Motley Fool Hidden Gems Investing - Motley Fool Money: 10.12.2012

Episode Date: October 12, 2012

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That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill, and joining me in studio this week for Motley Fool Inside Value, Joe Mager. For Motley Fool Pro and Motley Fool Options, Jeff Fisher. And for Million Dollar Portfolio, Ron Gross. Good to see you guys. Hey! Earnings season has officially begun. We will talk earnings, we will talk housing, and we will talk with the founder and CEO of the fastest

growing restaurant chain in America. And as always, we've got a few stocks on our radar, but we begin with the big macro. And guys, go ahead and pick your headline. We've got weekly jobless claims that hit the lowest point in four and a half years. Consumer confidence hit its highest point in five years. And the European Union has won the 2012 Nobel Peace Prize. I think we're all a little surprised by that one. But Jeff Fisher, I'll just start with you. What's your headline of the week? All right, I'll jump to jobless claims, which were below 375,000. And that is the magic number that signals that enough jobs are being created to lower the unemployment rate. That said, we're not much below that number at all. So that aligns perfectly with what we're

seeing out there, which is a very tepid recovery. Now, the Small Business Employment Index came out recently, too, and showed a 2.5% decrease in hiring at small businesses, which are the engine of employment growth in the U.S. So, that's not great. But that should pick up as we see some seasonal hiring around the corner for the holidays. One other stat that's interesting and doesn't get reported that much, the Bureau of Labor Statistics says there are three- Those guys are a total sham. Oh, yes. 3.6 million job openings right now. 3.6 million jobs open right now. That's up from 3.1 million a year ago, and that's good. There are 12 million people looking for a

job. So, you could effectively give 30% of these people a job if they qualify and if they're in the right area for the job. Do we know if they're service sector jobs or did it drill down? It does drill down a bit. It's interesting. It's spread across manufacturing and construction is high on the list, which is a good sign. But the problem, of course, a lot of people can't move. Their house is underwater, or they're not qualified for their job. That said, the U.S. is a small problem.

But still, when I look at us compared to Europe, we are very fortunate because we have a lot more job mobility than, imagine you're a Spaniard or you live in Greece. You're not about to move to Germany, an entirely different culture and language and whatnot to get a job. Ron, what stands out for you for a headline for the week? I like the consumer confidence numbers that came in highest since October 2007, I think it was. It's kind of building on this momentum. You've got a 16% up stock market. You've got

home prices that seem to be on the rise. Unemployment recently coming down. Consumers are feeling better. That can snowball and really turn into, you know, you feel good and it pays dividends down the road. So, I like that. Joe Maker? Yeah, I'll follow up on what Jeff said, which I thought was great and it's tough to expand upon, but I'm not a huge macro guy, but to me, seeing these jobs numbers is definitely heartening and a good signal, at least trajectory, of where we're heading. Am I the only one stunned by the EU getting the Nobel Peace Prize?

We're so stunned we can't talk about it. You'll do a nod. It just seems like the statement was something like, and we're going back, we're looking over the last 60 years, and I mean, I'm not on the Nobel Prize Committee, but I feel like if the eu gets the nobel peace prize this year then our radio show maybe gets a nomination for economics i'm not saying i'm not saying we win you know they've they've had some controversial picks in the past they've done yasser arafat kissinger um and it was strange it was kind of an encouraging peace prize here this is to encourage you to keep getting along i read some

comments though from from actual citizens of the european union who thought it was kind of a slap in the face well who gets the prize where does it go on whose mantle i think it's like the stanley cup, and then each country gets to carry it around for a couple of weeks. Now they'll fight over it now. Let's get to earnings, which kicked off this week. We will start with two big Wall Street banks, JPMorgan Chase and Wells Fargo. Both reported earnings Friday morning. Joe, they both appeared to have pretty good quarters, and yet shares of both were down slightly. Yeah, well, the headline numbers were great. And honestly, I had a little bit of trouble

figuring out what the market was upset about. When you dig in a little bit, it's mostly around net interest margins shrinking because of low interest rates. On the whole, though, I thought they were both good quarters. Wells is shrinking their bad loan book. J.P. Morgan's got the whole London whale mess behind them. And all in all, they're posting double-digit returns on equity. Balance sheets are moving in the right direction, and the stocks are both very cheap. Jamie Dimon, the CEO of J.P. Morgan Chase, is getting some headlines for his comment about housing and basically saying housing has turned the corner. We certainly saw that in JP Morgan's results. Do you think he's right? Yeah, I think so. We've had false starts with

housing before, but everyone from Kay Schiller to Redfin is showing that housing is turning the corner. And that's exciting, not just because of job creation, you know, getting back to what Jeff was saying, it's exciting to see a lot of construction jobs coming back. But there's kind of a virtuous cycle to people getting back from being underwater, I guess, above water on their homes. And that definitely lightens the mood, increases personal wealth, mobility, and that's definitely something to be excited about. Ron, what do you think? Because we also saw Frank Blake, the CEO of Home Depot, come out and say, well, this is nice, but it could be up to two years before he, anyway, is going to feel comfortable calling this a full recovery.

Well, timing is always the wild card. I mean, we had money managers, Bill Miller and folks, betting on a recovery two years ago, three years ago even, and they have obviously been wrong. It's going to happen eventually. We are starting to see it happen, I think. Anecdotally, my wife's a realtor, and I know it's just one area of the country here, but things are definitely firming up. You've got people bidding wars are back, two and three people coming in bidding, getting over asking prices. Things are definitely starting to firm. Yeah, when you've had, and two years is nothing, given what we just went through.

If it takes two or five more years, and I don't know how you define a full recovery, but just to see a slow, steady recovery, that's all we can ask for. When you've had home construction levels down as much as they have been, depressed for so long, that's feeding the fire. Low interest rates, super low now, around here, 3.4% on a 30-year fixed. I will say, though, when rates finally go up, however many years from now, that, of course, will be a headwind on home pricing. Costco's fourth quarter earnings came in better than expected this week, and shares hit an all-time high.

Gotta love Costco. Ron, what do you think? What's the story here? They continue to get it done. Results look great. There was one extra week in this quarter versus last year, so things look a little bit better than they actually are if you do apples to apples. But still, revenue up 14%, same-source sales up 6%, earnings up 27%. Most importantly, their membership renewal rates continue to be strong at 86% worldwide. Very important for them.

Even with the increase in membership fees. Right, a 10% increase a year or so ago. So they continue to do really great. At $100 a share, we owned it in a million-dollar portfolio, and I own it personally. I'm not a buyer at $100 a share. I think most of the goodness, the growth coming, is already priced in. Shares of Yum! Brands up this week after that company's latest earnings. Jeff Fisher, what stood out for you when you look at Yum! Brands?

On fire. This is the 11th consecutive year of 13% earnings per share growth, 13% or higher. That's incredible for a company this size. About 60% of Yum!'s profit is generated in emerging markets, notably China. They're opening 1,700 new international stores this year, and 700 of them are in China. But this is what blows me away, really. Yum right now has, you know, they have KFC, Pizza Hut, and Taco Bell. Yum has only two restaurants per million people in emerging markets

compared to having 58 restaurants per million people in the U.S. So management says, we have a long road ahead of us to grow. We will keep growing for years to come. Meanwhile, they have some of the best operating metrics of any business in its industry. They have a return on invested capital of greater than 22% right now. So although the shares traded a premium to the market, I think it's deserved, and they have a lot of growth ahead. They still have a large debt load, right? But certainly manageable.

Manageable with the cash flow, yeah. We were talking about this earlier today. It seems like when we talk about young brands, we focus a lot on Taco Bell. We look at KFC. It seems like Pizza Hut gets a little bit lost in all of this. Is that sort of the least profitable of the three? When you're looking for growth, are you looking more to Taco Bell and KFC? Is there greater opportunity with those two than there is with Pizza Hut?

Right now, the spotlight is on KFC. That's the big growth driver. But Pizza Hut, they're reinvigorating. And they're starting new little pickup-only stores or delivery-only stores to kind of compete with Domino's and Papa John's. And they have, by broadening the menu at all of their restaurants, they have some 38,000 locations of all their restaurant chains. And they say they're all underutilized. They can broaden the menu on all of them, including Pizza Hut and KFC. That's good to hear.

Have any of us eaten at a Pizza Hut in recent memory? I have. You have? Yeah, I have. How was it? I love pizza, and it's what I grew up eating, so I'm still anchored to it. Ron, you look skeptical. Well, I'm a New Yorker, so it gives me the high.

But, you know, any pizza's good pizza. All right, I'll go with that. Yeah, it still has a lot of kick to it as a brand. I mean, and it's taking off in India, China, France. It's popular for some reason in France. You can email your comments about Ron's pizza snobbery. Radio at Fool.com is the way to get a hold of us. Coming up, if you're a big fan of mini wheat cereal, we have got some really bad news.

Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. We're still here in studio with Joe Mager, Jeff Fisher, and Ron Gross. Guys, Coca-Cola is in discussions to invest $10 million in Spotify, the subscription music streaming service based in London. And Joe, I guess my question as a longtime shareholder is, why? Yeah, well, I like that Coke is thinking creatively about connecting with younger customers, but they have a pretty bad track record with non-core deals. For example, in 1982, they acquired Columbia Pictures, which under Coke's reign went on to make Ishtar.

I rest my case. He's Dustin Hoffman. Love Dustin Hoffman, but I think even Dustin Hoffman would agree. Ishtar, not his finest moment. I mean, kidding aside, I do really appreciate the commercial side of that just in terms of marketing. But, you know, they already have a relationship with Spotify and you don't have to invest in a company to market with them. And I think that clearly they have a niche that they scratch very, scratching niches very, very well. And I think they should keep funneling their money towards that.

and marketing not making small tech crunch wannabe-like investments. I was going to say, is part of this just, hey, we've got a market cap of $172 billion. This is a drop in the bucket for us. It is. I mean, we're only talking about something like a $10 million investment, but it's at a $4 billion valuation for Spotify, which is ridiculous. Shares of truck maker Oshkosh shot up 10% on Thursday on the news that billionaire investor Carl Icahn is planning to make a bid for control of the

company. Ron Gross, what do you think? Stock's up 50% in the last three months, based on partly Icahn's bid and the fact that results look pretty strong. And that's one of the reasons I think he's interested. I think it's kind of a lowball offer, not surprising. He wants to buy at a good price. He's not in the business of overpaying for anything. But he wants control. He wants control of the board. I think he wants to split the company into the defense business and the equipment business. So, good for shareholders, but not if he's getting it on the cheap. I'd like to see the bid raised another several dollars. What's the book on Carl Icahn? If you're an investor, if you're a shareholder and you

wake up and you see that Carl Icahn has either bought into your company or is making a bid for your company, should you be happy about that? Does he have the kind of track record that makes you feel better about your investment? It's controversial. You'll get different answers. I believe he has an exceptional track record. And more often than not, he does create value for shareholders. But obviously, you get into a little bit of the kind of Gordon Gekko, Wall Street kind of feeling about breaking up companies and a little Bain Capital laying off people kind of things. But I think overall, he does create value. Just last question on this, because I know we've talked before about companies like Caterpillar sort of in the truck space, or at least partially in the truck space. Obviously, Oshkosh, not nearly as big or impactful as Caterpillar. But do you think this says anything about what Carl Icahn believes about the broader economy? The fact that they're posting good results and talking about the future in a positive way is obviously good.

They're only a $2 billion company, as you said, tiny compared to Caterpillar. And they make things like fire trucks and cement mixers and things, which are certainly infrastructure-related, fire trucks not so much. So I think it's positive. I think the things coming out of the company is positive, and the fact that Icahn wants it is positive. Yeah, I mean, another statement coming out of it is that this is a pretty good environment for activism, where stocks are still relatively cheap by kind of classical investment banking standards. Corporate balance sheets are strong. The economy is turning around, and it's really cheap to borrow money and acquire.

So, I think you'll see a lot more of this. Shares of Barnes & Noble are up more than 35% in the past month. Jeff Fisher, what in the world is going on at Barnes & Noble that is resulting in its stock being bid up like that? This is really a tale of two companies, Chris. It's Barnes & Noble and its new Nook Media LLC division. Microsoft just finalized a $300 million investment in Nook Media that valued Nook Media at $1.7 billion. dollars, which is more than Barnes & Noble itself is worth. It has a market value of $1.4 billion right now, enterprise value. So, as the majority owner in Nook Media, Barnes & Noble stock went up

because this one little division of the company is worth more than the whole market cap of Barnes & Noble itself. So, there's a lot of promise in Nook Media, but we have to keep in mind Microsoft as well is not the most savvy allocators of capital in the past. Remember, they bought AQuantive for $6 billion and discarded the technology not long after. But what's interesting here, it really is two companies, Nook and Barnes & Noble, and everyone thinks Barnes & Noble is doing horribly, but last quarter, same-store sales were up 4.6%. There was an 8% jump in physical book sales last quarter, and EBITDA grew 88%.

So the business itself, the core book business, is only trading at about three times EBITDA. So these nearly 700 stores are doing pretty well, actually, on recent results. And now you have Nook Media as well adding value. Do you think that at some point they just start to get a whole lot more aggressive in terms of making their footprint smaller and just saying, you know what, we've got to get down to our best 300 performing stores, close a lot of the others, and just bet even more on the Nook? If they need to, I think they will.

But after Borders' bankruptcy last year, and now a lot of people like Sam's or Walmart are stocking fewer books, actually fewer physical books. Barnes & Noble is alone as the only nationwide retailer of a wide assortment of printed materials, books, magazines, what have you. So they could be able to pull it off as the sole, you know, last man standing. And finally, Kellogg's is recalling mini-wheat cereal in the United States due to possible contamination by pieces of metal mesh. We're talking about 2.8 million packages of cereal. It's going to cost Kellogg's about $30 million.

Again, Joe, it seems like when you look at Kellogg's and how big it is, it's a drop in the bucket. And yet, as someone who, up until I saw this news, did have a box of mini-wheats in his house. What did you have for breakfast, Chris? Believe me, that went right in the trash. Metal mesh, that's just, I don't know, it just seems like it's not going to be monetary damage. It's going to be brand damage. Yeah, well, as a consumer of frosted mini-wheats, it may already be too late for me. But I'll try and pass on this advice that sometimes the best time to buy strong consumer brand companies is when they have missteps like this.

I think Johnson & Johnson has been a good example at different points in the past and recently as well. And Coca-Cola has kind of stepped in it before in the same way. And in this case, it's not a huge deal. It's not something I would freak out about, unless you've been eating many meats. The number of recalls that we seem to be getting on almost a weekly basis from a variety of industries is disconcerting. And I wonder, is it because we're being better at identifying things that need to be recalled? Or are people – Metal mesh, for example.

Are our manufacturing companies really just getting more lax and more lax and more lax? And there seems to be a new one each week. I love that the Kellogg CEO said that it's okay. We can spend the $30 million. It's going to be offset by the revenue we're going to make from our latest Pringles acquisition. And Jonathan Shipley, a listener in Seattle, emailed to point out that Pringles, just in time for the holidays, launching three new flavors, pumpkin pie spice, cinnamon and sugar, and white chocolate peppermint. I absolutely don't want anything to do with any of those things.

I so want the white chocolate peppermint. That sounds awesome. In a potato product? Look, I live dangerously. It's a great stocking stuffer, isn't it? But like Joe and I were saying before the show, it's like they just ripped off the Starbucks seasonal flavors. Same sort of thing. They should have a Howard Schultz flavor.

Joe Vager, Jeff Fisher, Ron Gross. Guys, we'll see you later in the show. The fastest growing restaurant chain in America is Five Guys. Up next, a conversation with founder and CEO Jerry Murrell. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hilton.

Five Guys Burgers and Fries opened its first restaurant in 1986. And today, it's the fastest growing restaurant chain in America. Jerry Morrell started the company with his sons, hence the name Five Guys. Last week, he stopped by Fool headquarters and I interviewed him in front of a live audience. So the audio on this is going to sound a little different since we're in an open space and we're both holding microphones. But we began the conversation with Jerry sharing how he first started to think about going into the restaurant business. I know how my father would have reacted if I went to him when I was in high school and said, I don't think I want to go to college.

It probably wouldn't have been a pleasant conversation. But at the time, you had four sons and your oldest boys come to you in the mid-1980s and expressed some reservations about going to college. And your reaction was, oh, okay, well, let's start a business. Why did you have that reaction, and why did you pick this business in particular? I've always thought that my college days at University of Michigan were somewhat wasted. I had a lot of fun, but if I'd have went into business, I think I'd have been four years ahead of the game. and I've always thought that

if a person wanted to make money in America there's all kinds of ways you can learn how to do a trade there's people out there always looking for people that whatever you want to do if you like building cars or whatever it might be you don't have to go to college you can just go work in a garage

so when my kids said they didn't want to go to college it wasn't a big deal and I had a little bit of money saved up for their college and it was a good way to get into business And why this business in particular? Why not a garage? Why not anything?

Well, because I didn't know how to do anything else. I grew up in a small town, and there was a guy in that town that served what they called a fur burger. And he only sold hamburgers. He always drove a nice car, and he had a little tiny place. and everybody seemed to buy hamburgers from him even though the fact that he would pet a cat while he was

cooking. Hence the name Furburgers. And I thought, well, you know, if he just do, he didn't I think he might have sold cold sodas there, but he didn't sell anything else.

And he looked like he was always making money and having fun. So that was in the back of my mind and then i i worked for a big financial company and i came out here to washington and um now the member of the furburgers in the back of my mind but then i went to the boardwalk in ocean city and now and i was fascinated by threshers and they only sold one thing and they sold uh franchise and there was you know oh everybody's been there probably it was a line you know 100 feet long all the time from morning till night and i thought hmm

And so me and the kids, we used to sneak into Thrasher's and pretend we worked there. Really? Yeah. Well, I didn't, but my son, Matt, who was a lot more balls than I did, he would go in there and put a hat on and pretend he was washing dishes and stuff. And usually he'd get away with it for about 20 minutes and somebody would come on. Who are you? So they're really on top of things over at Thrasher's.

Really. Well, we were trying to figure out what they were doing right. And we discovered that they cooked their French fries pretty much the same way they cook at Maxime's, the best restaurant in the world. And so I thought, man, if we could just put hamburgers and French fries together. First of all, I thought just French fries. And my mom said, no, we've got to have hamburgers with it too, my oldest son. So I thought, well, push them up Tony's and the Furburgers and Thrasher's.

We should be able to do those two things right. And then I read a book by Bill Marriott. I was in Pittsburgh and didn't have anything else to do in a hotel, and they had a Bible. And then they had the story of his life. And I just couldn't get into the Bible that night, so I read the story of his life. And, you know, he started A&W and did things real simple down here in D.C. when they didn't have air conditioning, cold, frosted mugs, root beer. And he said in his book, he said anybody can make money in the restaurant business

if you cook good food at a reasonable price in a clean atmosphere. And I thought, well, we should go do that. So I think it was about three weeks later we started Five Guys. You touched on the sparseness of the Five Guys menu. And in the past couple of decades, it really hasn't expanded at all. You basically serve just five things. You've got burgers, hot dogs, grilled cheese, a veggie sandwich, and fries. My hunch is, since you've got now five sons, and they're all working in this business with you,

my guess is that at some point along the way, one or maybe all of them have said, you know what, we really should add coffee. We should sell chicken sandwiches. We've already got the grill. You ever drink coffee that a kid made? It was horrible. We just couldn't teach kids how to make coffee. And when I was at the University of Michigan,

I realized that young people don't even appreciate coffee because I signed up for a job to run a kitchen, and they didn't have breakfast. I hate getting up early in the morning, but I said, well, let's have breakfast. We can make more money. So I'd go down the night before and take the dinner coffee and pour a couple gallons of water in that and just let it percolate all night long.

And in the morning, the kids thought that was wonderful. And I knew right then that kids don't know anything about coffee, so we don't do coffee. You started franchising in 2002. And you'd said in the past that that was something that you really resisted. What finally tipped the balance for you in terms of making that decision to franchise? The hardest thing that we found, or I think any business has when they're getting started, unless they know guys like you, is that it's hard to raise money to expand. And we're doing everything by hook or by crook, going to small people and borrowing money from them, and it was slow. And my son came to me and said, well, there's a faster way, and he got me a book, Franchising for Dummies.

And I highly resisted it because I didn't think we could teach somebody else to do what we were doing, but it was an easy way for us to raise a bunch of money quick and expand. I don't like anything else about franchising, but it was an easy way to raise money quick. And buying farts worked out pretty good. You can't tell a franchisee what to do. You've got to ask them what to do. That's why we're trying to buy back more stores. But it was a quick way to raise some bucks.

I believe your largest franchisee is a guy in Richmond named Tom Horton. And I read a quote from him. He said, and this goes back to the menu, he said, we must have had the milkshake conversation 6,000 times. Would you like to give your version of the milkshake conversation and why you guys haven't gone down that road? Well, we don't serve coffee, and everybody else serves coffee. We're the only hamburger chain, I think, in the world that doesn't have a milkshake.

One of the ways we market is we use the food critics, and the food critics will come in and write about the good things you have, but they'll also write about the bad things. They'll probably write more about the bad things. So if we only have two things, they can't really write any bad things. But if we have a milkshake and it's not the best milkshake in the world, then they would say something about that. So our philosophy has always been if we're going to do a milkshake,

we're going to have to do it right. Now Mr. Tom Horton is in the process of trying to do a hand-dipped milkshake out in California someplace with one of our stores. I think he's going to get discouraged when he finds out how much work it is. But it's because if we're going to do a milkshake, we're going to have to do the best. I'm just going to, before going to Mike, I just want to follow up on the whole notion of Five Guys being a public company. I know you've had people approach you about that.

What is your current thinking on Five Guys as a private company versus an IPO somewhere down the line? Now, here's where I feel at a great disadvantage coming here today, because I think every one of you people know more about cooking a hamburger than I do about investing. i can't believe how much we've learned in the last three or four years uh i remember the first time somebody came to us with a mezzanine plan and hunt burke's on our board of directors and he said what in the heck is that you know we had no idea and then the first time somebody spelled eva die ask him how to spell it so uh so so yeah yeah we're getting a lot of interest in going and going public everybody's trying to get their foot in the door so if we ever do it

they will they will be there but we've made no promises to anybody and um we we it would be fun to do in the sense that you'd make i think we'd get a lot of money but we all we got two faults at Five Guys. One is we go way too slow and way too cautious. And then again, that's maybe a good thing because we go way too slow and way too cautious. But we're a little scared to bite the bullet because we don't want to lose control. It's kind of like our soul thing. Coming up, we'll give you an inside look at the stocks on our radar. Stay right here. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against,

so don't buy or sell stocks based solely on what you hear. I'm Chris Hill. Joining me in studio once again, Joe Mager, Jeff Fischer, and Ron Gross. Guys, before we get to the stocks on our radar and email, because we're going to dip it in the Fool mailbag this week, Jerry Murrell, founder and CEO of Five Guys, towards the end of the interview, talking about the potential for an IPO. This is one of those companies, I mean, there's a Five Guys location near our office. People love eating there.

It's one of those places that seems like there would be that initial excitement around, like, oh, God, it'd be great to own shares because there's a lot of passion around it. Ron, what do you think when you think about, whether it's Five Guys or anyone else, what do you think about sort of going public versus staying private? Because clearly, as Jerry Murrell indicated, there are benefits to both. Right, sure. So Five Guys is primarily a franchise model. So I like to see companies go public because they need to access capital, not because a founder or CEO needs an exit strategy. Franchise models are capital-light businesses usually, so I would want to see a good, clear reason why a company like that needs to go public for me to get interested in that investment. On the kind of public versus private thing, you open yourself up to so much scrutiny when you're public.

So he's got to make sure his franchisees are good and they know what they're doing because quarter after quarter after quarter, he's going to open himself up and his books up to the world, and it can be a big pain. Yeah, just leave it to the other four guys. Well, I think he feels a certain amount of responsibility. You think they should go public and he should just retire? Well, I don't know their family situation, but I would definitely try and keep it in the family for all Ron's points. they don't need to go public. And I think they would cash out in a huge way. And I think the business would probably go on to pretty great things. The economics of Five Guys are fantastic. I could wax on this for a long time. But one of my favorite parts of it is that it's such a stripped

down business and kind of has a timeless old school feel that there's not a lot of maintenance capex that goes into that. Whereas you go into Chipotle and everything is like very fresh and you can tell it looks great today, but it's going to look really dated in 10 years. Not the case at five guys. It already looks dated. It has bags of potatoes right in the middle of every store. That's the decoration. That's right. But when I was talking with him, I really got the sense that he thinks about his business the way that Jim Senegal thinks about Costco, in that he puts everything through this lens of just sort of this basic, here's our basic promise to people. And anything that distracts from that, even the whole notion of, well, if we add milkshakes,

that's a whole other separate thing. And if we don't nail it, we're going to get criticized for It seems like if they could keep that quality, they'd be in good shape. Well, that's what's right stuff for a franchise model, for kind of a control freak, for lack of a better word, like that, who really wants to make sure everything is perfect. Once you start franchising, you give up a lot of that control. And if you sell to the wrong people, if you allow the wrong people to run one of your businesses, it's a mess. Jeff? Yeah, and if they go public and growth eventually will slow years down the road, then Wall Street is going to demand other growth avenues, and that may mean expanding the menu and losing your purity. So I agree with Ron's very first point.

You go public when you need the capital to grow, and they don't need that right now. You can always email us. Radioatfool.com is our email address. Guy's got an email from Rajesh Mishra in Bangalore, India. He sent a very nice email about how he listens to the show and he listens to MarketFoolery, our daily podcast, during his commute. And he sent it on his BlackBerry and concluded his email by saying, I've been using this device for a couple of years and I'm very happy with it. Unfortunately, due to some rough use, the rubber component of the casing has started disintegrating.

This means that I'll soon have to switch to a new device. I had hoped that the fate of research in motion would have been decided by the time I came around to change my phone, but that seems not to be the case. RIM is still alive, though. I don't have the courage to invest in a Sunset Company product, so I guess I'll have to get a Samsung or an HTC. But I really hate touchscreen phones. Do you have any advice?

And at this point, let's go to the other side of the glass, not to our man Steve Broida, but to our producer, Matt Greer, who is in the exact same position. Literally. He is literally the last person at the Motley Fool. He's in India. He's the last person at the company who owns a BlackBerry. So, Matt, you're looking, you're in the same position as this guy.

Chris, it's true. As of today, the Motley Fool will no longer support my BlackBerry. So they pulled the plug today. So earlier this week, I went to Radio Shack looking for an iPhone 5 because I heard Radio Shack. And maybe a black and white TV. Thank you. Thank you. I go to Radio Shack and I have a soft spot for Radio Shack. I will confess that. I asked the woman, do you have any in stock? She says, no, but we've got a wait list. I'm like, would you like to be on it? I say, certainly. So she says, well, let me go to the back of the store. She comes from the back of the store with a spiral notebook you know of the variety that you would have in like fifth grade and on it it says something to the effect of Janie's business notebook and she opens it and

with a ballpoint pen she scrawls my name and a phone number and their names and phone numbers everywhere and some of them are crossed out and some of them aren't and I had two thoughts first this is oddly endearing and I feel committed now because she wrote my name in pen that's their business my second thought is this business is not going to be around for much longer wow wow what makes you say that uh uh back to the email just because i know that this is something you and i have talked about the whole notion you're not a fan of touch screen phones either where where are you coming down on that are you going to be looking for like a scan uh samsung which has the the keyboard or are you just going to go you're going iphone 5 i'm tired of fighting

it i'm going iphone 5 um you know my blackberry doesn't really work anymore the trackball doesn't work. The camera doesn't work. The browser doesn't work. I still like it because I like underdogs, but I'm tired of fighting it. I'm going iPhone 5. All right, Rajesh. Hopefully, that was of some use. Again, email us, radio at fool.com. We've got a few minutes left. Let's get to the Stock Center on our radar this week. We'll bring in Steve Broido from the other side of the glass with a question for you. Ron, what's your stock? My stock is near and dear to Joe's heart. It's UPS, ticker symbol UPS. Dominant package

delivery company. I think dominant is a fair term, right? Certainly benefiting from online shipping and will continue to benefit as the economy recovers, aggressively expanding overseas, whether it's China or Brazil or Mexico. Large footprint, great margins. So I think it looks cheap here. I'm digging in. Joe thinks it's worth $91 or so. It's at $72 now. I like the 3% dividend as well. So this is one that has really got me interested. Steve, question for Ron about UPS? Haven't people been buying stuff on the internet now? It seems like they've been doing that for so long. Are there more people

coming to the table every day to support growth in UPS? Yeah, I've got a stat on that. Only 8% of U.S. retail sales are done online, so there's still a pretty long runway ahead. See? Just to be clear, you're taking credit for the point that Joe just made.

Fair enough. Jeff Fisher, what's your stock this week? Gentex. The ticker is gntx we recently bought shares in pro they produce auto dimming mirrors and side view mirrors for cars they sell to most of the major automobile manufacturers the stock has recently gotten clocked because one of their key growth initiatives is a rear camera display that's in the actual rear view mirror and some manufacturers are saying they prefer an in dashboard rear camera rear camera display and everyone should know new cars starting pretty soon are going to be required by this law if it passes very soon in december to all have a rear camera display so you can see what's behind

you when you're backing up steve what are some growth opportunities outside of mirrors for cars for this company one great question one is smart beam and that is a sensor in the front of a car that senses when your beams should be on high or low and can even move the beam when you're going around corners, and it's a smart bean. Also, grocery carts. They're also making auto-dimming windows for airplanes now. See, they've got a lot going on at that company. Yeah, they do. Joe, we've got about a minute left. What's your stock this week?

Wells Fargo. It's got a 2.6% dividend yield. The stock stumbled on bad news today that I actually don't think was all that bad. They're doing a great job of winding down all the bad loans they got from swallowing up Wachovia, and I think as they shake that off, the market's going to be willing to pay more for the stock and the ticker symbol wfc steve question on wells fargo is wells fargo still have the logo with the the sort of horse-drawn carriage yes it's the wave of the future just wanted to clarify so love that logo so steve you're saying the the horse-drawn carriage maybe maybe a bearish indicator i think tomorrow all right joe mager jeff fisher ron gross guys thanks for being here thank you and thanks to our special guest this week jerry morell the

founder and CEO of Five Guys. That is it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.