. Hasbro is taking a page out of Marvel's playbook and is optioning the rights to its games and toys for movies. Reports this week that a director has signed on for a film based on the classic board game Battleship.

If you're a Hasbro shareholder, are you happy about this? I thought Battleship already, that commercial is like high art. You sunk my Battleship! Exactly. Well, now it's going to be a 90-minute movie. And it's actually going to be better than any of the Dan Brown movies that have come out. Say what you will, but the Da Vinci Code, I think it was about $800 million worldwide? Of course. What's worse is that apparently also in the works are films from Monopoly, Candyland, and Clue.

Now, first, I wanted to hate this so bad. There's already been a Clue movie. It was actually very good, yeah. Clue 2 or something? Wasn't there? I think there was. I thought so. Oh, there was a Clue.

Yeah, there was. Okay. Different endings as well. I have a bad source then. But clearly, I mean, maybe this is just a function of big money funding these movies. They just want a tried-and-true thing and these recycled ideas. But I just wonder how far we can stretch this. Big movies where lots of things blow up do well at the box office,

and there's not the language barrier. So when you take it to international markets, they can also blow up over there. And almost the ridiculousness is almost the draw here. I think they're looking for things that people like us will go, what is the dumbest idea I've ever heard? Because people will go to the theater just to see how stupid it might be. And they're doing it just to tick us off. They want some moolah.

Now, James and Seth, you're a few years away from playing board games with your kids, but Shannon, I'm sure you know, as I know, that Candyland is one of the first board games you're going to play with your kids, and I think that has the potential to be an amazingly trippy movie. Well, it could be. We have the Dora edition of Candyland, as a matter of fact, which is an interesting mashup, and it's still deadly dull. All right.

Before we get to stocks on our radar, guys, we got an email. Folks, you don't just have to listen. We have a listener? You can actually email us at MotleyFoolMoneyAtFool.com. We did get an email. Keep that card and letter coming. Exactly. And Steve Broido, if you could get on mic.

Yes. Can we get a dramatic reading of the email that we got? Certainly. I am just over 50 years of age and a mild fan of comics, but had never heard of Marvel's character Asbestos Lady. Just when I think Motley Fool has exhausted all of the available information receptors in my brain, you folks push me upward and onward to new levels of knowledge. Thank you. And that's why we're bottom-up investors.

Wow. Isn't that great? Of all the great ideas we try to discuss in here, it's a plucked fact on asbestos girl that brings in- Asbestos lady. Asbestos lady. I did a little Wikipedia research, and apparently she was known as girl and then was promoted to lady.

Oh, okay. It is an upgrade. And we love the email. I mean, we love you listening for whatever reason that you listen out there, whether it's the market commentary stock ideas or the random facts about superheroes like asbestos lady all right as we head into the next week shannon what's one stock that's on your radar well i'm going to stick with a health care angle i've been working lately uh you know as the conversation around reform has continued and moves toward what looks like pretty tepid uh cost control that's

benefited the health insurance plan industry which has done remarkably well over the last three months i think the dumb money there has already been made and cost controls are coming nonetheless, whether in this legislation or down the line, they're coming. And so a company like Inventive, which I know is probably near and dear at Cesshart, it's a great place to look. They make revenue streams out of tasks that are cost centers for the big boys. And so if you're looking for a play on the coming cost controls in healthcare, Inventive is a great company to take a look at. Yeah. We own that over at Hidden Gems for those reasons. Yep. James? Chris, I was poking around and I found this stock called Buckle and I've talked to Seth about this

And it's on my radar. I'm not sure what to think about it. But it's Schtick. It's basically a denim company that also sells some T-shirts and stuff for the younger set. You know, way too cool for somebody like me. But unlike Abercrombie and American Eagle, it sells other brands too. So it sells maybe 20%, 30% it's house brand than other brands. And so arguably that makes it a little bit more defensible against the fads that come and go.

The pessimists might say, well, somebody like a Macy's can do the same thing. But same-store sales are doing very well compared to its peers, and it's basically on the up-and-up. Wow. James and I are in the same industry. I'm looking at Aeropostale, which is making new 52-week highs, which the technical analysts out there will say means buy, buy, buy. It'll keep going up. I'm wondering. Now, they've done a great job.

They're the cheap Abercrombie. You've got the three levels of Abercrombie. You had four with Rule. You had Rule, Abercrombie & Fitch, then Aeropostale, which was—or, sorry. American Eagle kind of in the middle, and then Aeropostale sort of at the bottom. When the economic crisis hit, Aeropostale seemed to roll up all the business because the sales at the more expensive chains that were roughly equivalent just dried up. But Aeropostale is now priced for a real premium performance that may not continue.

Now, they're very profitable. They run smaller stores. There's a lot of good reasons to like this stock. Just be careful where you buy it. Seth Jason, James Early, Shannon Timmerick. Guys, thanks for being here. Good to be with you, Chris. Thanks for listening to this edition of 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. Do your homework and make your own decisions. And remember, the conversation continues 24-7 at fool.com. I'm Chris Hill. We'll see you next time. Thank you.