Motley Fool Hidden Gems Investing - Spicy Stocks & Tools for Smart Thinking

Episode Date: October 2, 2015

The government reports surprising unemployment numbers. Automakers report surprising sales. And rumors fly around Twitter's next CEO. Our analysts discuss those stories and psychology professor Richard Nisbett shares some insights from his new book, Mindware: Tools for Smart Thinking.  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. It's the Motley Fool Money radio show. I'm Chris Hill. Joining me in studio this week from Million Dollar Portfolio, Jason Moser. From Motley Fool Pro and Options, Jeff Fischer. and from Motley Fool Deep Value, Ron Gross. Good to see you, as always, gentlemen. Hey, Chris. We've got the latest earnings from Wall Street. We've got two apparel retail stocks going in opposite directions. And as always, we'll give you an inside look at the stocks on our

radar. But we begin this week with the big macro. The jobs report out Friday morning was disappointing, even though unemployment stayed at 5.1%. And earlier in the week, U.S. auto sales for September, surprisingly strong, Ron Gross, with sales up around 15% overall. When you look across the big macro for this week, what stands out to you? I think I'll highlight that U6 unemployment rate that I like to chat about every now and again. It's that broader measure of employment. Fell to 10%. Haven't been there since June of 2008.

I like to say it. If it gets between 8% and 10%, then I really like what I see because that's a good number. But on this flip side of that, you can't not mention the labor participation rate, which fell to its lowest rate since October 1997. So, that kind of offsets some of those good employment numbers. So, you kind of have to mention both of them hand-in-hand. Yeah, and Jason, part of that unemployment report, also the revisions for July and August being revised in the way we don't like to see.

Yeah, and I think that's always something worth noting. We always get caught in the present when we look at these jobs numbers. And they're almost always, if not always, revised. So, the revisions downward certainly hurt. And when you see the labor Ford's participation rate so low, and you see that wages are very flat, that's not all that encouraging. It'll be interesting to see how the Fed ends up responding to this down the road with their rate policy. Stepping back to the auto sales that you brought up, that to me was really pretty interesting. And speaking as a consumer, we actually participated in that this past September, Chris. I feel like, Ford, you're welcome, because you threw

a little money your way. And how many times did you participate, Jason? So, my wife's car would actually count for August, I believe. My car does count for September, because it, in fact, was September. Well, Ford's sales increased 23%. 23%, I was going to say. That GM was 12.5%. Ford really, really brought the heat, 23.3% there. So, it's interesting to me to even look at Ford's stock in light of that news, couple that with all the headwinds Volkswagen is facing. And even though Volkswagen is a

very small amount, as far as market share goes here domestically, I think that probably bodes well for the American automakers. But, I mean, it's worth noting that Ford, at least for one, was offering, you know, it was an offer you couldn't refuse, because it was free money, essentially. But, man, Ford stock now is yielding 4.5%. That's actually pretty interesting. Mark Fields has got to be feeling pretty good about things right now. Jeff Fischer, what stands out to you this week? So, Chris, yeah, we had September payrolls were weak, as we all just talked about. But also, August factory orders were down 1.7%, more than expected. And we saw weak

manufacturing numbers this week. So, across the board, you're kind of seeing weakness August through now September. But the thing to keep in mind is, one, the economists who made the earlier predictions, they're always wrong, and they will get revised. In this case, revised lower, which was unfortunate. But the final thing to keep in mind is, these were backward-looking, and the market is forward-looking. So, in a way, it's good that we just had some weakness. We've already gone through it. Hopefully, we'll get stronger going forward. Do you think no rate hike this year? What does this all boil down to? I think the people who are saying, well, we're going to see a rate hike in October,

I think they're very quiet. Yeah, we'll see. I think I had said the next time around we'd see one, but I don't know. This might be pushed. I'd be surprised at this point. Yeah, I think you want to be looking to place your money on a rate hike in 2016. Costco's fourth quarter profits came in solidly above expectations, but Wall Street seemed unimpressed, Jason Moser. Stock flat for the week. What gives? This is a good quarter. Yeah, you're right. Wall Street doesn't seem impressed based on the reaction. I think that Wall Street has consistently been impressed with Costco. The stock is performing very

well based on its growth prospects. That's actually something we've been kicking around over at MDP a good while now. While Costco brings in great numbers, and they have a number of stores out there. It's a total of 686 stores worldwide. 480 of those are in the United States. The question we have that continues to linger is, are they going to be able to bring their international presence up to parity with their domestic presence? Management believes that they can. It will take some time to do. I'm not necessarily sure that's so realistic. The deal with Costco is, they bring in a lot of money with those membership fees, and then able to offer those rock bottom prices. Gross margin actually improved a little bit, but

they saw some headwinds with gasoline prices being so much lower than they were a year ago. Costco is a wonderful business. It's trading at about 25X forward earnings, which for a business that's not lobbing up that kind of growth, it starts making you wonder if this isn't a little bit overpriced at this point. Yeah, I think that's fair from a valuation perspective. I think it is the kind a company you can hold as one of, we like to say, a core holding, and you probably do pretty well over time, certainly on a risk-adjusted basis. I got lucky a couple weeks ago, there was that one day where the market, it looked like the floor was going to drop out, and

I was able to pick up some Costco for $15 or $20 cheaper than where it's trading today. O' Well played! It was just that one-time thing. But if you watch Costco and you ever get that opportunity, then it's just a wonderful company to own. O' That's just it. The quality of the business is so high. You typically are paying up for that quality. So, to Ron's point, whenever you see that thing go on sale like that, that's certainly one that should be at the top of your list. So many quality retailers are trading at multiples of 20 or above right now, whether

it's Starbucks, Home Depot, Costco, Dunkin' Donuts. All quality names, yeah. Well, maybe not as quality as Dunkin'. No, not Dunkin'. I have to throw that in there, because we're talking about it later. We'll get to that later in the show. What that's telling me is, the market really believes retailers, consumers, are going to remain strong, or get stronger going forward. Alcoa kicks off earnings season next week, but making headlines this week with the news that it is splitting into two separate companies. One is going to be focused on upstream

activities and will be named Alcoa. What do you mean by upstream? What the heck? We'll get into that. I was going to tip that over to you, but I'm more fascinated by the fact that they've got a second business, which they don't have a name for. They've reportedly been working on this move for a couple of years, how do they not have a name for this? Let's do it! We'll name that other company later. The new company is the one the CEO is going to go to. That's the one you want to direct your attention towards. Can we at least agree, well, we say all the time, you never want to hinge on one single data point. If you see a company breaking

in two, and the CEO says, I'm going with this one, can't we all agree that that's the one you should be looking at? Especially when it's unnamed. It's unnamed, but I'm still going there. You can keep Alcoa. Alcoa itself will now have the the legacy, smelting, refining, the 123-some-year-old business of getting these materials from the earth and making them into something usable. And the new business will be the one that's supplying the components, the bodies, to autos and aerospace and whatnot. So, that's more the value-added business. Now, they're both giant businesses, but they've really overshadowed one another. Lately, aluminum has fallen out of bed, aluminum pricing, and that's been

to drag on Alcoa's entire business, even though the higher-end component business is doing pretty well. So, by breaking this apart, they're hoping to highlight the strengths of the component business and let the aluminum business just wither away. No, the other business should do well, as well, because they can take out costs and just really focus on the commodity side. Maybe that's the name, The Other One. It's kind of like Grateful Dead, right? I mean, that's how they came up with it. Let's play The Other One. Well, that'd be a pretty good title, right? The thing to be careful about, spinoffs do pretty well. The Bloomberg spinoff index,

which tracks ... You made that up. No, I wish I did. If I did, I'll trademark it. It's a proxy for spinoff performance. It gained more than 500% since 2002 compared to about 100% for the S&P. So, spinoffs can do well because the business is refocused and has new ways to grow value. But right now, I would watch Alcoa. It has a lot of debt, and how that debt is going to be divided between these two companies is not yet detailed. Heck, the name isn't even detailed. Still some questions to be answered. Shares of Twitter are very much a roller

coaster this week on reports that co-founder and interim CEO Jack Dorsey is going to get the word interim removed from his title, but Jason, Twitter's board of directors has yet to confirm that. What is going on at this company? Meanwhile, Dorsey, as we've talked about before, seems very much like the person for this job. He's also got another job. He's CEO of the mobile startup Square. Just another little multi-billion dollar venture. Yeah, which is due to go public later this year. Sure. And I think that's something important to note here, is that for the noise that we've heard this week, and I think that really started

on Wednesday, it really is nothing more than noise at this point. Because until you actually hear a formal announcement from the company. This is all just based on some tech reporting, which probably is right. I think that for the past three months, the going thinking has been that really, Jack Dorsey is the guy for this job. I agree with that. Personally, for me, I think it's important that a founder get back into the driver's seat here and really help steer this business forward. I've certainly seen, as a user of Twitter, there has been a lot rolling out here in a short amount of time. Three months seems like a really long time to go without a permanent CEO. It's worth noting, though, that Satya Nadella, it took

about six months to get him into Microsoft, too. So, this isn't abnormal. So, who knows when we actually will see a formal announcement. If we see a formal announcement, I think we will. And at that point, I think that we will see this shake out to where Jack Dorsey will be the CEO, Adam Bain will be the COO, you'll have Anthony Noto as the CFO. They'll have a bit more of a conventional leadership structure there, and it sounds like they want to get up there and shake the board up a little bit to actually make this a board that is doing something. It seems like you could probably go through right now with a stethoscope just to test if they actually have a heartbeat, because it just seems like they're sitting

on their thumbs. Don't you think, though, that if this does play out the way you've said, then the clock starts ticking and they've got maybe a year to show some serious results before people start saying, this company either needs to be acquired or just go private? Potentially. I think that when you look you look at what Twitter has done thus far, it's not a question really of monetization. They are growing their revenue. That's good, because they don't appear to be making money. Well, yeah, the profitability obviously will come as the business matures, but I do think you're right. They will have

a limited amount of time to really help change the narrative there. I think they'll be successful doing that, because I think that last quarter's call, where Jack actually participated for the first time. There's a sense of urgency there that hasn't been there before, and I really do think that this will be something they'll focus on here immediately. Coming up, we've got apparel retail and donuts. What more could you possibly need? Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Jeff Fisher and Ron Gross. This week, Ralph Lauren, founder of the eponymous apparel retail company,

announced he is stepping down as CEO, and the stock popped on the news, Ron, as though he's been running this business into the ground. They've been public almost 20 years. Stock has done very well with him at the helm. True, but it has been struggling lately as a business and as a stock. We're down 37% year-to-date, even with the pop that we saw following the announcement. So, important to understand, he's not going anywhere. Still executive chairman, still chief creative officer, controls 81% of the voting power of this business. So he's firmly entrenched in this company. But we've brought on a new mind here to run this, interestingly, from Old Navy and H&M. So we're looking downstream to the more value side, the lower price segment of

the retail apparel industry, which is interesting because obviously Ralph Lauren is a premium brand. And it kind of goes to show you what they thought is needed here, and maybe where the direction of Ralph Lauren will go in the future. Yeah, Stephan Larson, who's been the president of Old Navy for the last few years, and as we've talked about before, that's really been the brightest spot of the GAPS business. And Wall Street appears to agree, because not only did Ralph Lauren's stock pop on the news that Larson is going to be the new CEO, the GAPS stock fell through the floor. I mean, there's basically a 20% differential between these two stocks this week, just because

of Larson. Yeah, a well-respected guy. Obviously, he wasn't on my radar, to be honest, to any major extent. But he's got to feel good. He's got a challenge in front of him, which I hope he thinks is exciting. I'm sure he does. I hope Ralph Lauren doesn't go completely the opposite way and turn into a lower-discount brand that you see all over the place. I hope they maintain some of their cachet. Why? How did that work out for Coach? That story is still being written, my friend.

Shares of Dunkin' Brands down 10% on Thursday after lowering guidance for the rest of 2015. The company also plans to close 100 Dunkin' Donuts locations in the next year. I'm doing my part, Jeff. You are, and you brought Munchkins in this morning. Yeah, I'm trying to help this business. I mean, is this simply a function of them expanding too quickly when you see this number of locations shutting down? I don't think it really is, because these are all locations that are being closed by a franchisee, by Speedway Gas Station and convenience stores. And they represent 0.1%

of Dunkin's U.S. sales. So, they're really a blip on their radar. And the good part is, about closing these little locations, is they can then, in those areas, open full-scale locations. So, they didn't change their ... they still plan to open 410 to 440 net new stores year revenue growth 6%, 8% more or less. And they did lower their EPS guidance, but only by a penny or two per share. So, it's very minor. What maybe took the stock down as much as anything else, where same-store sales growth was slow, 1.1% versus 2.9% last quarter. So, they saw less traffic and they're revamping the menu. They said they took some things away and that didn't work out so well. Bottom line is, there's a lot of competition for

where we all go to get our coffee and our breakfast. That competition is going to remain very strong across the board. It's still pretty striking when you look at any sort of a map of where coffee locations are, just how it is so concentrated in the eastern half, and particularly the northeast part of the United States, and the opportunity in the west, and particularly California, is pretty enormous. It is. I think the sell-off in Dunkin' shares this week was probably overdone. I say the stock is cheap. It trades at 20X expected earnings for this year. But they are expected to grow at 15% or so next year, bottom line. So, not bad.

Shares of McCormick falling this week after third quarter profits came in lower than expected. McCormick controls about 20% of the global packaged spice market. Jason, it is specifically that international part of the business that's really hurting their results. That's amazing to think they control 20% of the market. Who controls the other 80%? Because it seems like McCormick's all you see. That really, I think, is the reason why they're so successful. It was a decent quarter for the company. As you noted, currency hurt them a little bit. This is really another wonderful business. We're talking about Costco. This is another wonderful business. It's one

you want to buy when it's out of favor. Unfortunately, that's just not this time. But because they make almost half of their money outside of the U.S., they are going to witness more currency effects than others. And that certainly played out on the company's results. I think the underlying business, though, is still performing very well. There's a big acquisition they made back in 2012 in China called Wuhan Asia Pacific Condiments. That is paying off. They're getting more share there with the consumer. And they're seeing some sort of the roll-off of all the avian flu concerns we saw out there on the commercial side. So, they're seeing some better numbers there as well. Again, this is one, it's trading at around 23 times

full-year estimates, which, for a company that's just not putting up that kind of growth, this is one you want to be a little bit more opportunistic on. But, I understand why the market's paying up for it. It is a very quality business. I'll never forget having gone out to that factory, their factory out in Hunt Valley, Maryland. It was just a life-changing experience for a cook like me. It must have smelled wonderful. It was very good. We've got about a minute left. Let's tap some of that cooking expertise. I'll

I'll start with you, Ron Gross. When you look in the universe of spices and herbs, what's something ... Don't give me salt and pepper. I'm good on those. Give me something underrated that I can spice up my menu with. Well, I don't think everyone will agree, but I think fennel is not used nearly enough, especially in Italian cooking. Sausage, tomato sauces really can be a nice little surprise. Jason? Would ginger count here? Sure.

I mean, Asian cooking, to me, is really delicious. Ginger can change virtually any dish. I love some good fresh ginger. What about you, Hefei? I won't say salt, I'll say sea salt. There you go. Oh, you're one of those. Still NACL2, no matter how you slice it. Come on, you can put it in olive oil, dip your bread in it, on avocado, on pasta, on popcorn. Sea salt is killer. I say this from time to time, you're just not getting this kind of information on Bloomberg. You're just not. Thankfully, yes.

Guys, we'll see you a little bit later in the show. Up next, a few tips for smart thinking. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Malcolm Gladwell calls our guest this week, the most influential thinker in his life. Richard Nisman is a professor of psychology at the University of Michigan and the author of several books. His latest is Mindware, Tools for Smart Thinking. He joins me now from Michigan. Richard, thanks for being here. Richard Nisman Thank you.

There are a lot of tools in your book. We're a show about business and money and investing, so I want to focus more on the economic side of the equation. And that is one of the questions that you pose in your book. Should people think like an economist? From your way of thinking and from your study, what does it mean to think like an economist, and should we be doing it? Well, first of all, it means just following the basic rules of cost-benefit analysis, figuring out the cost of an action, figuring out the benefits, comparing it to the next most plausible-sounding action that you might take, and the corollaries of the cost-benefit principle, which is how to avoid the sunk cost trap and how to be ever attentive to opportunity costs

for any action that you've chosen. If it's a tremendously important personal decision, it's worth spending a lot of time. But here's where psychologists enter the act. And one of thing that interests me most is the way that economists and psychologists can play off one another to get improved decisions. Psychologists think, certainly I think, that the best decision theorist for important personal decisions is Freud, who said, in matters of love and work, the unconscious should decide. So, bottom line, the more important and personal the decision is, The more important it is to do the cost-benefit analysis, and the more important it is to throw it away and sit on it for a while, think about it, let your unconscious do the work. Because we know that the unconscious really does a lot of things better than the conscious mind, and making choices is one of them.

Let's talk about the principle of sunk costs, because that's something we run into as investors from time to time. if I'm buying a $12 ticket to go see a movie, and 30 minutes in, the movie's no good, should I walk out? Because I've got to say, I'm a movie fan, and I can count on one hand the number of times I've walked out of a movie. Right. I think few of us walk out of movies at all, and economists would say so much the worse for us. Economists, I should say, I've studied how economists actually make decisions in everyday life, and they are a different species from the rest of us. I mean, they do walk out of movies. They do leave expensive meals uneaten.

They abandon projects that they spend a tremendous amount of time on. They cut bait. and let me give an example of what's a kind of sunk cost trap that most of us are going to be so likely to fall into. Suppose you bought a ticket for a basketball game a month ago. You paid $100 for it. Tonight's not a game, but the star is not playing. Nothing hangs on the outcome of the game.

and it started to rain cats and dogs and you have to walk six blocks to the subway. You're going to say, gee, do I really want to do that? But there's a compelling feeling you don't want to waste that $100. And the economist says, honk, wrong. You can't waste that $100. You don't have it anymore.

You're framing the problem wrong. And the economist's motto, which is very freeing, I think, is the rest of my life begins now. I mean, you can't get that money back. You can pay twice. You can pay once for the ticket and once for sitting there watching a boring game. And that's why they walk away

from things they put a lot of time, energy, or money into. And they're right about that. One of the things that comes up in your book time and time again is the many different ways every one of us is affected by unconscious cues. It can be the color of the paint on the wall in a room. It can be something as simple as having coffee on a first date as opposed to having a cold drink and how that can affect your mood. are you surprised by anything you've come across in your research, or are you experienced enough

now where anything is fair game in terms of the way unconscious elements can affect the way we make conscious decisions? Let me start at a top level on that and say, in my recent thinking, I've decided that the main story of psychology of the last 150 years is that we keep discovering how small the fraction of mental life is that we're aware of, that we're conscious of. It just gets smaller and smaller, which is scary in some ways. If you and I are commuting over coffee, we're going to think the other guy is a pretty warm guy.

How nice to meet such a swell fellow. If it's iced tea, I don't know, he's kind of a cold fish. So there are these, there's a huge range of stimuli that we're responding to. It's absolutely vast all the time. The unconscious mind is super efficient at parallel processing. The conscious mind is a unitary, single, narrow channel. and the unconscious is constantly perusing the environment, referring to us things that we need to know about.

Unfortunately, some of the things that it tosses into the stew are things we shouldn't really be attending to. And psychologists now, it's really all the rage to show these dinky things that have an impact on us that are embarrassing. So more importantly, though, are the things that really are chronically important and often the major determinants of our view, not just a little bit of body English putting on it by the warm coffee versus the cold tea. And that's our failure to recognize the power of social influence. um we do things uh to a huge extent just because other people are doing them which by the way isn't a bad rule of thumb i mean you know there's wisdom in crowds and we maybe should be doing that but

um we you know i i started playing tennis a long time ago and noticed everybody else i knew was playing tennis and then i lost interest and then i said geez the tennis courts are kind of empty these days and i bought a sob automobile and everybody my friends had them and it it's you're simply not aware that that's why you're doing things uh that because other people are um but uh you can make use of that if you're aware of the of the fact of the importance of social influence. You can make that work for you in your own behalf. It can make you have other people do something that you would like them to do or that you think is in their own interest or in society's interest. And social psychologists now have got a lot of tricks that are really socially beneficial

that take advantage of this. For example, the state of California has saved hundreds of millions of dollars in energy costs by hanging tags on people's doors, the ones who are using more electricity than their neighbors, saying, you're using more electricity than your neighbors, and the use drops down. And billions of tons of CO2 have not been put into the atmosphere because of this simple gemming. Last question, and then I'll let you go. For anyone listening who's looking to just get better at how they view the world, how

to solve problems, what is one concrete thing we can each do to become smarter in the way we think? well i'm going to return to that point that i've decided is the major lesson of psychology and that is the uh the size and role of the unconscious because just as we're finding that you know things we're doing things because of unconscious stimuli that we would probably wouldn't want to influence us we're discovering that the unconscious is really a better problem solver in some respects and the conscious mind. There's a lovely book of essays

collected by Brewster Giesel and by the most creative thinkers in history, writers, artists, scientists, mathematicians, and they're saying how I did it, my great accomplishment, how that came about. In every case, it was not while the person was sitting at the desk working on the problem it was when the problem was not in the conscious mind at all they were

on vacation and they put this point array says i put my foot on the step of the bus and i suddenly realized that the transformations of the fusion functions etc etc um i was at a bark backyard barbecue you know waiting for my hamburger and thinking about the sunset and it suddenly uh hit me out of the blue well what was that got to do with the rest of us who are not geniuses and it has everything to do with it because the unconscious can solve problems that the conscious mind can't but you've got to do the homework for the unconscious mind if you say oh i'm going to do this project i have this project in mind i'm going to do that somewhere down the road sit down now and think about exactly what the project would be, sketch what a solution would be,

start writing something. If there's a writing project, which may be junk, but get something down. The writer, John McPhee, who's a wonderful writer, writes a lot for The New Yorker, says the best thing to do is write a letter to your mother telling you what you're going to do. And that sets the stage, it brings the issues to the fore, and now the unconscious will start working on it. And the mundane problem-solving I do, if I wait till the last minute, for example, to create thought questions for a class, they're not going to be very good.

The class is not going to go all that well. If three or four days in advance I sit down and say, well, what are the main points of the readings? What would a couple of questions look like? That doesn't sound great, but I mean, maybe something can come of it. Then I sit down at the deadline. I've got to produce something. And it feels like I'm taking those questions by dictation.

It's coming from somewhere. It's coming from a megaphone way back in my mind, rather than something that I'm effortfully creating. So the unconscious is embarrassingly likely to bring things into a decision process or problem-solving process that we'd rather weren't there, but it also can do things that the conscious mind can't do. It can make decisions better than the conscious mind left to itself. It can solve problems better than the conscious mind left to itself. The book is Mindware Tools for Smart Thinking.

It is available everywhere. Richard Nisbet, thanks for being here. Thank you. You better think, think, think about what you're trying to do to me. Think, think, think, let your mind go, let yourself be free. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. Baby, you're a rich man.

As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, So, don't buy or sell stocks based solely on what you hear. Welcome back to Motley Fool Money. I'm Chris Hill, and joining me in studio once again, Jason Moser, Jeff Fischer, and Ron Gross. Let's dip into the Fool mailbag before we get to the stocks on our radar. Radio at Fool.com is our email address from David Lee in Australia. Long-time listener, first-time writer, I'd like to hear your thoughts on Horsehead Holdings.

Do you think it is a turnaround play or a value trap in light of its recent price collapse down about 65% in the last month, Ron? What do you think? How much time you got? Not that much. I'll be quick. We've got three things going on. Brand new expensive facility taking longer to ramp up than expected. Macroeconomic headwinds largely caused by China causing zinc prices to fall.

And Horsehead's cash is dwindling as a result of both factors. So that's the real risk here, liquidity risk. they could run out of cash before this business turns. I think they will be okay, but any investor in the stock needs to understand that there is a true risk of permanent loss of capital, as us value investors like to say. But it also has a multi-bagger potential. Question from Jason Lyon, who writes, I was hoping you could offer some insight about Arcos Dorados. To my untrained eye, the price seems to be hovering around imminent failure territory. Are all the concerns about this company strictly currency related, or are there

flaws in the company which currency problems are exacerbating to the point where everyone is fleeing the stock. I've heard you quote the mantra before that you should be greedy when others are fearful. In light of that, the current price has never looked better for acquiring a stake in McDonald's largest franchisee. But to that end, how do I know when being greedy is foolish with a capital F or foolish with a small f?" That's a great question. Yeah. Specific to Arcos, it largely is a macroeconomic problem. Although, as we've seen here in the States, McDonald's has been struggling. But the weak economies of Brazil and Venezuela

are really struggling. Soft consumer spending, the currency translation is an absolute mess. Companies cutting costs. They're monetizing some of their real estate assets. The balance sheet is not great. So, you could end up having a value trap here if things continue to deteriorate. Jason, beyond Arcos Dorados, how do you make the difference between, this is an opportunity to jump in at a cheaper price, versus, I think this company's got problems? Primarily, I want to make sure I can either identify a short-term catalyst or a long-term trend in play here. It may not necessarily be blatantly obvious. You may have to dig deeper to figure that out. But if you can't find a plausible short-term catalyst

or a reasonable long-term trend in play, chances are you could be looking at a value trap. Yeah, I like to usually start to see the storm clouds start to break, see some light at the end of the tunnel, and then more safely start to buy in. And keep an eye on the balance sheet, because they need those resources to give the company time to turn around. Alright, let's get to the stocks on our radar, we'll bring in our man Steve Broido from the other side of the glass to hit you with a question. Ron Gross, what are you looking at this week? I'm going to go back to Crocs, C-R-O-X. Stock got whacked this week when it lowered its

third quarter revenue guidance by just a measly $10 million. Part of that was due to currency, part of that was due to withholding some shipments from China to the Chinese distributors. Really, the stock should not have sold off as much as it did. I think the company's doing a really nice job. Their midterm goals that they've laid out seem very achievable. Stock's at 11, I think worth 17, without too much trouble there. Steve Broido, question about Crocs? Have they had any success with actually fashionable shoes? They all just look kind of dopey to me. They're very comfortable, but they do look dopey.

No, I think they've made some good traction into things that look more like a typical boat shoe versus that traditional clog and some other kind of designs as well. I think they've done a good job. Jason Moser, what are you looking at? Sure. Looking at Interactive Brokers, ticker is IBKR. This one I've been talking with Brendan Matthews over on the Stock Advisor team about potentially bringing over the MDP watch list. But Interactive Brokers is an electronic broker, very much like your Scott Trades and TD Ameritrades of the world, except Interactive Brokers is a bit less fuss and

really all just about this platform and volume. They're trying to really attract the traders that are trading in large volume day in and day out. Their claim to fame is being the low-cost provider. For me, they offer more products, really, than anyone else, from stocks and bonds to currency. Just the widest breadth of offerings and liquidity that really makes them attractive for bigger clients. The founder of the business, Thomas Pederphy, he's going to be stepping down as the CEO here soon. He does have a succession plan in place with the ... he'll stay on as chairman, but the current president, Milan Galick, who's He's an associate of Petter. If he's been with the business for 20 years, he'll be taking

over. So, I feel like there's a good succession plan in place. This is a well-run business that's performed very well in our Foolish universe to date. Steve, question about interactive brokers? Do you think people worry about their money being safe at a place like Interactive Brokers? I think Schwab, Safety Rock, Merrill Lynch, Safety Rock, Interactive Brokers, I don't know. Why doesn't Interactive Brokers elicit any confidence in you, Steve? I mean, it's just Interactive Brokers.

Is it the name? I don't know. I mean, I'm sure they're insured. It's just as safe. Jeff Fischer, we've got about a minute left. It's the power of old Wall Street. Gilead Sciences, a stock we own in Motley Fool Pro, ticker is GILD. They are really dominating the $20 billion hepatitis C market. There's a lot more room to grow there.

They just had positive results on their next generation hepatitis C drug. They also have the leading HIV franchise, helping people with HIV. The stock trades at 8.3 times expected earnings after Hillary Clinton and others attacked it on Twitter, and biotech went down as a whole this week, sharply. Steve, question about Gilead Sciences? What's the next big thing for them? That's the perfect question. Right now, it's hepatitis C for at least two, three, four, five years, in my opinion, and Wall Street thinks it's going to fizz out sooner

than that. So, that's where I think we have an edge. Steve, you got one you like? Gilead sounds pretty interesting. All right. Ryan Gross, Jeff Fischer, Jason Moser. Guys, thanks for being here. Thanks, Chris. That's going to do it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Dr. Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.