Motley Fool Hidden Gems Investing - The Devil's In The Dictionary

Episode Date: November 13, 2015

Macy's and Nordstrom take a tumble. Homebuilder D.R. Horton raises the roof. Cisco Systems slips. And Priceline trips. Our analysts discuss those stories and Wall Street Journal columnist Jason Zweig talks about his new book, The Devil's Financial Dictionary. Learn more about your ad choices. Visit megaphone.fm/adchoices

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BetMGM operates pursuant to an operating agreement with iGaming Ontario. pro and options, Jeff Fischer. And for Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen. Hey! How you doing? We've got the latest earnings from Wall Street, and we will dip into the Fool mailbag. Best-selling author Jason Zweig from The Wall Street Journal is our guest this week. And as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the big picture for retail, and it is not pretty, guys. The latest quarterly results from Macy's, Nordstrom, and JCPenney

were a collective disappointment on Wall Street. Shares falling across the board. And he's throwing Kohl's, Ron, and that's more than 3,000 stores across the consumer value spectrum. I'm not trying to be nervous here, but I am. It is somewhat concerning. And Macy's said, you know, they all have different explanations for what's going on. But Macy's, I like what they said. They said, listen, this happens every five to seven years in the retail industry. And let's not forget, retail is tough. I mean, even the best have struggles, and some of them even go bankrupt and reorganize. I loved what Nordstrom had to say. They said, listen, this wasn't about the weather. It wasn't about

macro. There was no traffic in our stores. It wasn't a merchandise thing. It wasn't a seasonality thing. There was just no traffic. And it happens. I think Nordstrom's is probably the best suited to weather this, but they're not immune to those macro conditions. JCPenney, interestingly, probably had the best relative report, because people's expectations were so low, but that didn't matter. Stock got sold off amongst the carnage as well. Yeah, but Jason, this is probably the worst time of the year for general retailers to put up these kind of numbers. You're right. This is the worst time of the year to do it, especially in the face of lower gas prices, seemingly an improving

unemployment picture. We would think there is a more confident consumer out there today, but the October retail numbers are telling us a different story. It really does make you wonder how this holiday season is going to shake out. I'll tell you a couple of retail operations that are not having any problems right now. You look at Amazon.com and Wayfair, those two companies really turned in some stellar numbers. I think that just is representative of this shift that we're seeing. It's the 21st century retail picture. It's moving online, and maybe these investments that Jeff Bezos has been making in Amazon are paying off after all. You know, I think Jason's onto something, too.

As you kind of train yourself to buy more things online, now more people are buying clothing online, for example, and groceries online, and staples, and a lot of that traffic's going to Amazon. It becomes your new habit because it's so convenient. So, Cohen and Company said retail traffic for the week ending November 7th was down 9.9% compared to last year. So, traffic fell nearly 10%, and apparel traffic was down 6.5%. And they're expecting another decline between 9% to 11% for this upcoming week of November. So, people just aren't going to stores. Weather does have some bit in this, because you don't feel you need to buy winter clothing right now. It even affects home furnishings. People aren't buying new throws or new rugs or new carpets and things to warm up

their house. This could affect things like Nike and Under Armour as well, because apparel is so slow right now. But I think Ron is right. These things cycle. This is why retail is such a tough industry, and hopefully it'll get better in the long run. I think one thing we can hang our hat on is that the holiday season is going to be very promotional to drive sales, and even if sales look okay in the end, margins are going to be weak, and we've got to be ready for that. Yeah, Ron, that's the problem, too. Everyone is getting used to buying at a discount. You have Nordstrom Rack doing well, but Nordstrom itself, not so much. You have Macy's now moving

downstream into a discount format with new stores. Once you go there, it's almost impossible to go back. Once we learn to buy at a discount, why pay full price? You look back in time there, Jeff Bezos has been known to say, your margin is my opportunity. And really, he's exploiting that, I think, to the nth degree now, because you're right, consumers now, we are more or less conditioned to expect nothing but really the lowest price possible. And Amazon certainly built that business sort of on that premise from the very get-go 10 years ago. I think Jason gets paid to say Jeff Bezos.

I want to go back to Nordstrom for just one second, because of all these results, this This was the most surprising to me personally. This was a massive miss from a retailer at the high end of the spectrum that is known for, among other things, Ron, really good service. That's the kind of thing that is unaffected by weather, that sort of thing. When you look at Nordstrom's business, do you expect them to bounce back in the next quarter or two? The next quarter could be tough, but if we look at next year, I think this is actually probably a decent place to take a position in this company. After the sell-off, maybe we're trading around six or seven times

EBITDA. I don't think that's necessarily very expensive. They did pay a cash dividend of $4.85 in October after they sold their credit card portfolio. They've got a billion-dollar share or purchase program in place. I like the company, I like the stock. Priceline's third quarter profit and revenue both came in higher than expected, but guidance for the fourth quarter scared off investors and shares down this week. The The guidance is kind of a surprise, Jason, just because typically management is pretty bullish with their guidance. Jason Moser. Sure. I mean, I think this quarter notwithstanding, investors should feel very

good about where Priceline is headed. To your point about the guidance, there are some currency headwinds that the company is dealing with right now with a stronger dollar that are posing some near-term challenges. But as investors, we're trained to look further out, and we know that currency helps and it hurts, and we kind of just watch that play out over time. But I think when you look at the core of this business, it's a Booking.com product that now holds over 820,000 properties and partners. That's up 38% over the same quarter last year. And I think that what is really interesting, when we watch TripAdvisor report their earnings, and then shortly thereafter, PricedOn report their earnings,

when you see the two conference calls, there was a lot of mention of each other in those calls. I think TripAdvisor was mentioned something like 19 times in Priceline's call. And that's because Priceline has joined onto TripAdvisor's instant booking platform, which, for TripAdvisor, they're sort of taking this into a new direction, offering their hotel partners another way to participate in offering out their inventory. And for the hotels, it's a bit more of an attractive offer, because they get to control the relationship, and it's a more direct relationship with the consumer. For a while, Priceline and Expedia were pretty against joining that platform. And I think, at some point or another, Priceline's leadership was wise to go

ahead and say, listen, this is actually a good offering. Our hotel partners really kind of like this offering. Let's be a part of the solution instead of trying to sort of play in the face of something that maybe comes back and bites us in the rear. So, I think having Priceline on that instant booking platform will be a good move for both Priceline and TripAdvisor. And when you look at the market opportunity here in general, I think that investors in Priceline today still have to feel very good about where they're headed. O'Reilly. Cisco Systems' first quarter results looked good, Ron. $12.7 billion in revenue, profits higher than expected, but shares down on Friday after their guidance for the second quarter was disappointing.

Yeah, it's a guidance thing, but I did think the quarter looked good. New CEO in place, Chuck Robbins, replaced 20-year veteran, I guess, John Chambers. The company's moving away, transforming themselves, moving away from switches and routers, individual switches and routers, towards a more integrated product with software included. They're moving to more cloud-based revenue, which is subscription-based, which a lot of folks are nowadays. What's important to see is deferred revenue is up 36%. That's something you definitely want to look for when you have a subscription-based model. Router revenue, not surprisingly, was the weak point here. The traditional business, that was down 8%. But the rest of the business,

I think, looks strong. So, yes, guidance was weak, but the company seems to be doing a nice job. They are competing now with the likes of Microsoft and Amazon in the cloud business. Once upon a time, Cisco's the company that's out there saying, hey, we're building the internet. But with the move to the cloud, they have more competitors than before. Salesforce.com, huge in this area, so much competition. Everyone is doing it out of necessity, whether it's the PC guys or the traditional router guys. You have to do it, but as you said, it's going to be a very price-sensitive battle. It's going to be a commoditized battle to some extent, a

large extent probably, and we'll have to keep an eye on margins. America's biggest home builder just got bigger. Fourth quarter profits for D.R. Horton came in higher than expected. Shares up more than 7% this week, and also bumped up their dividend, Jeff. Yeah, they did, but they still only yield about 1%. The stock trades at about a 15 price to earnings multiple, so it's in the range of where you might expect it to be over the long-term. They did well. They're seeing stable demand or moderately improved demand, and yet they grew more than 30% on revenue and pre-tax income because they're getting expenses out of the

business and basically leveraging the large platform that they have as the largest home builder. I don't know that I would buy it, although I've missed out by not buying it. the past 15 years, surprisingly, the stock has returned about 13% annualized, while the S&P 500 has returned 4% annualized. So, I'm surprised by that, given how cyclical and competitive home building is, and so many companies fail. The trick is to find a strong one, and this company is one of the better ones. As the largest, it still only has an $11 billion market value. So, it's a pretty small, large company. I'm not too worried about you missing out on D.R. Horton. I have it on good authority,

you've got at least a couple of winners in your portfolio. Coming up, we'll tell you why Wall Street is not popping the champagne for Party City. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Jeff Fischer, and Ron Gross. Third quarter revenue for Wayfair up 77%, but shares of the online home furnishing company getting whacked this week. A lot of people shorting this stock, Jason, including Whitney Tilson, fresh off his short of Lumber Liquidators. Yes. I don't think investors should not let the headlines regarding Wayfair lead to any rash decision-making here. I think this is one that ...

It looks like at least a couple of them did. It looks like a couple of them did. We would eschew that sort of behavior here at The Motley Fool. Wayfair is one that elicits a lot of Amazon-esque feelings. There are people out there that believe in the sustainability of the model. There are people out there that think it's flat-out unsustainable and it's the next Overstock.com. I fall in the former there. I think this is actually a very good business. Management is making a lot of those same types of decisions and reinvesting in the business and focusing on just building out a robust e-commerce retail business here. When you look at the metrics, all of the metrics

are trending in the right direction. Sales are up over 76% versus the same quarter last year. Gross margin ticked up 30 basis points. Active customers grew to $4.6 million from $2.9 million a year ago. Really, the big number here that we want to focus on is the percentage of repeat customers for Wayfair. It was 55.2% versus 49.8% a year ago. The more repeat business they get, the less they have to actually pay to acquire those customers, which means more and more profitability as they build out this business. And again, going back to what we were talking about at the very beginnings of the show with the way retail is trending, I think Wayfair is exploiting that, and I'm still very encouraged

about where they're headed. Jason, do you know, what does the bear argument hinge on? Why are they saying the company is unsustainable? I think at least part of it hinges on the fact that they don't make money. Part of it is, it's a very young business that is investing a lot in building out that e-commerce platform. They pay a lot upfront in the shipping, customer service, and things like that. It's understandable, at least, that there's some skepticism out there, but I felt like there was that same amount of skepticism out there in Amazon years

ago. When you have a business like this that's led by its founder still, they're really doing a lot of the same things we saw with Amazon back in its infancy. This is a very large market opportunity. Again, they're winning where companies like Bed Bath & Beyond are really losing. Again, we're seeing that retail shift, and I think Wayfair is really playing into that. Third quarter profits for Popeyes Louisiana Kitchen came in higher than expected. They also raised guidance for the full fiscal year. And, Jeff, that is the one-two punch we like to see.

And the third punch is, we're just glad we weren't born chickens. Nine billion chickens a year in the U.S. are eaten. Nine billion. And you know what? They're delicious. They're delicious. With cayenne pepper on them. So, Popeyes is still a pretty small company. At a $1.2 billion market value, they have about 2,400 locations, mostly on a franchise model. And Chris, they've put up, as you talked about on Market Foolery earlier this week, your daily podcast, they've

put up great growth numbers all the past many 5, 6, 7 years, and strong same-store sales, and they see more of those 5, 6% same-store sales growth ahead of them. So, it's really been a story of execution and getting customers in the door, despite retail elsewhere struggling so much. Stock is mid-20s, price-to-earnings multiple, so I wouldn't rush out to buy it, but it's been a good performer. Again, the past 5, 7 years, not so good the past 12 years. kind of middling. O' You're not rushing out to buy it, but the company did announce a buyback of about $200 million worth, so ... Yeah, I think they've finally worked out a lot of things the last six, seven years,

and now they have the cash to buy some shares, and they're getting on the bandwagon of that popular move right now. O' That does seem to be real bandwagon behavior, right? I mean, we're seeing it all over the place. It just has to make you wonder, like when we sort of see the challenges in the retail space now, I'm not saying the R word here, but you start wondering, if they're having trouble finding growth, they need to return value to shareholders in other ways, and share repurchases are one easy ... they always seem to get the positive vibes from the headline. We always tell people, look a little bit further, look a little bit deeper, right?

Shares of Party City hitting a new low this week, after third quarter profits and revenue both came in lower than expected. Ron, I don't mean to pick on them, but this is the quarter that included Halloween. Yeah, 335 temporary Halloween stores, actually, which was 20 more than the year prior. And average sales per store was up about 2% for the Halloween stores. That's OK. It's not knocking the cover off the ball. But it is growth. It's growth in terms of number of stores, and it's growth in terms of average sale per store. So not terrible. And in fact, the quarter itself wasn't that terrible. We did have retail sales up 4%, and operating income up 9%. But results were worse than both management and Wall Street

was expecting. The one-two punch. You'll recall this company only went public back in April at $17 a share, and now it's probably at around $13. Not such a great first year for Party City. Lots of debt on the balance sheet from when Thomas H. Lee Partners took a big stake in it. So, a couple billion dollars of debt. They've got to service that. I don't love the shopping experience there. We've got one relatively near our home that we frequent every now and again. It gives me a headache. Stock's down 36% for the year, and it's not a great first year for them. I don't know, Jason. I feel like it's completely fair to ask the question, if you people can't get it done in the quarter

that includes Halloween, what makes me think you're going to get it done any other quarter during the year? Well, I've got the dilemma here now. Ron, if I give you the choice between the Oriental Trading Company and Party City ... Oriental Trading Company, we know Warren Buffett bought that, Berkshire Hathaway Company now, and I think you probably saw there's a good e-commerce opportunity there. If I give you the choice between those two companies, which one would you take? So, do I want to buy online junk or brick-and-mortar retail junk? You said it's not a good shopping experience. At least you don't have to leave

your home to get a crappy shopping experience. I'll support Mr. Buffett, always. So true, though. I mean, we did all of our Halloween shopping on Amazon. Yeah. So did we. I mean, our costumes and everything, actually. Radioatfool.com is our email address. Email from Lucas Hien in Germany. I only started investing about a year ago, and the thing I've been proud of the most is being able to control my temperament. The problem I have now is that the first stock I ever bought, Amazon, is also my smallest position, despite being up 150%. This is a

company that I certainly believe will still grow a lot in the future, but I can't seem to justify paying so much more for something that I got for so much less in the past. Do you have any tips for getting over this mental hurdle? We've got about a minute left, Ron. It's a great question. It's a great question, and it's a common hurdle. There's different people who have different opinions about adding to your winners or, conversely, adding to your losers. I think they're both a misnomer, quite frankly. Each time you make a decision to commit capital is a brand new decision. It doesn't matter what happened in the past. It doesn't matter

if you have a gain or a loss on that stock. It's a brand-new decision. It might as well be a brand-new company. So, you need to look at it fresh, with fresh eyes, and make a new decision. Yeah, I like what Ron's saying there. Assess it from that day. Judge whether you think it can be a market-beater from that particular day. Don't anchor on what you paid for before. But with all of this said, it is not easy to get in there and say, I'm going to buy a new winner. But just remember, those companies are winning for a reason. And once you do it. The more you do it, the easier it gets, and I think you can really have a lot of fun. I'll throw in there, adding to winners has been one of my better decisions. And

yes, great job recognizing that you're anchoring on price. Try not to do that. Alright, guys, we'll see you later in the show. Wall Street Journal columnist Jason Zweig is up next. Stay right here, you're listening to Motley Fool Money. Chris Hill. Welcome back to Motley Fool Money. I'm Chris Hill. For more than 25 years, Jason Zweig has been covering business and investing. He writes the Intelligent Investor column for The Wall Street Journal. He is the author of several books, and his latest is The Devil's Financial Dictionary. He joins me now from New York City. Jason, thank you so much for being here. Jason Zweig. Great to be with you, Chris.

Chris Hill. The title of your book is a play off of The Devil's Dictionary by Ambrose Bierce. For those of us who are either rusty in our knowledge of Ambrose Bierce or, frankly, have no idea who he was, give me a quick snapshot. Sure. Ambrose Bierce was a close contemporary of Mark Twain's. He was born in 1842. He is believed to have died sometime around 1914, which is a very interesting story in its own right. You can Google it, Ambrose Bierce death, and you'll be in for a treat. He was one of America's greatest humorists, short story writers, and journalists. And starting in the 1880s, going into the turn of the century around 1905, in bits and pieces, he wrote what eventually he called the Devil's Dictionary, which is probably the greatest work of satire ever written in America and one of the greatest in world literature. in which he essentially made fun of every institutional aspect of American life and culture, from politics to religion and the family,

and all with this biting sense of humor and incredibly sharp, beautifully written prose. And I really hope to do three things with this book. So one is I hope to entertain, and the other is I hope to educate or enlighten, and the third is I hope maybe it'll introduce or reintroduce some readers to beers. But above all, I'm really trying to educate, because I think if you can make people laugh, you can help them learn. It's probably easier to learn if you laugh than any other way. Well, there's definitely some fun stuff in the book, and we'll get to some of the definitions in a minute. But you touched on something which I think is certainly key when it comes to investing and Wall Street, and that is the role that jargon plays and the fact that there are very intelligent

people, very accomplished people, doctors, lawyers, scientists, etc., who are very credentialed. And yet, when it comes to investing, they are in some ways paralyzed, in part because of the jargon that is just thrown at them from Wall Street. Yeah, it's a very important point, Chris. And I think jargon in the financial industry has a particularly toxic aspect to it. I mean, you mentioned doctors. Think of it, for example, you go to your doctor's office and your doctor tells you you have some alarming sounding medical condition. I don't know, you know, peritonitis of the peritoneum or something like that. And you immediately freeze, your palms start to sweat.

But the first thing you'll say to your doctor is, what is that? What does that mean? And your doctor will explain it to you in terms you understand. And if you have a good doctor, she'll explain it to you until she can tell you understand it. But jargon in the financial industry works in a very different way. There, the jargon is not meant to be precise, the way jargon in science or medicine is. It's meant to complicate what otherwise might either be simple or scary. but furthermore it has this extra toxic effect which is when you hear it instead of saying what

is that what most people will do is they'll just nod because they want to be on the inside they want to feel as if you know i'm an insider and so i know what a proprietary leverage discount model is even though those words when you put them together don't really mean anything at all other than the fact that the person who's saying them to you is is either hiding something from you or pretending to know something that he doesn't really know but by nodding and and sort of faking it yourself you make yourself feel as if you understand what's being discussed when in fact you don't. And as soon as you nod, the person telling you about it will stop explaining and will just deepen the jargon. So jargon in the financial industry is

sort of the step before getting beheaded. One of the themes that you touch on in the book, and this is something you've written about before and talked about before, is just the role that luck plays in investing and the way that it is not an odd occurrence. It is not by happenstance. It is, in fact, a very fundamental force when it comes to investing. Yeah, luck is huge. And it's huge for the same reason that it really matters in professional sports, for example. And that's because at extraordinarily high levels of skill, like we have in the financial markets where professional investment managers are operating and competing against each other all day long. Just as in a basketball game or a football game,

the outcome, the deciding factor between victory and loss is often just something as simple as which way the ball bounces or a bad call by an umpire or an injury to a key player at a critical moment. Luck is hugely important in the financial markets because the differences in skill, in level of skill among the players can be very, very small. And so, you know, you get one stock pick correct and, you know, you could be running a $10 billion hedge fund and you get one wrong and you go home. Let's get to some of the definitions in your book. The book is The Devil's Financial Dictionary. It goes on sale November 17th. Rumor, as defined in your book, the Wall Street equivalent of a fact. Yeah, because I think that's really true. And

if you look at what happens in the financial markets, the rumor is actually much more valuable than the news. Once the rumor starts to spread, it gets pulled into the price of the stock or the bond or whatever else is being traded. And then when the fact, the actual news comes out, it's almost like an afterthought. The markets are incredibly good at acting on information. And whether the information is true or false is almost beside the point. It's really the speed of the action that matters rather than the direction. Which leads to maybe my favorite definition, the phrase day trader, which you define as C-idiot. Are you surprised at all that day trading is still something that people engage in?

Because on some level, I am. I thought that it was a phase. I thought it was something that with the rise of the Internet that, I guess I understood it when it started, Jason. I don't understand why anyone would day trade now. Well, Chris, what I often like to say is that people are too good at learning lessons. and you know the lesson that people should have learned after the internet bubble burst in in early 2000 was day trading is a really bad idea but people are too good at learning lessons so they learned an over precise lesson and the lesson they learned was day trading internet

stocks is a really bad idea. So, you know, in recent years, we've seen the same kinds of people who traded internet stock, they traded internet stocks, going into trading foreign currencies. Now, why you would think, regardless of what you do for a living, that you would know more about the value of the yen relative to the euro, then the people who work at the biggest financial firms in the world is beyond me. Making that kind of forecast requires unbelievable knowledge and expertise. And most of the professionals who do it for a living, a very highly compensated living, by the way, aren't very good at it. So why you would think as an amateur you could learn how to do it in a few minutes and do it in your pajamas on your iPad at home just escapes me. But people

learn the wrong lessons from their own mistakes. And one more, because I don't want anyone to think that you have spared yourself and your colleagues from this book of yours. You define financial journalist as someone who is an expert at moving words about markets around on a page or screen until they sound impressive, regardless of whether they mean anything. Yeah, which I think is I think is a pretty good definition, at least of a lot of the financial journalism I read and hear and see. And at least every once in a while, some of the financial journalism I produce myself, you know, there's an enormous demand for what people call content today. And when the demand exceeds the realistic supply, you will get bad imbalances. You'll get people

producing stuff that doesn't make sense, isn't good quality, just because they have to throw something up on the internet or in the newspaper or on television. And that goes on all the time. And it's really unfortunate. You know, there's something in this book, I think, to offend just about everybody. I tried to be an equal opportunity offender. I hope on the flip side, there's something in it that will educate most people and amuse at least some people. You're listening to Motley Fool Money, talking with Jason Zweig from The Wall Street Journal. His new book is The Devil's Financial Dictionary. Let's talk about the content that you refer to, because you know investors have more access to more information than ever

before, and that can be a good thing, that can be a bad thing, and maybe a good example of that is Twitter. You're on Twitter. How do you think it helps investors? How do you think it hurts them? Well, I think Twitter is a fabulous example, Chris, because I think if you use it wisely, it can be very beneficial. I think most people don't use it the way they should. of the biggest, the single biggest danger any investor faces is overconfidence, coming to believe that you know more about something than you do. And the biggest contributor to overconfidence is something that psychologists call confirmation

bias, which is the human tendency to gather and pay attention to information that confirms the point of view you already hold. And so what I think a lot of people do on Twitter is they follow people who agree with them because they agree with them. And you essentially build this enormous amen corner in which all you're doing is sitting in an echo chamber of people telling you that you're right and everyone else is wrong and only the people who agree with this select community you've constructed are possibly right about anything. And if you use Twitter that way, you quickly become like a liberal who only listens to or watches MSNBC, or a conservative who only watches Fox TV. And I'm not making a political judgment on either side of the spectrum.

I'm just saying, to be an intelligent, informed voter and citizen, you should be ingesting information that comes from all parts of the political spectrum, not just from people you agree with politically. And the same is true as an investor or just as an intelligent thinking citizen. You should seek out as many people who will challenge your most cherished beliefs as you possibly can find. And that's what Warren Buffett and Charlie Munger will tell you has been the secret to their success. They don't try to prove their beliefs before they invest in a stock or another asset.

They try to disprove their assumptions. And it's only after they've tested their beliefs that they're willing to act on them. Every year, the Gerald Loeb Awards honor the best in business and financial journalism. It is the highest honor for a business writer. and in 2013, the award for personal finance went to Jason Zweig. His new book is The Devil's Financial Dictionary. Just in time for the holidays, pick up a copy for the investor

in your life. Jason, thank you so much for being here. Jason Zweig Thanks for having me, Chris. Chris Hill Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and 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. It is that time

once again, time to get the stocks on our radar. Ron Gross, you're up first. What are you looking at this week? Oh boy, I'm going to go to Perry Ellis. P-E-R-Y. It is getting caught up in this retail sell-off. Down 7% on Friday. Stock has dipped under $20 a share. I think it's worth closer to 30. Buyer beware, though. They don't report until November 19th. And if the retail sales we saw this week are any indication of what it might look like for them, there could be a sell-off. If you're a long-term investor, you don't mind buying and seeing a stock dip, then you have no problem. If you're the kind of person that really would kick yourself

if you bought a stock and it fell right the next week, you might want to hold off. But I think they're doing a great job. They've transformed themselves over the last two years, exiting non-core brands, low-margin brands, really increasing the growth of their core brands. And so, in addition to cost-cutting of $20 million per year, I think the stock is significantly undervalued. I don't know if you're scheduled to be on next week's show, but I have a feeling we're going to be talking about Perry Ellis, whether you are here or not. Look forward to it.

Jason Moser, what are you looking at this week? Sure. Ron, I know you're hungry. I'm going to make him a little bit hungrier here. Going with White Wave Foods, ticker WWAV. The reason why I think investors need to look at businesses like these is because they aren't limited to just one channel of distribution, like a bigger grocery store, for example. So, White Wave's customers include Walmart, Costco, Trader Joe's, and they're responsible for brands like Silk and Horizon Organic and other brands like that. You'll find them all over the place. Land O' Lakes is another one. But they recently acquired Earthbound Farm in 2013, which is an organic

salad packaged fruits and vegetables. So, you'll find a lot of that stuff in Trader Joe's. Again, this is kind of like that Haynes Celestial play. You're going to find them all over the place, and people got to eat, Chris, and they care more about what they're eating today than ever before. The company reported recently a good quarter. The stock has pulled back a little bit, trading around 35 times full-year estimates. I think it's starting to look a little bit more reasonable. Before we get to your stuff, I'm just curious. I feel like we're hearing this more and more, that it makes me wonder if investors are just starting to get a little bit more valuation-sensitive, that they're looking

at stocks and saying, you know what, this is still a little too pricey. I think that's a good point. I think we are actually getting a bit more valuation-sensitive. Ever since we've heard more and more talk about rates coming up, you're seeing a little bit more volatility in the market. You're seeing a lot of these growth stocks out there that have been more or less bid up on the promise of future profitability. We've seen a lot of those multiples come back. And I think that typically, when there is any kind of concern in the market, you definitely see those take a whack first. But yeah, valuation is becoming, I think, a bit more of a concern.

Yeah, I'd say it's been a difficult year for most stocks. I'd say a majority is my guess. Where's Steve this week? Steve is on vacation this week. Oh, okay. Well, then why am I pitching this? You're just sharing an idea with our dozens of listeners. What's on your radar? So, I've talked about this in the past, but not for a long time. It's Skyworks Solutions, ticker is SWKS. They're a semiconductor manufacturer that actually has rising margins and has a competitive advantage that I believe is sustainable.

The more content that we're demanding from our phones and tablets and our Internet of Things devices, the more manufacturers need Skyworks products, which are customized for each customer. Now, Apple is a giant customer of Skyworks, so the stock was hit this week on reports of Apple's iPhone 6S,

maybe slightly lower demand than hoped for, but the stock trades at about 10 times forward earnings estimates, and I think it's a good long-term investment in the Internet of Things, as well as smartphones and mobile computing. And the ticker symbol? SWKS, and we own it in pro, and I own some myself. All right. Jeff Fischer, Jason Moser, Ron Gross. Guys, thanks for being here. Thank you, Chris.

Thank you. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Anne Henry. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.