Motley Fool Hidden Gems Investing - Motley Fool Money: 12.09.2011

Episode Date: December 9, 2011

Jobless claims fall as the EU continues to search for a resolution to the debt crisis. Ford reinstates its dividend for the first time in 5 years. Microsoft releases a major upgrade to Xbox Live. McDonald’s stock hits an all-time high and JC Penney buys a stake in Martha Stewart. Our analysts discuss those stories and more, and share 3 stocks on their radar. Venture capitalist Paul Holland discusses the future of technology and “Something Ventured”, his documentary film about the start of the VC movement. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill. Everybody needs money. 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 from Motley Fool hidden gem, Seth Jason, from Motley Fool income investor, James Early, and for Million Dollar Portfolio, Ron Gross. Gentlemen, good to see you, as always. Good to see you. How are you doing, Chris?

We have got the latest from Ford, McDonald's, Microsoft, and more. We have got a startup expert giving us a look at the next big things in technology. And as always, we've got a few stocks on our radar. But we begin with the big macro. Jobless claims fell to a nine-month low, Ron Gross. Last week, we talked about unemployment dropping. That was good news. Is this good?

Do you feel the momentum building? Do you feel it? Two weeks in a row of good news? I think I might feel it. Yeah, I'm encouraged. And each week we get another data point that's positive. I become more encouraged, and I've been pessimistic for a long time. So two weeks is a good trend.

We're not out of the woods. Let's not get crazy, but it is a trend. How many data points would you need to have to be off the charts? Twelve. Twelve, exactly, twelve weeks. If you're a regular human, all you need is two. Two makes a line, right? That's how we roll.

Two data points, we've got a trend. Exactly. Well, before we... One if you're a reporter, by the way. Exactly. Before we get too steeped in the good news, let's go over to Europe, which is constantly in flux. We had to go ruin it. It was a perfectly good show. I know. And I almost hesitate to mention this, James, because I sort of feel like by Monday, anything I say now about the EU is just going to be obsolete. Monday, by later this afternoon. But it appears that EU leaders have a deal in place with most of the countries. Great Britain is not one of them.

What's the latest? Well, Chris, group psychology studies have shown that a size of four is like the optimal group size for getting ideas together in decisiveness. So you put 27 people together, make them Europeans. I mean, you're not going to get much. I'm a little surprised they agreed on this in the first place. And they all hate each other. The problem is monetary union without fiscal union. So they're trying to think of a way to fiscally unionize, basically, so that the kids can't go spending on the parents' credit cards, metaphorically.

There is some kind of agreement. I don't really understand it. It's vague, and I think that's going to be the question is how does it play out, and will the member states abide by this? Because there were previously agreements before about joining the euro, and they didn't work too well either. Seth? Yeah, the question here is, is there an actual mechanism needed to take care of liquidity problems,

or do they just need to sort of convince everyone that, hey, we've got this big secret plan over here, and if there's a problem, it'll be taken care of? And is that kind of reassurance enough to just get these so-called bond vigilantes to quit drubbing the Italys and the Spains and the others? It's a solvency problem at the end of the day, yeah. Is 2012 going to be the year when investors can finally look at Europe and feel like, okay, I'm now going to dip my toe back in the waters of investing in Europe? Oh, no. I think that's going to be the year that we say, woo-hoo. I mean, I feel really bad for all those people, but I have been looking for real estate in Italy for a long time, and I'm glad it's gotten so cheap.

For the first time in more than five years, Ford Motor is going to be paying a quarterly dividend. James, Ford Motor is one of your stocks. You've got to be ecstatic. Well, it's not one of my income investor stocks, but I am a little bit familiar with it, I will say. I'm semi-ecstatic. Actually, I'm not ecstatic at all. The American car companies, Ford less so than GM, are kind of like the kids who just got beaten up in the playground. And they're trying their best to stand up and walk around like nothing happened. But these guys have just been through hell. So, they need to take a breath, I think, and maybe not try to pay out so much cash just yet.

It is not a lot of cash. I think they're starting with $0.05 a share in March, compared to like $1.40 something in EPS per year. So, it's not huge, but I don't see the rush. Ford does. Ron? Interestingly, I think the amount of the dividend was less than analysts were hoping for. So, even though it was good news, it was a little bit disappointing. I thought it was interesting that the company said they've done stress tests on the business,

and they've looked at their solvency. And even if we get another downturn, economic downturn, this is the kind of thing that is sustainable. They will not take it away again, which who could promise that, let's face it. But I think that is a good signal to the markets. Now, earlier in the week, the Wall Street Journal reported that Ford has begun a two-year search to find a replacement for CEO Alan Mulally. He's expected to step down in two years. The search may take less than that. They listed some internal candidates for executives, a guy from Hyundai who's an executive who's a candidate as well. Ron, you own shares of Ford. How do you feel about this being out in the open?

Well, first, let's say Ford has not confirmed this. In fact, they say they're not currently undergoing a search. So, whether they're doing it behind the scenes or not, we can't really be sure. There's obviously many good candidates that probably could take the reins here. I prefer more disclosure than less. Some people think it's a distraction for this to be talked about now when it's two years out. Hey, I'm an owner of a company. I want to know what's going on with the leadership of that company, and I can handle a little bit of noise here and there. You can handle the truth. Would you want to be CEO of an American car company? Absolutely not. Oh, I'd take it any day. Would you? Oh, yeah, because all of these things are

sort of, you know, if you screw up, you're still a bazillionaire. So what's the difference? I mean, Malali didn't screw up, I don't think. I think he did a pretty good job, and he's going to be an even bigger bazillionaire. But, yeah, you want to be a CEO of any American company because the pay structure is such that even when you fail, you can just laugh at everyone and give them the finger because you never need them again.

Do you want me to make some phone calls, see if I can get you on the short list? Yeah, you've got two years. I don't think that's happening. All right, Xbox Live got a major upgrade this week that includes new options for watching TV and improvements to its Kinect game system. Seth, I will be honest.

I was downloading it. I know you're an Xbox person. I didn't realize the numbers were this big. Microsoft has 35 million subscribers to Xbox Live. Well, and they don't, I think that's a good count, actually, because a lot of companies, especially these internet startups, they just tell you how many people they have signed up. Microsoft is talking only in that number about people who logged on in the last three months.

That's a pretty good conservative number. I think it's a fair number. But it's also tiny compared to the total user base that Microsoft can be bringing into this system. And I'm going to get to that in a second. But there's 364 million Hotmail users. It's by far the biggest free email system out there. And, of course, they bought Skype, 521 million users of Skype. That was as of Q3 2009, at least according to the numbers I got off Wikipedia, which were the only ones I could find.

How could those be wrong? Who knows how many there are? And, of course, they are going to be integrating Skype with both the Windows Phone platform and the Xbox platform. One of the more important things they've done here is they've kind of made the look and feel consistent with Windows 8, with the tiles that are coming up, as well as Windows Phone. And that is very well regarded by a lot of the tech analysts out there. So they're really finally bringing everything together. And, I mean, I think they have a good shot at owning the living room.

They do in many senses already. And they introduced the cloud in this time around, which I think is a pretty nice. Well, yeah, that's actually a very small piece for now, but it's interesting that you can now save your games to a half gig of online space. Save your saved games, not like the disc itself. But anyway, that means that if you're a gamer and you're over at your buddy's house, you don't have to have a memory stick with you. You just log on and go. Well, and this isn't just about games. I mean, this also includes Netflix.

You've got TV channels. Yeah, they're adding, they're starting to add HBO to Go. They're going to have Verizon, and I think it's Comcast. On-demand from Comcast. On-demand systems. They're going to have Crackle and some others. So they've had for quite a while now Hulu Plus and Netflix, which I think are the two most popular services.

But as they add more of these, essentially you get an amped-up set-top box that also plays games and can do a variety of other things. As we continue to hear rumors about Apple TV coming in 2012, Do you think the folks at Apple are watching this and looking for a blueprint? Well, they obviously haven't because they've been copying some of the features for a while. The voice search that's been built into the connector, the voice control, has been there for a while, for months now. But now they've added some search, which is actually pretty impressive. I say, you know, Xbox, find New Girl.

I tried last night the TV show, and it found it in two or three different places. You could buy the episodes. You could use Hulu Plus, and it just brought those up. and then I could just wave my hand over the Hulu option, since I'm already a Hulu subscriber, and bang, it started the latest episode just like that. So a lot of the rumored features that people are saying are going to make Apple TV such an awesome device,

they already exist. They're already here? They're already here. They're in the Xbox. You can use them on any TV in the house. Coming up, Martha Stewart's not going to jail, but she was in the headlines again this week. We'll tell you why right after this. You're listening to Motley Fool Money.

Welcome back to Motley Fool Money. Chris Hill here in the studio with Seth Jason, James Early, and Ron Gross. Shares of Costco down slightly this week on the company's latest earnings. Ron, the profit looked good. The margins, less good. That's good. Well, the first headline was that they missed expectations. They didn't meet analysts' expectations, which is actually not correct. If you strip out the one-time charge from an audit that was done on the Mexican joint venture, they were right in line. Most importantly- O' You sound defensive about that, though.

Yeah. O' Yeah, you know, Costco's my baby. Yeah. Body language says it all. O' What's going on here is the company is holding the line on prices, even lowering prices in some circumstances as we go into the holiday season. They're doing that in the face of rising costs, which impacts their margins, impacts profitability, which sometimes Wall Street doesn't like. But this builds goodwill. It plays right into where they want to be. It drives those strong retention rates, those membership retention rates that they

have. And this will pay dividends down the road. Because they scalp you every year on that fee, right? So you're like, wow. It did just raise 10%. You're like, I've got to save a nickel on my toilet paper. But I'm paying them how much more? Bill, this is like the first time in five years they raised the membership fee. Right. It's still, what is it, $55 a year, a little bit more than a dollar a week? bad we can say about costco just to watch ron and it is it is the end of the tenure of uh jim

senegal so uh we thank him for all he has done for us shareholders and uh but it's clear he's ready to go after the company is still in good hands shares of martha stewart living omni media up more than 40 this week after jc penny bought a minority stake in the company uh seth obviously that's good news for martha stewart um is this everything at that company is always good news for Martha Stewart. She comes first. Is this a good long-term move for JCPenney? You know, I really don't think so. Macy's has been selling Martha Stewart's stuff for a while, and they're reportedly miffed by this because they expected something more of an exclusive arrangement. But I don't know that this helps JCPenney. And I think this shows that Ronald

Johnson, who is the guy who takes credit for the Apple retail strategy, may be out of ideas. because I saw one of his ads the other day, or a JCPenney ad, I assume that he had some control over this because it was a complete ripoff of a Target ad. Well, he did used to work at Target. So you're saying he's a genius. I'm saying that he seems a little bit

like a one-trick pony to me. I mean, even the font choice and colors were a complete ripoff from Target. And what he did at Target, one of the things that helped at Target was he brought in some kind of hipness. So he brought in sort of Michael Graves designs and some other brands.

And I think that works at Target because Target essentially, before this, Target was not hip. It was just sort of a cleaner version of Walmart. But I don't think you can do that at JCPenney no matter what you try. And certainly Martha Stewart is not going to bring any hipness to anyone.

Walmart tried to copy Target itself and it failed miserably. It's just that these retailers have their niches. I tend to agree with that. Earlier this week on MarketFoolery, our daily podcast, one of your colleagues called this a business match made in heaven.

You're saying JCPenney and Martha Stewart is not the next ExxonMobil? Well, it's just so obvious. I found myself saying, I couldn't already get Martha Stewart junk at JCPenney. They have all those other junky brands that are not differentiated and not the least bit cool. I don't think this moves the needle at all at JCPenney.

I don't think you're getting a holiday card from Martha Stewart this year. Or Walmart. Shares of McDonald's hit an all-time high this week, and the company reported global same-store sales were up nearly 7.5%. James, that is huge. It is great.

When the times get tough, we get less picky about where we eat, and McDonald's is cheap. I actually- When you say we, you mean you included it? I went- Was it the McRib? I did go to McDonald's this morning. Wow. Really?

Whoa. Yes. What did you eat? You guys know I used to be vegetarian. My wife and I cook and buy our food separately because she doesn't want a part of my weird animal-friendly diet. I had no food, so I was going to go to Whole Foods for breakfast. Too much traffic, so I took a weird way.

Went through McDonald's, got three Egg McMuffins. Three? And I'm dealing with the guilt, but it was fast. But they were pretty good, weren't they? It was really fast. I've got to say that. And they were good, weren't they? I know not the Canadian bacon.

What did you get in it? What egg McMuffin did you get? Just egg and bun. Like an English muffin. And you ate one of these? Three of them. Wow. Wow.

That's disgusting. The company is doing well. Ron wouldn't do that. It is an income investor. Yeah, well, it's been a couple hours now. But income investor recommendation, strong international revenues in particular, whereas like a Yum! Brands, for instance, It's done pretty well, too, but they're not as strong domestically. McDonald's is very well diversified. It's a good company.

If you are looking for Coca-Cola's secret formula, it is now on display at the World of Coca-Cola Museum in Atlanta. Sure it is. But before you pay your $16 to get in … It's with the Fort Knox gold. That's what the ticket costs. You're going to see only the vault encasing the formula. That's going to be visible to the public. The formula, I guess, we're going to take …

It's not really on display, then. Yeah, and for $2, you can go to an internet site and see a picture of the ticket that you get. Probably for free. Why are they doing this, Ron? Because they get free for this. There's a mystique. People will pay for almost anything. Three egg McMuffins, let me give you an example.

It's like five bucks, but cheap. Yeah, I mean, people will pay to go inside a giant fiberglass muskie in Hayward, Wisconsin, or wherever that thing is. What's a muskie? A muskie? Muske-long? Yeah, it's a giant pike-type fish. Very aggressive, skinny, long fish. This show is not only entertaining, but educational.

In the few minutes we have left, we'll get to the stocks on our radar, and let's bring in our man Steve Broido from the other side of the glass for a question for each one of you. Ron Gross, you're up first. I'm going to go with Zipcar, ticker Z-I-P. The stock has been absolutely smacked since we originally purchased it in a million-dollar portfolio, giving us the opportunity to buy a little bit more, average our cost basis down. And for those not familiar, it is the leading car-sharing company, kind of changing the paradigm of the car rental market and the car market in general. And we think it's got a ton of growth in its future.

It's really a young company at this point. Steve? Sure. I can think of nothing more frightening than Zipcar, actually. The number of variables. You have cars that are being driven by different people, things smashing into each other. They have to get parking spaces all over the country. Yes.

What is so appealing about this? It just makes no sense to me. For people certainly in metropolitan areas that don't own cars, it's a great solution. I know many people who are subscribers. You pay a small annual fee and then a user fee per time, and it's very convenient. It works very well. And if you don't own a car, it's a nice alternative. And they're firing on all cylinders, too.

I didn't say that. Steve, no, the one time you should use it. It's a perfect analogy. It sounds like Steve might be more of like an Avis and Hertz kind of guy. Well, I'm with Steve, but I recommended this, and we bought it at Hidden Gems. And I started out saying, listen, this is not my kind of thing. I don't like to share it. Get your fork away from my plate unless you want my fork in your hand.

And I certainly don't like to share cars. But that doesn't mean I can't recognize that other people don't see the value in this. And I think a lot of people do. In the minute we have left, James, your stop. Chris, I'm going deep. Anglo-American, A-A-U-K-Y. And the pink sheet is the ticker. It's actually a very big company.

On November 4th, it was announced that it was increasing its ownership in De Beers Diamonds to 85%. Now, I've been thinking a lot about socially responsible investing lately. I'm trying to decide how I feel about diamonds in general. I know De Beers has this Kimberly Accord to ensure conflict-free diamonds, but I've heard it's not very well complied with. So I'm trying to think about how I feel about Anglo-American now. It's just on my radar. Steve? Shouldn't I be afraid of just anything on the pink sheets?

The pink sheets sound like a scary, scary place to be. Most of the time, yes. But, like, Nestle is a pink sheets company. There's a couple others. There are a few sort of big-name, huge market-gap pink sheets, and this is one of them. But you're right. This is the rare exception. You can sometimes find value because, as you said, some people stay away.

Seth? I'm going to go with Guess, which I've spoken about before here. G-E-S is the ticker, just released earnings, disappointed Wall Street slightly. I own the stock. We have it over at Hidden Gems, but they are still doing very well, producing a lot of cash. The revenue growth has slowed down a little. They're protecting their brand, so they're not doing the discounting that everybody else is doing, and so that's slowing down sales a little bit.

But international expansion is important for them. They're doing well there. And, you know, the free cash flow yield is about 9% right now for a company that can be growing in the mid-teens for a long time to come. That's just too cheap. Steve? One primary, guess his primary competitor. Who would it be? One company.

One company? Ah, boy. It's sort of, they don't have a single competitor. You know, they compete in a lot of places. So, you know, they compete in accessories, coach, et cetera. Benetton is still around? Benetton, yeah. Jordache?

You could probably say Benetton, I guess, especially in Europe. I think Reggie Middleton is a big fan of gas. He would be a fan of gas, yeah. All right. Seth Jason, James Early, Ron Gross. Guys, thanks for being here. Thank you, Chris. Coming up next, what are the next big technologies we should be looking for?

We'll talk with startup expert Paul Holland. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Paul Holland is a venture capitalist and is the co-executive producer, along with Molly Davis, of a new documentary film about the venture capital community. It's called Something Ventured.

Paul joins me now. Paul, thanks for being here. Thank you so much, Chris. I'm very excited to be on Motley Fool. So you get hooked up with Dan Geller and Dana Goldfein, who are the co-directors of the movie. I watched the movie. It's really fascinating stuff. And frankly, if someone had told me, hey, I've got a documentary about venture capitalism, it's really riveting stuff, I would have thought they were crazy.

But it's really just an amazing set of stories. And let's just go through a few of them. And I'll just start with the biggest fish in the sea, and that's Apple. You know, one of the things that blew my mind in this movie is the number of people who had the opportunity to invest in Apple very early on and passed on it. Yes. What were these guys thinking? Well, they're thinking what everybody thinks when they're dealing with, you know, very volatile, extremely risky, kind of a little bit flaky, interesting, yet bright, early-stage entrepreneurs. earth it's really really hard to tell at that point in existence when folks like nolan bushnell

and others turned down the opportunity as you know from the film he was offered the opportunity to buy one third of apple computer for fifty thousand dollars and he turned it down and uh he's not the only one there were you know those who are cash starved companies they still are today and you have to kind of make your bets going back to the you know the mention of uh dan and dana when we were interviewing uh filmmakers which is the unusual process in this case because we sort of had the idea that we went to the filmmaker community to find somebody to make it um we you know we're trying to find common ground because here it is i'm coming out of the kind of the hardcore financial world and entrepreneurial world i'm talking to these very creative filmmaker

types and as dan and i were trying to kind of make that connection i i said uh a comment to him i said you know one of my favorite films is the movie reds which you know obviously goes back in time talks about the russian revolution and then does it to the eyes of the very very old people who are retelling their stories. And he lit up and he said, so it sounds like we're going to make reds, but without the communists. I was going to say, yeah, a capitalist version of reds. Yeah, that was it. So yeah, but there were lots of folks that get a chance to invest in these things. And, you know, not just them, but we miss them all the time. It's really difficult to figure out at that stage, which ones are going to win and which ones aren't.

You're listening to Motley Fool Money, talking with Paul Holland, venture capitalist and co-executive producer of the documentary film Something Ventured. You mentioned Apple, and it reminded me of maybe my favorite single image in the movie, and that is a news article from 1974. It's the cover story of a magazine, and it is about the success of IBM. And the image is of a massive shark, and written on the side of the shark is IBM. And it's basically going to eat all these smaller sharks. And the smaller ones are other computer companies, Siemens, Honeywell, GE. And the quote that blew my mind was, there will never be another new computer company. That's 1974. And obviously, there's a lesson to be

had there in terms of sort of the folly of huge pronouncements like that. But I'm curious, when you look around, I mean, Apple seems like it's the big shark today. It seems like the company that it would be easy for someone today to say, you know what, there's never going to be a company like this ever again. What do you think is the shark that potentially eats Apple as certainly, you know, IBM as a computing shark was certainly taken down a few notches? Yeah, I mean, I think that's a very rich question. I think that we're operating in a little bit of a different world today in the sense that back then companies were either pretty strictly vertically oriented

or horizontally oriented, and they either ran their entire supply chain, including their manufacturing and so forth, which, of course, is what IBM did going back into their earlier days. If you look at what's happening today and you look at a company like an Apple, Apple, in my opinion, Apple's key success factor is that they're a phenomenal design company. You know, they just have figured out what consumers want, and they just get there ahead of everybody else. They're in incredibly difficult businesses. They're in hardware.

They're in consumer electronics. They're in all these businesses that generally people just don't think of as very attractive. But they found a way to build fantastic products at great margins. And I think that's what makes them so great and what makes them so valuable. But I think the threats to an Apple today are very different than the way IBM was threatened back in the past, where people would have to vertically integrate the way they did. These days, it's different. You know, the biggest threat to Apple, arguably, is the Android operating system,

which is coming from, you know, essentially the equivalent of a consortium activity that was organized by Google. So it's a combination of, you know, open source code and a combination of code that Google owns. owns much of it you know apparently originally they came from sun and java and javasoft other other organizations that kind of contributed over time and so i think the biggest threat to something like an apple is that people will look at those devices and look at those products and say i love the products i just want to pay the prices for them and so they go with a lower end operating system and they go with other hardware vendors that are able to essentially knock off things like ipads iphones and others and create comparable devices for less money uh but it

but it's certainly not killing them yet. There are some amazing stories in this movie, a lot of them because of their success. There are also just some colossal failures in this movie. I mean, I suppose that's the nature of the beast in venture capital, but are there any in particular that sort of stand out in your mind where you just sort of look back and go, wow, what were they thinking when they invested in that? Well, you know, some of the ones that get profiled, of course, Tom Perkins talks about the fact that And, you know, the second investment made at Connor Perkins was a company called Snowjob,

which was a motorcycle adaptable to become a snowmobile. And for whatever reason, you know, the folks who eventually funded Genentech and Tandem and Google and Amazon were funding Snowjob. I think it's just one of these things where, you know, you can run into any entrepreneur at any given time, be captured by their excitement and the enthusiasm they have for a given concept and sort of get carried away along those lines. And, you know, there have been many, many kind of failures or sort of spectacular flops over the years from that perspective.

But I think it's, you know, the fact that the people that were involved in those things were in the game. They were meeting those kind of world-changing entrepreneurs. And you just never know when the next person you're going to meet is going to be, you know, or the people you're going to meet are going to be Sergey and Larry or, you know, Steve Jobs and Steve Wozniak. It's just, you just don't know. and you kind of have to maintain a perpetually open mind about these things.

And I think one of the things that's fun about the film and about these characters is that in the case of a number of them, they're still investing, and they're well into their 80s. They just like it, and it's in the core of their being to be part of that entrepreneurial experience from that perspective. You're listening to Motley Fool Money, talking with Paul Holland, venture capitalist and co-executive producer of the documentary film Something Ventured. You are a partner at the VC firm Foundation Capital.

So I want to ask you a couple of questions that sort of tie into your experience there. We recently had Neil Ferguson on our show, the historian, and talked about his latest book, which deals with essentially the rise and the decline of the West. One of the things he talked about was the rise of innovation in China, among other places in the world. Do you think America is losing its edge in innovation? I guess I'd answer that question yes and no. So I'd say at some level, we're more innovative than we've ever been. If you are a 23-year-old computer scientist who's coming out of a good school and has a head full of ideas and are working with other people who have a head full of ideas, this is the most exciting time in American history from your perspective because the world's your oyster.

There's an incredibly vibrant business environment with a whole new set of companies that are working in the social media realm and in other related realms. There's incredible opportunities now in the mobile space as the world moves from kind of a desktop world to a mobile world. There's really fun opportunities involving information and content, as evidenced by one of our companies, Netflix. It's pretty well known. So there's a lot of excitement, and I think we're still a very, very innovative country and a very innovative society. I think on the other side of the equation, there's a lot of pessimism, and some of it's warranted, about the general state of the economy, the state of opportunities for people wherever it might happen to be.

And I think if you're dwelling on that end of the spectrum, it's pretty hard to see the bright side. But if you're some of these folks that are forming companies literally by the thousands, it was just in New York, and they have these meetings that are kind of every other week we're involving hundreds of entrepreneurs starting companies. So I think, I still believe that America is the best environment in which to start and run and build a large company from an entrepreneurial basis. I still believe it's the most meritocratous place to be able to do that. I think in China, you have some exciting elements, both in terms of the demographics,

the fact that the government kind of gets behind certain trends and themes there and kind of helps them along, and I think in a more functional way than we tend to do it here, um that i think those are some things that are very interesting but i also i would have other areas of concern when i look at some of the emerging economies and and i and i and i i don't i don't think anybody's got a blank check from that perspective and i think over the next century um i wouldn't you know i have all sorts of respect for uh for for mr ferguson but when i look at um i think there's just as good a case that over the next century we're going to look back on this in 100 years and say it was yet another American century from the point of view of innovation

and business success. At The Motley Fool, we're focused on public companies, but as a venture capitalist, I'm guessing you're focused on private companies and sort of the up-and-comers and looking for the next big thing. What are a couple of companies or technologies that are on your radar right now that are probably not on the radar of people like me? Well, I'll throw out as many as you'd like, and you can stop me along the way, because there's a lot. It's a great time to be involved in early-stage venture, and there are a lot of really interesting companies. I'll start in the mobile space. There's a company called MobileIron, where we're an investor.

And MobileIron has a very simple value proposition. As the world has moved towards what they call BYOD, bring your own device in the workplace. So bring in an iPhone, bring in an Android device, bring in a tablet, and use that as a combination device that you use for both your personal life and for your professional life. That creates a really interesting challenge for the IT departments around security and control and so forth. MobileIron solves that problem with a series of different solutions that they deploy. And it's a very, very fast-growing company in just a blisteringly hot market. And that's one we're very excited about.

Over in a different realm, we have a company called Chegg. And Chegg is a company that's almost a little bit of a successor company from a concept basis to some of the things that Netflix started. But what Chegg works on is in the area of renting college textbooks and also digital services for college students. And the timing of their birth was perfect from the perspective that they came into the market just as the recession was hitting. And so being able to offer a $200 textbook for $50 or $60. as a rental as opposed to doing it as something you had to buy, the kind of things you and I did when we went to school, is a really intriguing option,

and the company's grown extremely rapidly as a result of it. Another very fast-growing company is a company called Sunrun in a completely different realm for us in our cleantech practice. And what Sunrun does is also blindingly simple. They enable you to put solar on your home, and they do it in such a way they invented a model and perfected a model that had been invented for the commercial realm called the ppa or the power purchase agreement and so rather than going and spending you know

30 or 40 thousand dollars out of pocket to put seven or eight or nine kilowatts on your roof uh sunrun can put that on your roof for free or close to free and then you do sort of the equivalent of a shared lease with them over the life of the project over the life of the time that you have the solar on the roof and they've become the uh you know as i understand it they become the top installer of solar across the country with with that model. And then one final one I'd like to add on, which I think is a good one for the Motley Fool, is a company called Lending Club. And Lending Club works on a model that's that's really fascinating. It's called peer to peer lending. So rather than go to the bank and get a loan for, you know, $15,000 to

buy a car, you go on to Lending Club and you put yourself out for bid. You say, I am, you know, I'm Chris. My credit rating is the following. Here's my credit history. I'd like to borrow $15,000. Are you interested in lending it to me? And so there are thousands of Chris's out there looking for that type of funding. And fortunately, there are thousands of other people who want to make a better rate of return than they can make at their local bank. Coming up, more with venture capitalist Paul Holland. Plus, we'll play a round of buy, sell, or hold. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hale talking with Paul Holland, venture capitalist and co-executive producer of the documentary film Something

Ventured. Paul, before we wrap up with a round of buy, sell, or hold, help settle a debate in our office, because we talk frequently about the IPOs that have occurred in 2011. And as seen in your film, there are venture capitalists who will essentially take flyers on 10 companies. One of them can pay off big. Some of them could also fail very quickly. So I'm going to spot you up with a few IPOs. You tell me, of the ones I give you, if I were just to hand over to you 100 shares, which one you would feel best about over the next five years? LinkedIn, Groupon, Pandora, and just because it's close to my heart, literally, Dunkin' Brands. And I've just handed it over at the current stock price, and I'm expecting to see appreciation over

a five-year period. I'm just going to hand over 100 shares. You don't have to take the risk. Which one are you thinking is going to pay off the most in five years? I would choose Groupon, which I recognize for some people are probably moaning in agony when I say that. How could you choose something like that? Groupon has fundamentally changed the way that retail is practiced, and retail is the largest business in the world. What they do, how they manage it, whatever might happen to be, none of us have any control over, but they have opened, to borrow a pun from the other company you mentioned, Pandora's Box, they've opened Pandora's Box about what the next generation of buying things is going

to be like, and they've been one of the first to get way out in front of that. And I think certainly they'll have their ups and downs over time, but I think it's a company that has the potential to be very, very valuable over time. All right, we'll wrap up with a round of buy, sell, or hold. There are reports that the IPO next year could be looking at a company with a valuation of around $100 billion. Buy, sell, or hold the business of Facebook.

Buy. Why is that? Well, there's never been a business in the history of humankind that has found a way to get 700 million people to join it in a period of roughly five years. And they're only beginning to monetize those relationships and that activity with what will ultimately become Facebook Commerce and other types of things.

It's quite literally one of the very few companies you can scale. The sky's the limit. There are no inherent barriers to where they go and what they do and how big they can become. It's got a loyal customer base, and it's got Howard Stern, buy, sell, or hold the future of SiriusXM. sell why is that yeah the the i think that the world of i'm i'm a i'm an avid customer of serious i have it in three different cars and i love it from that perspective but the music world

which is an area that i just i i really enjoy kind of delving into from a hobby perspective is changing so rapidly right now with a whole range of different types of players that are coming out the the new model that i think is going to be the one that trumps all is the you know, is the all-you-can-eat model, you know, pay $9.99 a month and get 15 million songs. All of those services, without mentioning the names of the specific services, all those services are going to get folded into automobiles, which is where the vast majority, probably 90% of the listening that occurs for Sirius and XM occurs in cars or in transport of some form.

And as these new models merge into those places, I think it's going to be very threatening for them to sign up new customers. I think it's going to be a ferociously competitive market. And finally, there are rumors that this could be the next big thing for Apple. Buy, sell, or hold an Apple television set. Oh, boy. Can I go neutral? Yeah, you can hold. Absolutely. I'll just hold on that.

I've got Apple TV, and I use it as a software platform at home. But I'd like to wait and see on that. Never want to bet against Apple, but not every one of their product introductions, Witness the Newton, has been successful. The film is something ventured. It is as entertaining a film as I have seen all year. Congratulations, Paul, to you and Molly and Dan and Dana and the whole team. It's great stuff.

listeners should go out they should find this movie because it's it's probably not playing at your cineplex yet but this is definitely a movie you want to look for something ventured paul holland thanks so much for being here chris thank you very much it's a tremendously enjoyable time that's it for this week for daily analysis on the latest business news you can check out our daily podcast market foolery and for video highlights you can go to fool tv.com that's 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.