Motley Fool Hidden Gems Investing - The Future of Facebook

Episode Date: July 31, 2015

Facebook and LinkedIn fail to impress Wall Street. Twitter plummets. And Whole Food slips. Our analysts tackle those stories and discuss when to sell a stock. Plus, MarketWatch columnist Chuck Jaffe talks Apple, mutual funds, and investor sentiment. Learn more about your ad choices. Visit megaphone.fm/adchoices

Chris Hill, joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argersinger, and from Motley Fool Pro and Options, Jeff Fischer. Good to see as always, gentlemen. We've got the latest earnings from Wall Street. We will dip into the Fool mailbag, and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the social network. Facebook's second quarter revenue topped $4 billion for the first time, but spending increased more than 80%, Jeff. At least in terms of the stock, which is down a little bit this week, that seems to be what investors were focused on, the amount that they are ramping up their spending.

Seems to be, Chris. And it reminds me of Google in its early days when it really ramped up spending, and you need to. Facebook is serving more than 1.4 billion people monthly on the site, and they want that experience to be top-notch. And so they're investing in server farms and technology and people, of course. They're serving almost a billion people use Facebook daily, and it gets about 20% of all time spent on smartphones is on Facebook properties. So, I actually think Facebook is the best-positioned website property in the world right now. And I never thought someone would supplant Google, but I think Facebook is best-positioned. It has a lot of traffic to still monetize. It has great properties, great loyalty of users.

And I own shares. I would still be a buyer now as well, too. O' I think you don't even talk about their ... we don't really get a lot of light on the numbers that Instagram and WhatsApp and ... Facebook Messenger, too, which is a huge, huge popular app. O' Yeah, Messenger, exactly. They broke that off as a separate app. You're looking at $300 million on Instagram, $700 million on Messenger now, $800 million-plus on WhatsApp, and that's all traffic that really hasn't been monetized yet, at least to the degree that they feel they can.

True, Jason. And 450 million people are using events, 850 million using groups. So, what I love about Facebook, they have so much optionality to build into the site. Search is starting to take off, too. 1.5 billion searches a day on Facebook. Now, this sounds really simple. I know someone at Facebook is listening. You can make it even more integral to your daily life. If that becomes the place where you go to check your weather in the morning to get news, which I know they're working on news, But Facebook has the chance to really become your home hub online for not just your social network, but almost everything you do. Shares of LinkedIn falling on Friday, despite second quarter sales rising 33%.

That seems like a nice number to me, Matty. What's going on here? It's a very, very nice number. I mean, the overall member count is growing very nicely as well, up 21% to 380 million members. The one thing I'll say about LinkedIn, though, that has me a little concerned, and I think you're seeing this in a lot of social networks, though, in LinkedIn in particular, is that the member count's nice, but the active user count as a percentage of that member count is actually declining. If you look at it in the past quarter, 97 million of those 380 million members, or about 25%, were visiting LinkedIn about once per month. In the same

period last year, it was about 27%. That's not the direction you want to be going. One One area where they are growing very nicely is China. I noticed in China that they reached about 10 million members. That's almost triple where they were a year ago. The key for LinkedIn, of course, is the business. It's the talent solutions business. That's up 33%, so $443 million. Display advertising, though, has been weak. One thing I noted is that they recently purchased Lyndon.com, which is an online training video tool. They almost doubled their overall revenue projection for that business, but they didn't really raise their overall company revenue guidance by the same degree, which suggests that, OK, take out

that acquisition, LinkedIn's business is actually not performing as well as it should be. Yeah, in a way, it's almost a little unfair. We've talked before about how acquisitions are tough to pull off and execute well, and they shell out $1.5 billion for Lynda.com, which is this video library where you can learn and develop new skills. They do really great integrating data to the business. And in a way, they kind of got dinged for it. It's like, well, you made more money off of that than we thought you were going to make, so we're going to sort of sell you off because you're not making more money in the basic underlying business.

Right. And again, it's almost the same conversation we're having with Facebook. It's that these businesses and these platforms are investing so heavily in themselves. And I think in LinkedIn's case as well, making good acquisitions. The problem is, if you expect LinkedIn's profits or revenue to really, really take off the way they have been, you're going to be disappointed. How concerned are you that for the second quarter in a row, they're lowering guidance? It's a little concerning. I'm more concerned about the usage factor of the platform. No one's really talking about it on the street. If that continues to decline as a percentage

of total members, I'd start to get really worried. I agree with that, Matty. Facebook has it in one way easier, because they still have relatively few advertisers. I mean, they have 40 million small businesses advertising on Facebook, but that's tiny compared to the market out there. So, their ad revenue goes up 74%. Mobile ad revenue jumped 74% this quarter. Once you have traction, once you have a good ad platform, your ad revenue can grow quite quickly if you have the sales force to drive it. LinkedIn, in contrast, is mainly selling enterprise software, which is a longer sales cycle, bigger ticket item, takes more time to grow your revenue, and yet they're

spending to grow rapidly at the same time. So, they need more time to make that work. That's right. Twitter's second quarter revenue rose 61%, but the company lowered guidance for the third quarter and shares down around 10% this week. Jason, we were talking about this earlier. As investors, we always want management to be as open and honest with us as possible. But in this case, the honesty from Twitter's management about their future prospects is largely what sent the stock down. It was brutal honesty, indeed. As a shareholder, I'm actually OK with that honesty

because I feel like they've done a pretty good job of trying to cupcake their quarters up to this point. This quarter was a mixed bag. Revenue growth, as you mentioned, was strong and user growth was not. Wall Street is going to focus on user growth here. When Anthony Noto spoke in the call and mentioned that they did not see any turnaround coming really quickly, that's when the stock really plummeted. The concern is valid. Twitter needs to gain users. I think that management's correctly identified the fact that the company's failed to communicate why people should use Twitter and the value in Twitter. So, the actions that they're going to be taking here for the second half of the year should reflect trying

to communicate that value more. They're hiring a chief marketing officer, which I think is good. The two catalysts that are coming up right now, really, Project Lightning, which to roll out here at the end of the year. I think that'll be something they can use to focus on big events coming. Think about, we have a presidential election coming up, the Summer Olympics, things like that. Really, the key for them right now is, they need to get a CEO in that seat. A permanent CEO to help steer this business in the right direction. This temporary CEO leaves everything to question right now. You can't be confident that the strategy they're talking about today will be the strategy in place six months from now.

That's what we need to know. I think you talked to me after listening to the call that you got the sense that Jack might be sticking around. Jack Dorsey. He did not sound like a temporary CEO. He sounded like ... He wants the word interim removed from his title. He just sounded like he was thinking about this business in terms of years, and not just filling a role. Honestly, I would be okay with him being the CEO there, because

He's a co-founder and he's a user of the product. He obviously helped develop it. I think that's what they really need, is someone who can think from that perspective. It wouldn't shock me if he ends up getting that job, but still, the question's out there and nobody knows. Shares of Baidu down more than 10% this week. Second quarter profit for the Chinese search engine giant was lower than expected, and they lowered guidance for the third quarter. Matty, they are spending an awful lot of money. Right. Another story where we have this incredibly popular huge platform that is just investing in itself a lot, and so it's going to make short-term profitability look pretty bad.

But look at the top line for Byte. We kind of remember how big this company is already, but revenue was up 38% in the quarter, $2.7 billion. The amazing thing of that is 50% of that revenue is coming from mobile, where you go back just a few years ago, and the company really didn't have much of a mobile presence at all. And so what they've invested in is really paying off. They have 629 million monthly active users, mobile search. I mean, that's an incredible number. What's that number again? 629 million.

That's roughly, what, twice the size of the United States, I think. You know, 590,000 active advertising customers. That was up 21% year-over-year. But really, it's all about the profitability. If you look at the operating income for Baidu, it was actually down year-over-year, which was troubling. But this is about a company, I think, that's investing heavily not just on mobile, but it recognizes that the world is moving towards an app world, where it's not much about search. We talk about TripAdvisor, Priceline all the time. I don't need to go to Yahoo

or Google anymore to search for hotels in Hawaii. I can use those apps and live within those apps. I think Baidu is recognizing that. They're making a lot of investments in travel being one. I'm going to really butcher this, but ITE, which I think is a new video streaming service like Netflix, they're building that out. All that takes a lot of money. It's hard to move from a core search to app world. So, we've talked about LinkedIn, Facebook, and now Baidu all investing heavily in themselves. I'd just like to point out, it's great to hear that. For years on the show we've been talking about companies sitting on cash and not spending it. This is good

for the economy. Of course, it may only be partially offsetting all the energy companies that are pulling back the reins and not investing. But to that point, though, you can look at what Baidu is doing as an expensive bet, but if it pays off, then nobody's going to care about the stock drop. No, no, no. Exactly. It's the same thing that Jeff said about Facebook. These 629 million monthly active users, they want them to have a great experience. If they are having a great experience and spending and using Baidu apps, that's going to be a huge business. Up next, Priceline is not the only online travel stock putting up some big numbers.

Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. Chris Hill here in studio with Jason Moser, Matt Argersinger and Jeff Fischer. Guys, shares of Expedia hitting a brand new all-time high this week after second quarter profit came in higher than expected. The online travel company also raised their dividend. Jason, this looked pretty strong all the way around. Yeah, it was strong, absolutely. I think the most attractive part of this industry is the actual size of the market opportunity at more than $1 trillion. And so, these online travel agencies are obviously chasing after a lot of money that's still out there. Very

strong performance in international hotel bookings. They continue to grow their network of hotel rooms. Gross bookings ended up growing 28% after X currency effects. They recently sold their interest in Yilong, a Chinese interest, in May. They did clarify on the call, though, they still intend to pursue that China market. It's obviously a much more difficult market to gain entry into. But they are continuing on with the Orbitz acquisition. This should close by the year's end. Again, when you look back to the market opportunity, the way they're managing this company, Priceline isn't the only way to win in this business. You mentioned the numbers that they're putting up despite the currency effects.

I'm wondering if investors should ... I don't know, should we be rethinking companies that come out and say, well, the strong dollar hurt us? I get that that's a very real thing, But on the other hand, you have companies like Expedia that are still knocking it out of the park despite that. Well, we look at currency effects, generally speaking, as a long-term net-net. We don't really see it as a major part of the thesis in any kind of case. I think when we look at how much more global we are today in the investing world, I think that currency effects are just always going to be a part of these reports.

As long as you have a company that's not too terribly exposed one way or the other, then I think we just keep on moving forward. Third quarter profit and revenue for Whole Foods both came in lower than expected, and same-store sales rose just 1.3%. Jeff, Whole Foods co-founder and co-CEO John Mackey sits on our board of directors. It was tough to find some optimism in this quarter. It was. One thing that really hit the company and the stock was the problems with pricing in New York City, in New York State. But Whole Foods is saying that was inadvertent human error.

It happens at every grocer around the country, is what they say. Whole Foods has, for some reason, it went viral. This news went viral. It was at a small set of stores, and they're correcting the problem, or have corrected it. But they really now need to get out there and let people know and repair the damage that has been done to trust. list. Whole Foods is already viewed, for better or worse, as an expensive store. And now, you take away some trust, and it's going to hit them hard. Same-store sales were running

around 3%, their average result, most quarters. And it just fell through the floor when this news went viral. So, that's what really hurt them. Well, we were talking about this earlier. I think part of the reason it went viral is because it does play into that, fairly or unfairly, it does play into that preconceived notion that this is an expensive place. And when they have this issue where there is pricing that is not accurate based on pre-packaged food by weight, and sometimes it works out in the customer's favor, that just totally gets lost. It's so much easier for people to just wrap their head around, well, it's expensive, and they're overcharging.

It's ripping me off. It's our cynical society, too, like, oh, they're trying to rip me off, when yeah, sometimes it went to the customer's favor. This happens everywhere. John Mackey said in the conference call, well, we'll try to be perfect, we are trying to be perfect, but weight can be off by a tiny bit. Yeah, and I think where this perception hurts the most is among millennials who obviously don't have huge amounts of spending for groceries, and they're just probably not going to Whole Foods anyway. So, they're launching this new concept next year or later this year, but what always befuddled me was what they're calling it, which is 365 Buy Whole Foods,

which I just thought they were going to go in a different direction there. So, I'm curious about how successful that's going to be in light now of the pricing issue. Yeah, Matty. So, Whole Foods, the flagship stores, they have 424 now around the country. They expect to have 500 in 2017. And they still aim to have 1,200 Whole Foods in the long term. But these 365 smaller urban-centered stores start to open soon, as soon as next year. And small footprint, value, quality, equilibrium they're trying to offer. I like the name because I like the Whole Foods 365 brand. I'm not sure why, but I was taken by it right away. I'm like, it's a value, it's good quality. So, I look forward to going

to check these out. Alright, we'll see how they do. Cybersecurity company FireEyes. Second quarter results were overshadowed by the fact that Chief Financial Officer Michael Sheridan is leaving the company. He's been there five years, Matty, and it always seems like, all things being equal, it is a slight negative when the CFO walks out the door. I know, but just before we get to Look at this. Revenue was up 56%. They raised guidance. Deferred revenue, which for a lot of companies is kind of a backlog of orders, up 77%. Operating cash flow turned around from a loss of $61 million last year to a positive $39 million. Overall, the results

were really great for FireEye, but none of that matters. None of that matters, because their CFO, as you said, Chris, Michael Sheridan, is leaving to pursue an opportunity at another technology company. Sometimes, I think this is a bigger deal. But for this situation, here's a guy, he's not a founder of the company. This is, according to Forbes, his seventh company over the last 15 years. O' So, two years, he's ready to move on. Right. I just don't think this is a big deal. I know the stock sold off because of it. But given the quarter, I just think, if you're interested in a company like FireEye and the cybersecurity space in general, this might be an opportunity.

I was going to say, I'm bullish on hacking. I think hacking is here to ... O' You're bullish on hacking. If I could buy stock in hacking, I would buy it. So, it seems like there's a future in cybersecurity. FireEye. Ticker is F-E-Y-E, correct? That's right. Boston Beer's second quarter looked pretty good. Profits up, sales volume on the rise. So, Jason Moser, why is the stock falling a little bit? It was a decent quarter. They beat expectations. There was 7% growth and barrels

shipped. I'm a little surprised by the market's reaction. I really thought this thing was going to sell off, which it hasn't sold off nearly as much as I thought it would. And The reason why is because depletions, which is a metric we use to see how they're doing in volumes quarter in and quarter out, it's the distributors' sales to the retailers of the company's beers. Depletions were a little weak for the quarter, and they actually guided full-year depletions down. That's a metric, that's kind of like same-store sales. The market sees that as same-store sales, that's the depletions metric. When the weak guidance comes in for that, usually the stock gets hit pretty hard. It didn't get hit as hard

as I thought, because they reiterated earnings guidance for the year. This is one we have on the watch list in MDP. You look at the stock today, now it's trading at around 30 times full-year estimates. So, it's starting to look a lot more attractive now, given the long-term growth prospects. We're going to be digging into this one next week. So, you're actually hoping it gets knocked down further? Oh, I would love to see it get knocked down further, Chris. We've got about 30 seconds left. Do you have a beer recommendation for anyone thirsty out there? Wow, boy, there's just so many

out there. I'm going to go ahead with Sam Adams, though, just because I think their cold snap beer is really good. It's out of season right now, so if you want to get a summer ale, I know Matty likes that, too. Oh, the summer ale is just, wow. All right. Jason Moser, Matt Argesinger, Jeff Fischer, guys, we will see you a little bit later in the show. Up next, a conversation with MarketWatch senior columnist Chuck Jaffe. Stay right here. You're listening to Motley Fool Money. Baby, you're the rich man. Baby, you're the rich man, too.

Welcome back to Motley Fool Money. I'm Chris Hill. For many Americans, their first investment is a mutual fund, whether buying direct or through a 401 plan at work. And it adds up. The United States has the largest mutual fund market in the world with somewhere in the neighborhood of $16 trillion in assets. It is a subject extensively covered by our guest this week. Chuck Jaffe is a senior columnist for MarketWatch and host of The Daily Podcast, Money Life with Chuck Jaffe. Chuck, thank you for taking time out of your busy schedule this week. Chuck Jaffe Chris, it's always great to chat with you.

Let's start with the biggest company out there, and that's Apple. The stock dropped a little bit after its recent earnings report. I know what that means for people who own the stock, but what kind of ripple effect does something like that have for people who own mutual funds? Well, ideally, most fund investors wouldn't have noticed. But if you're one of those folks who charts your portfolio every day on the Motley Fool site or the MarketWatch site or wherever, and you look back when Apple was announcing and you saw, well, my portfolio is down a couple of percent, there's a good chance that you've got too much Apple.

And it's not that you have too much Apple necessarily in any one portfolio. It's just that Apple fits a ton of mutual fund profiles. I mean, obviously, any large-cap fund, any index fund, those sorts of things are going to have it. But you find value managers who have Apple stock. You find growth managers who have Apple stock. And it's all bad for a fund manager to not have Apple because it basically is going to mean that they don't perform like their peer group if they have anything to do with large-cap stocks. So the result is you have a lot of overlap. There's a lot of Apple in a lot of different funds.

You might think you're diversified, and there might be a little more Apple sense than you thought. Last time you were on the show a couple of years ago, the market was already doing well. It's up about another 40% since then. And there does, however, seem to be this skepticism sort of in the air out there. Is that simply a function of the fact that we are now in year six of a bull market? Well, I ask this question to experts all the time. people are a lot smarter than me. And yes, there is something about it where people have gotten to where, well, this can't continue. And since it can't continue, I'm not going to buy in right now.

And if the market were a coin flip, a 50-50 proposition, then you might have some gambler's fallacy going in. You know, the gambler's fallacy is that, oh, well, we just had five times where the coin was thrown and it was heads five times in a row. So that either means that the sixth time it's likely to be heads because we're in a hot streak, or the sixth time it's likely to be tails because it can't stay heads forever. Well, in each case, every throw is a pure 50-50 proposition, period, end of story. So I think you get a little bit of the fantasy in there that, you know, this can't keep going on forever.

But I think the bigger side is that bull markets really don't end when so many people are skeptical. And it's not just me that says that. it, guys like Jeremy Grantham or Bob Dahl from Nuveen or whatever. You can find plenty of experts out there who will tell you that bull markets end when everybody is thinking, wow, this is great. I can't wait to get in. I wish I had more money to throw in. It's all easy. And you're not hearing that now. And so until you get to that optimism, it's not that you couldn't have downturns and everything else, but you're not likely to have the market roll over and have the major crash.

You mentioned Jeremy Grantham. He was one of the featured speakers out in Chicago recently at the Morningstar Investor Conference. You were out in Chicago for the conference. What was your headline? well when it comes to jeremy grantham everybody missed the headline and i didn't actually write about it but i'll be happy to tell you about it which is that you know jeremy grantham the headlines for his speech were that jeremy grantham sort of thinks the market's about 40 percent overvalued i believe the number he used was 42 and when jeremy grantham says hey it's 42 percent overvalued that means he thinks that you could blow off that much so everyone heard that and said, you know, Grantham sees bubble building and what have you. But what Grantham actually said was, yes, the market's overvalued, in my opinion, and I do see things building bad. But as I just

pointed out, you don't wind up seeing a bull market end until everybody is optimistic. So since that's the case, he was suggesting that people continue to invest, ride it, understand what may be coming, but take advantage of what's there right now, which is conditions that are going to make the market keep going in the right direction. You're listening to Motley Fool Money, talking with Chuck Jaffe, Senior Columnist at MarketWatch. One of the things you wrote recently, and we're obviously just past the halfway point of the year, but you wrote something recently, five easy-to-answer questions about your portfolio mid-year. And the one that leaped out at me, Chuck, was a question that I had never really considered before, and it's,

did anything in my portfolio make too much money? I guess I never thought of that as a problem, but the more I think about it, like, yeah, that is actually a question you want to ask. Well, you at least want to know. I mean, you want to look at surprises, and you want to look at surprises in both directions. And it's sort of akin to, you know, if the market tomorrow goes down 1,000 points, you're going to be talking about it, your site's going to be filled with it, my site's going to be filled with it, etc. Nobody, 1,000 points, oh my gosh, the market lost 1,000 points. But if the market gained 1,000 points tomorrow,

it's the same amount of volatility, it's the same percentage move, but nobody's going, wow, the market moved up too much, this is a bad time. You want to be aware of surprises. You want to be aware of them in either case. And sometimes when you get a positive surprise, if it's beyond your expectations, that's a good sign that maybe you want to take a little bit of profits. Not you want to sell necessarily, but hey, if the market's going to reward you beyond your expectations, maybe lock in some of those profits and see if you can put it someplace where

you think maybe you haven't gotten ahead of perhaps what you expected in the growth curve. One of the things you wrote about recently was sort of the fine line that money managers have to walk between what's best for them, what's best for their clients. How fine a line is it, and do you think it ever becomes a problem? Well, I think it's a problem all the time. I think, you know, no offense to anyone in the industry, they know I'm an equal opportunity offender. I hate them all. But the truth is that financial services companies put out things that are definitely best for the financial services company they're not always best for the investor and that includes a lot of the new products and everything else and there are times when you as

an investor if you decide to try a new product you're basically the crash test dummy who has buckled in for this thing and maybe it works out and maybe it doesn't and sometimes these products die from lack of interest and you're left with gee i i suffered significant opportunity costs And I got hit with a tax bill for my pleasure and didn't really get much of anything. Because if performance was any good, well, the public would have taken notice. So the fact that they can do things doesn't always make them good for the public. And the truth is we have significant sort of kill-off. The fund industry, but particularly the ETF business, is throw it up and see if it sticks.

And you know what that means? That means that you could be covered with goo whether it sticks or not. So I'm not always a big fan on, yeah, this is somebody's new idea. That doesn't mean it's a great idea. New is not always improved. Well, it's interesting because if you think about the technology industry, it's almost like they're covered because they get to use the word beta. Well, this is just the beta version of this app or this software or that sort of thing.

Whereas I feel like if the financial industry threw the word beta on top of any new funds, ETFs, whatever that they were putting together, that would help reset expectations for the clients. Well, but sadly, the word beta is in there a lot. It's called smart beta, and it has its own set of meaning, different from the one that you're talking about with the technology industry. I mean, the real issue is this. We are left with a variety of products where people are basically saying, hey, I can make something from scratch today, and it can be better than what's out there and i think in some cases they're actually telling the truth and if you think about what we're talking about apple stock i don't really understand why

anybody would like to have a market cap weighted index which says hey because you're the biggest will make you the biggest and to me it makes much more sense if you believe you want to buy the 500 companies that make up the S&P 500 to do it at equal weighting. And that way, you have each piece holding the same amount of stock and weight in your portfolio, regardless of their weight overall. So that way, if a little company takes off and does great, you benefit from that more than you would in a market cap way. So sometimes you're getting products and they are real improvements, but they're not such a grand improvement that you have to say, well, let me sell what I've got, especially if there's a tax hit involved,

to move into whatever the newfangled product is. And I think that's the side. And by the way, whatever we create today, they're going to create something new tomorrow, and they're going to tell you it's better tomorrow. And some of it might be, and a lot of it won't be. All right, last question, then I'll let you go. Donald Trump is very much in the news this summer. I'm not asking what you think about him as a presidential candidate, but I am curious, what is your opinion of Donald Trump as an investor? Well, okay, if you read his full disclosure, that is different from what I did in a column. I wrote about him as a mutual fund investor, and I simply looked at his fund portfolio.

And in his fund portfolio, he's way too concentrated in the funds of another brash New Yorker, that being Ron Barron. which would not be, if I was going to invest in one fund company, the Barron Funds would not be it. So he was heavily invested in the Barron Funds, and then he has a few others, much smaller fund holdings. As a fund investor, he's not exceptionally diversified, at least by management company and management style.

And the funds he owns are expensive to their peers. Even if he's got institutional share classes, is he's not getting institutional share prices, perhaps, is the way to put it. So from the standpoint of a fund investor, you know, Donald is being the Donald. He's paying up to get what he wants, but that's not necessarily the most fiscally responsible way to invest in funds. As for the rest of his portfolio, it's really tough to judge. You're talking about over 300 names of investment,

including lots of overlap where he owns Apple stock or Microsoft in multiple portfolios he is he definitely favors big name companies who understand that the rich are much different from the rest of us in terms of if donald trump makes a mistake whether it's his fund portfolio or anything else he can afford it now here i'll also tell you one other thing after i wrote my column on trump and his fund portfolio a whole bunch of people said well how come you haven't written anything about hillary well i haven't written about hillary because, at least to this point, she's never written books on, you know, hey, follow me and the way I make money, do part of the deal.

So I hadn't done it, and I may or may not write about her portfolio. But you know what? Hillary's portfolio, according to her most recent disclosure, includes two funds, two publicly available mutual funds. And they both invest in the same thing. It's the S&P 500. And by the way, the famous investor who suggests that, hey, you know, if you wanted to just go off and buy an S&P 500 index fund, that would be Warren Buffett who suggests it. So I think Hillary's strategy is interesting, not from a political standpoint, other than the fact that it kind of makes it that in Trump's case, you look at all those companies and you start to wonder, will there ever be conflicts of interest or anything else?

In Hillary's case, you look at it and you go, well, she's invested in the Vanguard Index 500 with the vast majority of her fund money, and so she's getting it cheap and easy, and nobody can really say, wow, you have a lot of individual stocks. So that's my take on it. You got a little bonus on Hillary's side because I haven't written about it, but that's where she stands right now. You can read more from Chuck Jaffe at MarketWatch.com, and also check out his daily podcast, Money Life with Chuck Jaffe. It's available on iTunes, pretty much anywhere you can find podcasts. Chuck Jaffe, thank you so much for being here. Thanks for having me, Chris. Stay thirsty, my friend. 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 interests 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, Matt Argersinger, and Jeff Fischer. Guys, before we get to the stocks on our radar this week, let's dip into the Fool mailbag. You can always drop us an email. Radio at Fool.com is our email address.

Question from Seth Smith, who writes, I'm a long-term investor, but when is it time to cut bait with a stock? I like and own InvenSense, but the performance has been subpar. Is it time to sell if I have better ideas?" We can't really give the specific advice around InvenSense, but Jason, the question of when to sell is one we get a lot. Do you sell when you have a better idea? I think that's one reason. I recently wrote about this, and I'll just give you four reasons why you might want to consider selling. One is, the thesis is broken. That's not always so easy to determine in InvenSense. I think the jury's still out there. But yeah, if there's

a better opportunity for your money elsewhere, that's another reason. Or, No. 3, if you need the money for something. And No. 4, if you feel that you're too overweight in a given holding and you're actually losing sleep at night, that's when you might want to ratchet back a little bit. Well, I think Seth nailed it in his question. I think the No. 1 reason you should sell, and it's one of Jason's, is if there is a better opportunity out there. If you look at a range of companies that you're interested in buying and you say, you know what, I've owned in Ventsense, it's disappointed me, it's not living up to expectations. I just

think I'm going to get a better return out of XYZ. Always, always invest in XYZ. Question from listener number 349. No name, just a number. I make monthly contributions to my discretionary portfolio, and at times my cash position gets pretty big because I have this aversion to adding to positions significantly above my cost basis. This is a shorter-term portfolio with more conservative dividend payers. Could you discuss the pros and cons of monthly cost averaging into positions, winners or losers, versus building cash to wait for pullbacks?" Do you have a preference of those two that you use as a strategy, Jeff? A strong preference for any long-term portfolio would be to add on a regular basis,

a monthly basis, rather than wait. There are several reasons for that. One is, over time, the market, on average, does go up. The value of a good company goes up steadily. Number two, if you're waiting for a pullback, what do you define as a pullback? 3%, 5%, 10%? And then, how do you know that you're going to actually act and act in a smart way during that pullback? Are you actually going to invest your money? Too many people wait for stocks to fall. They finally capitulate and they put their money in after stocks have risen for years. We may slowly be seeing that happen right now with this market. So, it's better to be on a steady program and keep investing. Now, this Fool mentioned that this

is maybe a shorter-term portfolio, so you've got to weigh that in. When you need that cash, don't invest it, of course. I would just look at today as an example. We've been looking at a lot of thoughts out there about the market, ready for a pullback here, and it still hasn't really happened, so I think a lot of people who have been waiting have missed out on a lot. Alright, let's get to the stocks on our radar this week. Jeff Fischer, you're up first. What are you looking at? OpenText, it's a Canadian software company, ticker O-T-E-X. They sell enterprise information

management software, so it helps you manage all of your data and your processes at your business. The company has been hit the last couple quarters as license sales declined in favor of cloud software sales. The thing is, cloud software revenue will be larger than license revenue over a number of years. It's just smaller right up front. So, it's kind of an optical illusion that the business is suffering a bit. It really isn't. So, this quarter, numbers look better again. The stock was up on earnings, but I think it's still inexpensive. So, O-T-E-X, it's one we've owned in pro for many years. O'Reilly. All right, Jason Moser.

Jason Moser. Sure. We're going to go back to the well on U.S. Ecology, E-C-O-L. This is one I have on the watch list in MDP as well. O'Reilly. Going back to the well. Wells as well. This is a hazardous waste disposal specialist, and they made a big acquisition about a year ago of this company called Environmental Quality. They basically doubled the size of its business, and the integration has gone very smoothly, which is encouraging. They make their money a couple different ways, in a base business and an event-driven business. The acquisition gives them 25% share in the hazardous volume industry capacity. I like

this business because there's such high barriers to entry and very high switching costs. It's It's just a little company, so I think there's still a lot of growth out there for it. Really? People aren't looking to start their own hazardous waste company? Thatty, we've got about a minute left. Okay, I'm going with the company we discussed earlier, Baidu. B-I-D-U. I just think they're making a lot of smart investments to diversify their core search business into apps, into e-commerce for one. They also announced a $1 billion stock buyback a day after the earnings came out. They're recognizing the value in the company, and I see a $60 billion

company that should be a lot bigger in the future. Historically, do they have a pretty good track record with stock buybacks? Not everybody does. Good question. I don't. I mean, they do a lot of stock-based compensation, so I'm probably going to doubt that, but I'll have to take a look. Well, at the very least, it was smart that they announced it after the stock had fallen. I mean, on the day itself, it had fallen about 19%. That's right. Alright, Jeff Fischer, Jason Moser, Matt Argersinger, guys, thanks for being here.

Thank you. Thank you, Chris. That is going to do it for this week's edition of Motley Fool Money. The man behind the glass this week is Dan Boyd, so thanks to Dan for helping us out. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We will see you next week.