Motley Fool Hidden Gems Investing - Motley Fool Money: 09.21.2012

Episode Date: September 21, 2012

Apple's new iPhone goes on sale.  Microsoft increases its dividend.  Nike buys back shares.  And an online real estate company makes a big splash with its IPO.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, and joining me in studio this week, for Motley Fool Inside Value, Joe Mager, for Motley Fool Income Investor James Early, and for Million Dollar Portfolio, Ron Gross. Gentlemen, good to see you as always. Good to see you, Chris. We have got dividends on the rise and one coffee stock on the decline. We've got one hot internet IPO and one retailer leaving investors cold. And as always, we've got a few stocks on our radar. But we begin with the biggest public company of all, and of course, that is Apple.

Guys, shares crossed the $700 mark this week. But by Friday, the big story was what CNBC was calling the Maps fiasco. Mapplegate. Mapplegate. Nice. Trademark that immediately. The operating system in the iPhone 5 has a new built-in map system from Apple that replaces Google Maps. And, Joe, if the reports and what we're seeing on Twitter and on Facebook is to be believed, people are just not happy.

So my question is, how bad is this for Apple? Well, it's bad in the sense that it's going to shatter this image of Apple being the true absolute champion of user experience. Clearly, from all the reports we've heard, Google Maps is a superior offering. So, it's frustrating if you're a user, like I personally not upgraded on iOS or upgraded iOS 6 because I don't want to give up Google Maps. I'm pretty reliant on that. I do think that's going to hurt the image in a long-term sense, but they're still going to sell several dozen million of these phones in the next year. At least a few dozen, I would think.

So I don't think it's going to be a backbreaker. James? It's just petty, too. That's the thing that gets me. I mean, they're taking a page out of Microsoft's playbook, and that's what I don't like. I don't know if Steve Jobs would have done this, but I'm not sure he would have.

I think what they're trying to do strategically is capture, I think according to the Wall Street Journal, location-based ads are now like 25% of all mobile ad spending and growing rapidly. So the market's there. I think it's just a gauche way to go about getting it. Ron, what do you think? I mean, to James' point, this is clearly a shot across the bow of Google. Yeah, well, clearly. And to that point, I saw a great Wall Street Journal blog that called this a strategy tax that Apple consumers were being forced to pay, which is an interesting way to put it.

It's not a great move, but it's something that Apple thought was necessary for competitive reasons. I think it'll come out to be a mistake, and I think we'll see Google Maps back at some point. Would you do this if you were heading Apple, or are you not above that? I'm not even smart enough to know where this is going down the road. But listen, I don't think this is a stumbling block in any way in the big picture for Apple. I don't think it has any impact on the stock in any major way. The phone is going to sell very well, and I do think they'll end up having to probably admit a mistake, and we'll see Google Maps back at some point. Well, I think a more troubling thing is whether they keep up this pattern of

putting their own interest ahead of the users. And I think the reason everyone loves Apple is because they've always been user first, but when they put Bing on the phone instead of Google, that's the next step. Well, I mean, Joe, to Ron's point, I think that Apple has already admitted a mistake because they've already come out and said, this is going to get better. That's as close as you'll get to an admission. Exactly. So we've seen this once before with there was some iteration of the iPhone several iterations ago where they had the antenna of problems. Steve Jobs, I believe, left his family vacation to come back to oversee the fix. So I'll just end on this, Joe. What is going to be the next step here? Are we going to see Apple

backtrack and say, you know what, we're going to reinstall Google Maps or make it easy for people to get that? Or do you think that they're just going to push ahead as is? I think Google Maps will pop up in the App Store sometime soon. But if I was Google, I'd wait a couple months and make Apple sweat it out, keep the bad press coming, and then you just swoop in like a savior with your sweet maps offering. Everyone will be so happy. Microsoft has increased its quarterly dividend by 15%. James Early, in real terms, we're talking about a dividend that's going from 20 cents a share to 23 cents a share, but still- It's all relative. I mean, and now the yield is almost 3%, which is pushing it almost into my territory for income investor. Yeah, yeah. For a

tech company, Chris, Microsoft has really been coming out of the dividend closet for the past couple of years, and that's been great. Although I will say, technically, this is a 15% increase, which is not as high as the 25% we saw last year. Things are slowing down, but the point being, they're not squandering the cash, which is the most important thing. Ron, what do you think? Yeah, not surprised to see it slowing down 25% and then 23% the year before. I mean, the dividends only been around since- Look at your Mr. Stats on the top of your head.

I think 2004 is when the dividend was initiated. So, not surprising to see big gains right off the bat, and then slowing down. But 15% is nothing to sneeze at, obviously. We like both Microsoft stock, we like it for appreciation potential, and now we like the dividend as well. James, we also saw McDonald's this week increasing their dividend by 10%. Are we going to be seeing even more of this as companies grow, as they get cash on the balance sheet? Is this the easiest and best way to make shareholders happy? Right now it is. There are two factors, Chris. One is that companies do have cash, and they're scared to hire en masse, so they have to do something with that cash.

But multilingual. Just today. The second thing is that with bond rates really, really low, investors have shown a preference for yielding stocks, so companies want to get in on that action. McDonald's, the stock has done great. They're a little bit of a victim of their own success, but they're yielding over 3% now also.

I think long-term, that's another winner. Joe, for a long time, Apple was the company that we talked about in terms of not paying a dividend. But when you look at your beloved Google with around $50 billion on the balance sheet, at what point does Google decide it's time for us to start paying a dividend? We're in that territory where they're going to start getting some more heat. It's going to be tough for them to put that cash to work. This week, Starbucks began selling a single-cup machine called the Verismo on its website. Next month, it'll be available in stores like Williams, Sanoa, and Run.

I know what the market thinks of this move, because this week Starbucks shares up about 5%, and Green Mountain Coffee Roasters, with their Keurig machine, down about 15% this week. What do you think of this? How about Green Mountain down 75% from its 52-week high? Yeah, this takes a bite out of them. I did look up. Verismo is the right pronunciation. And interestingly, it is an Italian opera usually ending with someone's death. Wow.

I love that every morning. That is apropos to the Green Mountain situation. The K-Cup patents went off recently, within the last month. Starbucks is going to maintain the relationship with Green Mountain. They still will sell those K-Cups. But this is a shot across the bow in a big way. It adds to Green Mountain's problems that they're having with accounting issues, a lot of criticism there. It's a bit of a different target market. The Verismo is a high-pressure system for lattes and espressos, but it also makes brewed coffee like the Keurig does. So, it's a little bit of a higher-end product. It is more expensive, but this is clearly competition.

Green Mountain has about 90% of the market share for the single-cup machine. Ron, I'm curious what you think about this thing that Howard Schultz, the CEO at Starbucks, said. He told the Wall Street Journal, 75% of Starbucks customers don't own a single-cup machine, and he expects to make converts of them with the Verismo. That seems ambitious to me, only because I drink a lot of coffee, but my kitchen is small, and I'm not going to buy one of these things just because I don't have the space for it. I think that's a big number. That's an aggressive number. I read another stat that said Starbucks already controls 25% of the K-Cup market, which is really interesting.

But you're correct that the machines is where they want to go. They want that razor, razor Blade model to really kick in. I think it will do well. I don't know if Schultz's prediction will really come to pass, but I think it's a nice area of growth for them. O' You have a Keurig machine in your house. I have a Keurig, and I like it, but I'm really not picky about really strong coffee. Dunkin' Donuts is fine for me. I don't have to go to Starbucks. It works for me. O' Maybe around the holidays, something for your wife? Perhaps.

O' Coming up, did our man Steve Broido single-handedly push one stock to an all-time high this week? We will answer the question that all of Wall Street is asking. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Joe Mager, James Early, and Ron Gross. Guys, Nike said it plans to spend $8 billion buying back its stock. This will start in 2013 when Nike has completed its current $5 billion buyback plan. Joe, I'll start with you. Nike's market cap is around $44 billion. This seems like a lot of money to commit. Yeah, it's a big bite. Yeah, I mean, Nike has a good problem on its hands. It makes more money than it can reinvest in the business.

I'm not wild about this repurchase, though. It just seems like they're trying to put the money to work, but they're buying back stock at 20 times earnings. I think they could probably get a better price, be a little more patient. And they'll put that money to work over a period of years, but really I'd rather just see them pay that back out as special dividends sporadically instead of just kind of forcibly repurchasing shares. But buyback should really be outlawed because nine times out of 10, they happen at the worst possible time, don't they? You heard it here first.

Outlawed? Outlawed, Chris, outlawed. All dividends all the time. Regardless of the buyback program, Joe, when you look at Nike stock, is it fairly valued? Is it a little bit of a value opportunity? Yeah, I'd say fairly. It's a wonderful business that I'd like to own for the long-term at the right price, but I think 20% cheaper would be more attractive.

Real estate listing service Trulia went public this week. And Ron, I think this must be the opposite of Facebook, because on the opening day, shares went up 41%. The street loves it. Investors are loving it. I mean, Zillow, which is the closest competitor, very similar, has done quite well, too. I think it went public 20 and now sits at 45. They've already done a secondary offering. Business models are very similar. Zillow. There's obviously a need out here for people wanting information about real

estate. They're really targeting the realtors who would want to advertise and gain customers through the online world. My wife's a realtor. I know many realtors. They're not necessarily in love with this product. O' Darn you, price transparency! There's a lot of criticisms about the estimates they come up with, whether it's the Zestimate for Zillow, or Trulia's Zestimate. I checked out my house on both of them. They were within $35,000 of each other, but they were significantly off in general. On a $10 million house, it's pretty close, too. But, it does provide a lot of great specialized information, and investors certainly

are interested in it. Trulia's not profitable yet, but they're growing gangbusters, so people are hoping they grow into that valuation. Grow into that 12-time sales valuation. Right, exactly. It's only a $645 million market cap. But for a company not profitable, hey. Now, you mentioned you checked it out in terms of the estimate for your house. I actually typed my address into Trulia, and I didn't focus on the estimate of the value of my home. I focused on the information about my home, which, similar to Zillow a year ago, not correct.

Right. Now, this is interesting. I don't have that many bathrooms in my home. Zillow allows you to go on and change it and make it more up-to-date, and Zillow is now suing Trulia because Trulia does the same thing, and Zillow is citing a patent infringement, so it'll be interesting to see how that works. Patenting the idea of correcting information? Right, exactly.

I thought they were suing them. Who would have thought of that? Whiteout is next. I thought they were suing them because Trulio was also using the word Zestimate. Guys, the hits just keep on coming for JCPenney. CEO Ron Johnson told analysts that JCPenney's shops within its stores

are doing 20% higher sales than the rest of the stores, but that it's, quote, way too early to draw conclusions. James, I think investors have drawn their own conclusions. Shares of JCPenney down about 10% this week. Chris, I'll draw my own conclusion, too. I mean, this store is done for. I don't care about the store within a store.

I mean, there's $888 million in cash, but the last 12 months, the company had a net income of negative $540 million. So this is a bathtub with a pretty big hole in it. They're trying in desperation to change their name. A bathtub with three haircuts. I guess all bathtubs have holes in them. It's just a weird analogy, right? With the stopper removed.

Okay, think of it that way. They're trying to go by JCP now. It reminds me, like 10, 12 years ago, Kmart changed their name to the Big K. That's how they wanted to be called. How well did that work for them? I mean, the only way they can really survive is if they just totally destroy the concept and do something new, which they're not going to do because they're going to try to maintain the old customer base, which isn't much. The company plans to transform its stores into a collection of 100 specialty boutiques.

Wow. By 2015, is Ron Johnson going to be the CEO in 2015? No. Because there won't be a company in 2050. I wouldn't go that far. This is just a disaster of a store, though, in my view. The problem with retailers, retail is a tough business. You've got to say to yourself, if this company or this store went out of business tomorrow,

would people be freaking out? Where's my JCPenney? And I think the answer is no, because there's so many other substitutes. And so poor execution, really not needed, not differentiated, spells trouble. And yet, if they are doing well with these shops within the stores, to the extent that there is a Hail Mary pass that Ron Johnson can throw, is it simply just doubling down on that and speeding up that process? Is that the path forward? There's no doubt, Chris, is negative. There are no doubt monetizable assets within JCPenney.

There's some brand. There's just the fact that people come to this facility. And so maybe there's something they can hive off there. It just won't be the core concept, is my view. Shares of Darden restaurants hit an all-time high on Friday after reporting better-than-expected quarterly profits. Darden is the parent company of Olive Garden, Red Lobster, Longhorn Steakhouse, and others. And, Joe, Olive Garden is getting the credit here because, for the first time in the last six quarters, there was a rise in comps at Olive Garden. What do you think when you look at this stock?

Well, I'm not a big fan of restaurant concepts. It's a very similar dynamic to retail. It's just a bad business over the long term. But they've done very well in each of these niches. You know, you think steak, you think Italian, you think seafood. And each one of their flagship restaurants there is broad enough that people know it. And you can go there and get a broad selection of food and you're comfortable with it. So I can see why they've been doing well.

You can always drop us an email. Radioatfool.com is the way to email us. We got an email from Dave Beatty in Wildwood, Missouri. Last week, guys, we had talked about McDonald's putting calories on the menu, and Dave emailed to say that he thinks that McDonald's gets a little bit of a bad rap there. And he writes, there are a lot of other places that probably have a lot more calories in the average meal purchased at their respective restaurants. From personal experience, I've put on the most weight when I start eating at Olive Garden and Red Lobster more often. And then he parentheses your eyes. How could that be?

Sorry, Darden. So long as I'm being relatively active, I can work off my more frequent-than-they-should-be meals at McDonald's, no problem. So what you're saying, a fried chicken breast smothered in cheese over a large bowl of pasta has a lot of calories? You mean endless fried shrimp is a bad idea. Did I mention the bread basket? This is unbelievable. Matt Greer, our producer, and I, we actually, when we got the email, we were checking out the menus at Olive Garden and the calorie content. And I think the number one calorie item at McDonald's has 1,150.

That's the big breakfast with hotcakes and biscuits and Olive Garden. Most important meal of the day, Chris. Absolutely. Biscuits, yes, it is. Biscuits are a part of any wholesome meal. Olive Garden just has a whole bunch of items that are 1,400 calories and above. And at this point, we'll bring in our man Steve Broido because, among other things, Steve is the biggest fan of Olive Garden that I think we know.

Number one fan. Steve, first, did you help in the last quarter, in the last three months? Were you part of same-store sales for Olive Garden going up? Unfortunately, I was not. I have not eaten there recently. We have a small child who is not yet a fan of the OG. He will be as he ages. Are you doing Thanksgiving there?

No. I wish we were. Do you have any kind of buyer's club type card from there? I don't. I should get a t-shirt made or something. What is your favorite go-to dish there? Chicken parm all the time. The endless salad, it just doesn't get much better than that.

Do you have a rebuttal for Dave Beatty in Wildwood, Missouri, who's basically saying, look, don't pick on McDonald's. Look at Olive Garden. I can't really rebut it. It's terrible for you. I mean, I'm not going to lie. It's just terrible for you. But it's delicious.

And my favorite part, I always tell my wife, is the chairs with the wheels on them. It just makes getting around the Olive Garden that much more enjoyable. Wait a minute. It's been a long time since I've been to an Olive Garden. They've remodeled recently, and they've removed the wheels. But for years, that was the... Where do you wheel around? You wheel the bathroom?

You wheel around and see your neighbors, talk to your friends. It's just terrific. It's family style. Absolutely. I was going to say, because whenever I see the commercials on TV, that's the big, to Joe's point, the family style. That's the big thing they're pushing. Come have a big family meal. When you come to Olive Garden, you're family.

And now what I'm hearing from Steve is... We offer wheelchairs. One, we offered wheelchairs, because what says safety more than that? And two, we don't go there because we have a child. Do they not have chairs for your boy? They do have chairs for him, but I think he's a little too young to fully appreciate the menu. The endless breadsticks. All right, Joe Mager, Ron Gross, James Early, we will see you a little bit later in the show.

La, la, la, la, lasagna. Circle your calendar, because September 25th is Worldwide Invest Better Day. you can learn more at investbetterday.com. But coming up, we will tell you what's in store on September 25th and how you can be a part of it. Don't go anywhere. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. The stock market is at a four-year high, but investor confidence is at its second lowest point in the past five years. So to help, The Motley Fool has set Tuesday, September 25th as Worldwide Invest Better Day. And here to talk about some of what's in store is Andy Cross, Chief Investment Officer here at The Motley Fool. Andy,

good to see you. Thanks for being here. Thanks, Chris. Yeah, four-year high. Four-year high, and investor confidence still not nearly where it probably should be. I should point out, we have a free website we've set up, investbetterday.com. We're going to have programming all day on the 25th. We're going to have speakers, roundtables. There are going to be meetups across America. But let's talk about some of the key themes that are going to be hit on Invest Better Day. And one of them is the whole notion that, as an investor, you really have to focus on the business and not the ticker. Well, and we've talked about this so many times at The Motley Fool, and you've talked about it so many times on the radio show. I mean,

One of the things, you pointed out this stat about investor confidence, and investor confidence is at a low, and part of that is because they've lacked the insight on how to invest, and many have been burned not just by investing poorly and making poor investing decisions, but also their housing and the financial crisis and jobs. So there is all those legitimate concerns, but really with Worldwide Invest Better Day and what we've done for so many years at The Fool is really help people understand that investing is best when it's most business-like. And when you're thinking about your stocks, not as pieces of paper or baseball cards that you're trading in and out of, but they're actual real parts of real businesses that generate real cash flows that the management team can use and deploy back into the businesses or back to shareholders, and that helps the stock appreciate in value.

And over the long term, that's really what you're trying to do as an investor. Well, and a lot of times, some of the best stocks, and you and I have talked about this before, it's the sort of thing where a lot of times people think, well, there's got to be a tip, there's got to be a secret, unknown company. Most of the time, you look at the great investments, they're really the great companies whose names you know and probably their services you use. Companies like Costco, Amazon, Google, that sort of thing. One way I love to think about investing is, and David Gardner, the co-founder of The Motley Fool and the advisor at Stock Advisor, along with his brother Tom, has done this for so many years. And it's really thinking about businesses that you use, and if those businesses vanished, how would you react?

And if Starbucks vanished, Chris, you and I, I think- I'd be in a catatonic stupor. We'd be done. Yeah. So thinking about businesses and stocks as your investing approach from a business perspective and those products that you use and that you appreciate, that's really the best way to start investing. Whether you're a new investor or whether you're even an experienced investor, I still think a lot of your portfolio, you should think about investing in businesses for the long term. Speaking of the long term, holding period is another one of the themes we're

going to be hitting on Worldwide Invest Better Day, because it's easy to get caught up in the action. And certainly, you watch CNBC, there's a lot of action on the floor and that sort of thing. But really, when you're talking holding period for a stock, investors really should be looking out three to five years at least. Absolutely. And unfortunately, they don't. Investors, as we know, and studies show that we trade way too much. Individual investors trade way too much. Professional mutual fund managers, actively managed mutual funds, trade way too much, turn their portfolio over more than 100% a year. And that's just very detrimental to your portfolio because not only is it, I mean, the stress level of trying to trade that much and determine what

that hot stock tip is and when you should get in and out rather than buying the business, but the commissions and the taxes just eat into your returns. I was just going to say the taxes alone. Yeah. And they just eat into your return. So if you're turning your portfolio over and you're buying tickers rather than buying stocks of businesses. That just doesn't do you any good to think about it that way. And your holding period, I mean, at Stock Advisor, our flagship service, we've held these stocks. The turnover in our portfolio is very low, and the returns have been outstanding for so many years. In fact, Holbert Financial Digest just put out its results

of looking at the returns of stock investing newsletters over the last five years, and Stock Advisor is one of the top 10. And really there, we're trying to invest in great businesses and hold for the long term. So every investor out there, really think about your holding period and try to increase that. Another theme we're going to be hitting on Worldwide Invest Better Day is the whole sense of community. Because for so long in America, investors were just in the dark. There was a serious lack of information. The internet obviously helps a great deal with that. And I feel like we've taken that one step further with just sort of online community, online support, and what an asset that can be.

Yeah, and it really is, Chris. I think here at the Motley Fool Community First, we've long been advocates of using the community and joining the community to both help other investors, but also help yourselves and learn. I mean, investing has always historically been a one-to-one relationship. It's been you and a financial planner, you and a broker, you and that person who gave you that hot stock tip. With the community and with the access that we have in this day and age with the Internet and with forums like The Motley Fool, you have the opportunity to ask questions that you never had the chance to, to learn things you never had the chance to, and to get that support.

Both actually learn something, but also emotional support, which is very important when you're talking about your money. So communities like we have at The Motley Fool are very valuable, and I really encourage everyone to embrace that. Speaking of communities, I should mention, in addition to the online meetup at investbetterday.com, we're going to have actual meetups not only across America but around the world in London, in Singapore, in Sydney, Australia. Are you here, by the way, on the 25th or are we sending you somewhere? Yeah, no, I am here. I love our office, although I've never been to Singapore. And, you know, I almost tried to sign up for the visit out to that part of the world.

But no, I will be here with Tom and David, and we will be hosting a day-long events of investing, information, stock ideas, education, and really trying to help everyone understand some of these timeless, foolish principles that we believe in and we think you can use, investors out there can use for their portfolios. A lot of great programming all day long. InvestBetterDay.com. That's Tuesday, September 25th. Andy Cross, Chief Investment Officer here at The Motley Fool. Thanks for being here. Thanks, Chris. There is so much going on around the world, and here to help us make sense of it all is

one of our international experts. Joining me in studio now, Tim Hansen, Senior Analyst at Motley Fool Asset Management. Thanks for being here, man. Tim Hansen. Always a pleasure, Chris. I want to go big picture here. Let's just start with Europe. What are you thinking now when you look at Europe? Is the situation better? Is the damage in Greece contained? you think when you look as an investor at Europe? Well, there's certainly some optimism about Europe right now because of the banking union that they've proposed and sort of the expanded financial stability mechanism that has gone along with it, which is basically to say that if all these banks

in Europe and all these countries agree to give up sovereignty for wider regulation, the European Central Bank will give them an unlimited spigot of money. So that's generally speaking being regarded as a good thing. But at the same time, the real sort of tangible details continue to be really treacherous. Unemployment in Spain right now is at an all-time high of 25 percent. It's going up, not down. I mean, it shows no signs of abating. And just sort of in a funny anecdotal example, Coca-Cola Hellenic, the Greek-based, Greece-based bottler of Coke beverages, was up five percent on Thursday when it made, the rumor started getting around, they were just going to move their main listing out of Greece. So we're just going to go from, we're going to go from

athens to london and they've hived off their greek subsidiary so it is now just a subsidiary and it's not you know the greek bottlers no they basically have made themselves super so just the fact that we're getting out of greece is enough to send the stock up five percent correct so that that that would not uh point towards the optimism so you know people say they're optimistic about the bailout funds and uh central banking regulations but then you know what does the money do when When Coca-Cola says they want to become more of a supranational company based in London with their main listing in London, taking out that currency risk and the Greek stigma, the stock is up 5% and would arguably go higher if they actually make the move. Where do you come down now on the euro? This is something that over the past, I would say, five years or so, you've gone in different directions in terms of believing the euro as a currency is absolutely going away.

it's just a matter of time to thinking, you know, like when I remember when you came back from Greece and you're like, boy, the political entrenchment is such over there that it's probably going to stick around. Well, that's right. I don't think my position has been inconsistent despite my waffling. It's just, you know, I think I wasn't trying to think you were waffling, but I would just say, you know, that the merits of the currency on its own would point to the fact that it would go away just because maintaining this currency union seems unwieldy and impossible. The flip side of that is that the people who put the currency union in place seem completely committed toward maintaining it. And so it's sort of a push me, pull you type

situation. Where that shakes out ultimately is that I think politics for the time being can defeat reality, as we have seen in many examples over history. So I think that's probably going to happen. But if you look out maybe 10 to 20 years, I think you'll find it has to be some sort of modification in the situation in terms of either Europe's really going to come a lot closer together and it's going to look more like the United States, or the euro will maintain some of its common traits, but they'll give some flexibility to the southern countries to have a weaker currency or just the flexibility that needs to happen to manage these different economies. So I don't know what the solution they're going to come to is. I think the right

solution would be to go back to different currencies. I think the political solution is going to stick, or the political idea is to stick with what they have. Let's move over to China. And we've seen signs recently of a slowdown in China. And as we've talked about before, when numbers are coming out from the Chinese government, they need to be taken with a grain of salt. With that in mind, though, when you look at China, what are some of the numbers that you're watching most closely? I think government published numbers need to be taken with a grain of salt anywhere. You know, obviously, even in the United States with job numbers and revisions and seasonality. Revisions every couple of months.

Exactly. So what I like to focus on anywhere, and particularly in China, because the problem is more egregious there than elsewhere. I don't mean to sort of make everything too relativistic, but things that can be sort of counted rather than estimated. So examples of that would be electricity consumption. Another example of that would be the tonnage of freight that's being reported being shipped on some of the publicly listed railroads. So we're watching those very closely. Another good example that was given this past week in earnings was FedEx's package counts way down. China is definitely, all indicators point to the fact that China is producing and exporting less. And that's obviously going to be a big drag on their economy. I don't know what

that means for GDP, where it falls on the spectrum from 5 to 10. Frankly, I don't really care. You really just need to be more focused on the directionality of it. And I think it's headed in the downward direction. And China is going to go through some volatility and some tough times in the near term. Is there a ripple effect for U.S. businesses, either positive or negative? It's hard to see who would benefit dramatically from this in the near term, besides sort of the people who are shorting China or people who would benefit from some declines in commodity prices. And there are certainly companies like that, you know, restaurants, farmers would obviously like to see corn prices go down. Truck drivers would like to see oil prices go down. So that could be

sort of an ancillary benefit. In the medium term, though, I think the winners are the consumer goods companies. And the reason I say that is because if China goes through an economic stress at present because their export sector starts getting really, really weak, I think that turns up the pressure on the government to really do more to stimulate the consumer sector in China, which is what they said they want to do to transition the economy to be a more balanced economy. To the extent that they get more pressure to do that, they put in measures to make that happen. I think consumer goods companies, both domestic Chinese and multinationals importing into China, do well as a result of that increased consumer spending. Last question on investing. When you cast your

wide net and look around the world, is there a particular region or country that you're watching with a greater sense of interest? Well, there was a really fascinating article in the Wall Street Journal not too long ago about how, you know, Walmart recently got approved to acquire MassMart, which is a South African big box retailer. And there was an article in the Wall Street Journal about all the suppliers to MassMart who are now being introduced into sort of the Walmart way, which is, you know, really hyper-focused logistics, high inventory turns, that sort of thing. And so it was an article about how these companies are all adapting to better serve Walmart. And I thought that was really interesting because obviously Walmart is now taking a foothold in South Africa and they're going to push north, most likely up towards Nigeria, through the rest of those countries in sub-Saharan Africa where a lot of people live. And generally speaking, those people are quite poor per capita today. But to the extent that you can look around the world for an exciting market with a lot of people that hasn't really been served by modern business, that's it.

And so I'm intrigued to see, you know, how some of these South African companies, Clover Dairies is an example of one. You know, can they become, to the extent that they can serve Walmart better, they are likely to become way more efficient companies. And, you know, so you're thinking about higher returns on invested capital, potentially higher profit margins. And then in this very big market, so you're also looking at potentially higher growth as Walmart store expansion helps them expand their distribution. So that's sort of a part of the world and a universe of companies that's gotten my interest recently. Last question. The last time you were on the show, you and your wife just had one child. Now you have two children.

We're multiplying. You have to. What biggest difference for you? Oh, boy. I would say the amount of planning now that goes into like mobilizing to do something, you know, because you need to make sure you've got all this stuff for the two year old. So that's a snack, milk, you know, a change of clothes, his diaper bag. And then for the infant, it's like, all right, well, we need the car seat and the this and the that and the double stroller. So all of a sudden, you know, for a trip to the farmer's market or what have you, I mean, you've got to take the car because we've got so much darn stuff to carry around.

You have a heightened appreciation for people who excel at logistics planning? I could use my own. I need UPS to come manage my children. Tim Hanson from Motley Fool Asset Management. For more information, you can go to foolfunds.com. Tim, thanks for being here. Thank you, Chris. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Joining me in studio, once again, Joe Mager, James Early, and Ron Gross. Guys, time for the stocks on our radar. We'll bring in our man, Steve Broido, from the other side of the glass, assuming he hasn't dashed off to Olive Garden. And I should point out that also, joining Steve on the other side of the glass this week, longtime listener Hans Schubert and his dad, Lee, celebrating his 50th birthday.

Happy birthday! We will spare Lee, and we will spare all of our listeners by not actually singing happy birthday. But we'll bring Steve in with a question for each one of you. Ron Gross, you are up first. What's your stock this week? I am going to circle back around to Starbucks, SBUX. The stock is off from its highs, mostly out of economic concerns and some rise in commodity costs, but they're diversifying their revenue streams, whether it's Via or Evolution Juices, the new Verismo. I think they've got plenty of international growth ahead of them. Stock doesn't look cheap on

the face of it, so I need to dig in there, because 15 times cash flow doesn't scream cheap to me, but I think they've got some nice growth ahead of them. You know what would help is if you bought your wife one of those new Verismos. It may help. Three or four of them. Ron, does this ever weave your radar? No. Well, it's a great company. When the stock pulls back, that's when I get interested again. Steve, question for Ron?

What does the future look like for tea for Starbucks? I've heard that tea is a big opportunity for them. I think tea is definitely, obviously, a big trend, as are cake pops, by the way. You might want to try those. Is it? Cake pops? Have you seen those cakes on a stick? I've never heard of that. Yeah, they're big at Starbucks now. I think tea definitely has a place going forward. standalone retail stores that do tea, but I think Starbucks, definitely, that's one of the areas they'll go in. James, your stock this week? Chris, I'm going for an 11% yield in a company

called Newcastle Investment Corporation. The ticker is NCT. This is a REIT, a real estate investment trust that typically buys various mortgage or real estate securities and mortgage debt. It's actually a five-star stock in our Motley Fool caps database. It is up 73% year-to-date, which helps me a lot because I bought this for my wife's IRA a couple of years ago and watched it go almost down to nothing, and now it's actually back on the upswing. Congratulations. Steve, question for James? Can you just explain to me how REITs work? That's a long question, Steve.

We don't have that kind of time. They typically hold real estate or real estate-related securities. They don't pay income taxes. That means your dividend is fully taxable, so you want to hold it in an IRA or some kind of tax-deferred account. Typically, they're given the structure to encourage investment in our U.S. real estate infrastructure, just in general. No breadsticks. No breadsticks. No Chicken Alfredo when you're talking REITs.

Joe Mager, your stock this week? International Speedway. They own and promote some of the biggest races and tracks in NASCAR. So, Daytona, Talladega, Kansas Motor Speedway. NASCAR attendance and TV ratings have plummeted over the last five years, But there's a saving grace here, which is that there's been a big boom in what networks are willing to pay for TV rights for live sports events. And there's a big renegotiation coming up with NASCAR this coming year. I think International Speedway is going to do very well coming off that. Steve?

What's the biggest future opportunity for them? Is it merchandising? It sounds like the TV rights are a huge deal. Is it sales at the events? The real big dollar ticket is the TV rights. It's very high margin. And the ticker symbol? I-S-C-A.

Are you a NASCAR fan, Joe? No, not really. Okay. Steve, you heard three stocks. You got one you're particularly curious about? I know that dividend sounds very, very appealing, so I may have to go with Mr. Newcastle over there. All right.

Joe Meagher, James Early, Ron Gross. Guys, thanks for being here. Thank you. Thank you, Chris. Thanks to our guests this week, Tim Hanson and Andy Cross. As I mentioned, worldwide Invest Better Day, September 25th. Circle your calendars, and there's more information to be found at investbetterday.com. check it out, investbetterday.com. That is it for this edition of Motley Fool Money.

Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.