Motley Fool Hidden Gems Investing - The Future of Movies

Episode Date: March 17, 2017

The Fed hikes rates. Intel makes a big buy. And Caterpillar faces a federal probe. Plus, CNBC's Julia Boorstin talks VR, 3D, and the future of movies at this year's South by Southwest. Thanks to Away for supporting Motley Fool. Go to awaytravel.com/fool and use the promo code fool to get $20 off your order! Learn more about your ad choices. Visit megaphone.fm/adchoices

stop wasting your nights on a mattress that doesn't get you experience the most comfortable mattress in the world the sleep number smart bed at the touch of a button you can personalize your comfort choose firmer or softer adjust cooler to warmer and right now save up to twenty five hundred dollars during our massive labor day event hurry into your local sleep number store today because we have your number. This episode of Motley Fool Money is brought to you by Away. Away makes first-class luggage at coach prices that allow you to charge your phone on the go.

For $20 off your order, go to awaytravel.com slash fool and use the promo code fool. That's awaytravel.com slash fool and use the promo code fool. Also, support comes from Rocket Mortgage by Quicken Loans. When it comes to the big decision of choosing a mortgage lender, work with one that has your best interests in mind. Use Rocket Mortgage for a transparent, trustworthy home loan process that's completely online at quickenloans.com slash fool.

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, and joining me in studio this week from Hidden Gems, Seth Jason, and Chief Investment Officer Andy Cross, and from Total Income, Ron Gross. Good to see you, as always, gents. Ron Gross. Gentlemen. It's like the old guy's day.

It is old guy's day. I resemble that remark. One of us has shaved. We've got the latest headlines from Wall Street. We will talk media and entertainment with CNBC's Julia Boorstin. And as always, we'll give you an inside look at the stocks on our radar. But we begin with the big macro. On Wednesday, the Federal Reserve raised its benchmark interest rate by a quarter percent in a move aimed at fighting off the threat of inflation. Ron, it is seen by the Fed board, at least, that America's economy is getting stronger.

Stronger, but not necessarily strong. Two percent is okay. But you are correct about the inflation being something they're consistently worried about. And their target for the PCE inflation, personal consumption inflation, personal expenditures, is two percent. And we're edging up on that right now at, let's call it, 1.9. So, it's just a target. They're never going to hit it exactly. But they start to get concerned when we see 2 percent inflation or higher. And we're also seeing, as you said, GDP around 2 percent-ish. Not amazing, not terrible either. Time to raise rates. They're signaling two more hikes this year as the economy hopefully strengthens.

I'd be interested to see if anything changed as much at all, because some of the only inflation you hear a lot about now that seems to be becoming problematic is actually some wage inflation, especially, strangely, in lower-wage restaurant workers and stuff. Apparently, it's hard to find people to work in some of these. And we're getting price increases, and we're seeing those of us who follow restaurants, we've got Chipotle, McDonald's, we have all these other ones. They're all getting kind of pinched, and it's not just because of regulation making them raise their wages. Some of them are just doing it because you have to do that to get workers. Well, that's about the only spot that it is then because real wage growth is at 0%, and it's been falling for the past two years. So when you compare the wage growth versus the inflation, as Rahm was talking about inflation,

so most workers in the United States are feeling a little bit pinched with the creeping up of inflation and wage growth not keeping up. So we're seeing retail sales affected very positively right now, so that's going in the right direction. Obviously, stocks are moving in the right direction. But wage growth and productivity continue to be the big problems in the U.S. economy. Yeah, and along those lines, we've got a dozen measures of price increasing of inflation. And consumer prices are the ones that are above the rest, at around 2.7% as of February,

much higher than the PCE, which I mentioned is what the Fed keeps an eye on, which is only at 1.9%. So consumer prices are increasing at a faster tick. One thing we've seen over the last few years, we've talked about the free money forever. That's my favorite kind, by the way. It's a lot of companies' favorite kind. And that's my question. Are we going to see sort of a ratcheting back of companies borrowing money as interest rates start to tick up? I think the inevitable answer is yes, not yet. Interest rates are still historically low. But eventually, that's the point. The Fed tightens it up a bit.

What does it do to shareholders is an interesting question, because a lot of that borrowing was not done in order to put in new capacity or expand operations, capital spending or anything. It was done to sort of fund dividends and do other things that made shareholders some money. The deal of the week goes to tech giant Intel, which agreed to buy Mobileye for the tidy sum of $15.3 billion in cash. Mobileye is in the business of autonomous driving and accounts for about 70% of the global market for anti-collision systems. They've got the money over at Intel, Andy, but even though they've got the money, this was a deal, a price tag that sort of raised some eyebrows. Yeah, I didn't know if you said tidy or tiny. For Intel, it is relatively tiny. They have

$17 billion in cash, and this is a $15 billion deal. Intel does $10 billion in earnings. So, you know, really, it's less than two years of earnings for Intel. So, in the big picture for Intel, which does $60 billion in sales, Mobileye is a really small fish. So, it's all about the growth, you know, Chris, and thinking about where the market's going. You know, Intel has been down this road before. They did make a very large acquisition in McAfee in 2011 for more than $8 billion. And they are now ending up going to probably write some of that down. They announced last fall that they're going to be selling off part of it to TPG at a valuation half what they paid for.

So they'll write some of that down, and they did make a big acquisition last year for another $15 billion of Volterra. So these are two back-to-back $15 billion deals that we haven't yet seen and will have to see. And it'll play years. It'll take years for this to play out on the return for Intel shareholders. Yeah, it's tough to figure out exactly what the price tag meant. I know Andy did some valuation work on this a while ago. So did I. And when I did it, it looked like they would have to be selling their product into every car in the world, except that there would have to be more cars selling every year than actually were for it to even begin to make sense. So they're counting on that technology expanding a lot or getting something else out of it, perhaps mapping data.

Some people have been throwing around. I don't know if I buy that. Yeah, interesting. They paid 40 times sales, which is an extraordinary amount. That's where Ron is over there. But Mobileye has been growing at 50% a year. But five years ago, it was growing at 100% a year. So we have seen steadily declining rates.

Again, plug it into the Intel family, and maybe they can get a better return for their buck. Remember, we were just talking interest rates earlier. Intel's, that $17 billion is making nothing for Intel shareholders. So maybe they're thinking this is a better return on the money than what they can get from keeping that cash on the books. So they'll break even in about 20 years or so, if the growth rate continues. That sounds awesome.

Yeah, if it doesn't work out, it is a relatively small write-off for Intel shareholders. Not a reason to make the acquisition, of course, and hopefully it doesn't work out for Intel shareholders, but it's a relatively little bet for Intel. You have to look like a player in self-driving. Otherwise, all the other kids are going to make fun of you. Yeah, sure. Well, that's the thing. The Uber has it.

This is not a little startup company. as I mentioned in my opening read, Mobileye has 70% of this market, and they're still not selling enough to, to Andy's point, about 40 times sales. They're still not making enough to make this look anything other than an overpayment for their business. You're just not optimistic enough about the future. Caterpillar's making headlines, but not for good reasons. Earlier this month, U.S. law enforcement raided three of Caterpillar's offices as part of an IRS probe. This week, the company hired former U.S. Attorney General William Barr to deal with the ongoing government investigation. Ron, can we call that officially a red flag? Anytime you have to hire the former,

it's like, who used to be the leading law enforcement official in America? Let's get that person. It's a mess, and I feel kind of bad, I guess, for the new CEO, only been there a short period of time, and he inherited quite a mess. You never want federal agents raiding your headquarters, just a little advice for other companies out there, that's bad. The IRS is saying $2 billion hit is coming their way for taxes that they should have paid, probably related to their Swiss subsidiary, although these investigations are always a little bit cryptic as they're going on. The company, of course, says that they are compliant and they are cooperating, but then again, as you said, this week we see a former U.S. attorney

brought in to help matters. And you've got pressure from an investment group, the CTW investment group, pushing for more disclosure, better corporate governance. So, not good times over at Caterpillar amidst a kind of global slump in kind of exactly what their business lines are. I can't wait to see the legal thriller headquartered in Peoria. International thriller. Speaking of Caterpillar, we were touching on this before we started taping today. Where are we with the business of Caterpillar and specifically their industry? And I'm talking about infrastructure, because a few months ago, it really seemed to be all anyone was talking about

in terms of 2017, we're going to have this big boost in infrastructure spending. And it really seems to have quieted down, Seth. Yeah, well, Terex, which is a company we had in Hidden Gems, I took the lead from their own management, which said, well, I'll paraphrase, we ain't seen an infrastructure bill, and we're not going to count on it. Even if we had seen one, that money wouldn't come through for several years. I actually sold Terex on that news because the market continues to value these companies as if there's something big around the corner, and we've seen nothing so far. And we're just not seeing it from international much either yet. Yeah, a lot of companies did get the Trump bump. November-ish was pretty hot for some of these

companies, Titan International, another company we follow, has had quite a run bumping off the bottom over the last couple of years, but still remains weak when you look at it on a five-year basis. These are cyclical businesses, and I'm a firm believer that eventually the cycle does change, but it's always a matter of how long does that take and what rate of return on an annualized basis can you put in your pocket. Therein lies the trick. Yeah, and we've seen no indication from them that things are about to change, except that they're very excited about some of their agricultural tires, but they've been excited about them for a couple, two, three years at least. I am happy to see the balance sheet firm up on that. Listeners of

the show will know I talk about Titan probably too much. I'm still a believer in it. I'm still a shareholder in it. And so, just patience. Yeah. Coming up, we've got some earnings and exciting news from the world of gaming. Stay right here. You're listening to Motley Fool Money. Support for Motley Fool Money comes from Rocket Mortgage by Quicken Loans. When it comes to the big decision of choosing a mortgage lender. It's important to work with one you can trust and has your best interests in mind. With Rocket Mortgage, you'll get a transparent online process that gives you the confidence to make an informed decision. Don't waste time searching through stacks of paperwork. With Rocket Mortgage, you can securely share your financial information to get a mortgage

approved in minutes. You can even adjust the rate and length of your loan in real time to make sure you get the mortgage solution that's right for you. So, whether you're looking to buy a home or refinance your existing mortgage, you can lift the burden of getting a home loan with Rocket Mortgage. Skip the bank, skip the waiting, and go completely online at quickenloans.com slash fool. Equal housing lender, licensed in all 50 states, NMLS, consumeraccess.org, number 3030. Welcome back to Motley Fool Money. I'm Chris Hill here in studio with Seth Jason, Andy Cross, and Ron Gross. A mixed holiday quarter for Williams-Sonoma. Overall, profits came in higher than expected, but Williams-Sonoma is the parent company of

Pottery Barn and Andy, they are struggling over there at Pottery Barn. Yeah, well, they are relatively. They did better than, as you mentioned, they did better than I think some of us were expecting. But their brand growth really has just been falling. I mean, Pottery Barn was down 4%, and Pottery Barn Kids and Teens are both down 5%, 8% respectively. West Elm continues to be the bright spot at Williams-Sonoma. So, I mean, here's what you have with this story. You have a loyal customer base that loves to shop at Williams-Sonoma.

They tend to be older demographic, wealthier demographic. They are competing with Amazons and Wayfarers of the world. Most of the products you buy at Williams-Sonoma, you can only buy at Williams-Sonoma, same as West Elm. With West Elm, they're actually having more success going into the younger demographic markets like college-age kids. And you have a business that's basically flat GDP growth kind of levels. and they're just very diligent on the cost side. It generates healthy profits. It'll probably grow earnings in the mid-single digits maybe this year.

And they generate a lot of cash and they buy back stock and they invest it well. And the stock sells at 14 times earnings. And so I think you have a market beater from here on out. The stock's around 50. They bought back 13% of the shares over the last few years. I mean, you have a decent kind of value play and maybe you get some leverage as they continue to expand internationally. And I think you have a good shot at some good, healthy market-beating returns,

considering the market's going to grow at 7% a year. I think they can beat that. They also do a good job across the omni-channel. When you think about it, a lot of bricks-and-mortar retailers struggle. They do a good job with their stores, with the e-commerce, with the catalogs. Yeah, and they just brought in, just this week, announced a new leader for Pottery Barn, the long-time leader there, who I think has been there 20 years, is stepping down, and someone else is coming in. So, breathe some new life

into a brand that desperately needs it. Fourth quarter profits for Alarm.com Holdings rose 36%. Shares of the home security company up around 45% in the past year. They're kind of on a roll, Seth. Yeah, there wasn't a whole lot of reaction to the news, which I thought was, I mean, they beat estimates by a long shot. But in defense of investors, this isn't Coca-Cola. Alarm.com Holdings, not a household name. I'm not sure I've even ever heard of it.

So it's an interesting little company we've picked over at Hidden Gems. They sort of provide the cloud service type backbone for a lot of home security. In other words, you go to the local or regional provider in your area, and you have them put in cameras and door locks and all that stuff, there's a good chance that Alarm.com is providing the service, the backbone for all that, including sort of putting a cell phone-type receiver that keeps you connected all the time. So they continue to, as those folks continue to add customers, those customers, of course, become Alarm.com sort of customers.

And Alarm.com is pushing a lot into video. It seems to be really well accepted. That's good news because folks who have video and use video on their phone apps and stuff generally engage more with the systems. They're more likely to stick around. They pay more every month. They also generate some hardware sales from this. And so it's a pretty nice, healthy growing business that not a lot of folks have heard of. And they've been around, you know, quite a while. The other thing they're doing that is kind of the, I guess you could call it the call option, is that they're becoming a hub for sort of all the smart home devices you might get. So

They've added Amazon Echo, and they have all sorts of other devices. You can control this all from their system, which makes them kind of a one-stop shop as opposed to kind of trying to cobble this stuff together on your own as a do-it-yourselfer. Shares of Tiffany hitting their highest point in more than two years after fourth quarter profits came in higher than expected. They're seeing some pretty strong demand overseas, Ron. Overseas is the name of the game here. America continues to struggle, and Trump is not helping it matters at all.

They saw a 7% drop in their flagship store due to its proximity to Trump Tower. So, thank you, Mr. President. I'm sure they're saying. But the strength, as you said, Asia Pacific up 9% due to new stores. Japan up 15%. We saw some price increases, change to the products mix, helped boost margins a bit. So, pretty good. Overall sales up 1.3%. Nothing to write home about, but still we're on the right track.

Profits were up. So, the company doing a fine job. New CEO just took the helm. So, I mean, just to be clear, Tiffany's not being political in any way about this. They have genuine traffic disruptions at their flagship store. Are they building that into their own guidance? Because the president is not moving his New York City home in the next four years. Anytime soon. That's true. And there's been a lot of disruptions, whether it's to people living there or to businesses.

And so, you know, Tiffany is not the only one being affected by it. And they have to build something like that into the guidance because, as you say, I assume it's going to persist. But nevertheless, guidance still was solid. We talked earlier this year about Monopoly token madness, the vote for new tokens for the board game. And the final votes are in. Come on, hashtag. Come on, hashtag. Sorry, Seth.

The three new tokens voted in, the penguin, the rubber ducky, and the T-Rex, which means no hashtag. No hashtag, which used to be the number sign, but then it was the pound sign. And no emoji tokens. I'm happy no emoji tokens. They got rid of the lame ones, though. They really did. Wheelbarrow, boot, and thimble, I think, are the acts. You hate the old economy. And those are gone. Those are out with the Baltimore Opera hats.

But wait a minute. If those old tokens were, to Ron's point, signs of the old economy in terms of agriculture, in terms of apparel, that sort of thing. Wow, that's deep. Clearly, we've gone away from this, because I don't think there's anyone who's looking at penguins or dinosaurs and thinking, well, that's going to drive the economy. That's true. Emoji would have been a much better representation of the new IPOs. What's the Snapchat monopoly figure look like? A disappearing naked picture? Something like that.

How do you do that in pewter? Let's go back to the world of precious gems. Arkansas's Crater of the Diamonds State Park builds itself as the world's only keep-what-you-find diamond site. 14-year-old Kal-El Langford was digging around and came up with a 7.4-carat brown diamond. It is the seventh largest ever found at the park. The value has not yet been determined, but a one-carat brown diamond typically has a value of around $2,500.

He says he's going to keep it as a souvenir. I don't know, Rob. Good for him. Forget about that. Let's talk about his name, Kal-El. Kal-El. It's Superman's Kryptonian name. Yes, the parents are clearly fans of Superman.

Really? And L, do we know about L in the Superman? Jor-El, Kal-El, Lana Lang, Lois Lane, Lex Luthor, all Ls. Big L. L meaning of God in Hebrew. You know what? I've said this before, I'll say it again. You're not getting analysis like this on Bloomberg.

No. Nowhere. That's Ron Gross right there at his best. Let's go to our man behind the glass, Steve Broido. Steve, I'm guessing you've never found a seven and a half carat diamond. What would you say is the most valuable thing you've ever found in your lifetime? Probably like a $20 bill. That's the best I got for you.

That sounds pretty good, though. It was a good day. You find the $20 on the ground, you're happy. Chris, mine was my wife. Ooh. I found a package full of weed. That is not the best of Ron Gross right there. When my brother and I were little, we were walking home from school,

and we found like a cough drops container full of weed. That was pretty cool. Andy, can you top that? I cannot top that. I'm not sure how valuable it was. I've never even used a metal detector. Have you guys ever used a metal detector on the beach or anything? I was a nerd, and that seems impossible to believe.

That's okay. All right, guys. We'll see you later in the show. Up next, we're headed to Austin, Texas, to check out the scene at this year's South by Southwest. This is Motley Fool Money. All right, before we get to this week's interview, I've got to say a word about Away.

Away makes affordable, high-quality suitcases that charge your phone and start at just $225. By cutting out the middleman, Away is able to offer the perfect luggage made with high-quality materials at a much lower price. When I went down to Austin, Texas for South by Southwest, I got the chance to try out some Away luggage. And it is fantastic stuff. And it reminded me of what we always say about Warren Buffett and his investing strategy, how Buffett himself says, I like to buy great companies at a good price. And that's what Away makes. They make great suitcases at a good price. It comes in a variety of sizes and colors. They all cost less than $300. And they have two USB ports and a high-capacity battery that let you charge multiple devices on

to go. So phones, tablets, laptops, you can be wherever you want in an airport. You don't have to be hanging out by the charging station with everyone else. And that's what was great about when I had a layover and I had to charge my phone. No problem. I didn't have to hang out by the charging station with a bunch of people I don't know. I got to find a comfortable seat somewhere in the terminal and charge my phone right there with my away luggage. It comes with a lifetime warranty. If anything breaks, they'll fix it and replace it for life. And they've got a risk-free 100-day trial period. So if at any point you decide it's not for you, return it for a full refund, no questions asked. They've got free shipping anywhere in the continental United

States. And I mentioned it's great luggage at a good price. It's at an even better price for our dozens of listeners because you get $20 off when you go to awaytravel.com slash fool and use the promo code FOOL at checkout. That's awaytravel.com slash FOOL and use the promo code FOOL. You're not fine. Welcome back to Motley Fool Money. I'm Chris Hill. Thirty years ago, South by Southwest started as a small music festival. Over the years, it has grown in scope and size.

South by Southwest now includes a film festival as well as high-tech and interactive programming with events and sessions that are attended by hundreds of thousands of people. Julia Boorstin covers media and entertainment for CNBC. And earlier this week, I caught up with her in Austin to talk about the scene at South by Southwest. What's been your headline so far for South by Southwest? South by has gotten really big. I've been coming on and off for maybe nine years now, maybe even 10 years. And it's just there's so much now.

And it's not just about the music and the panels for Interactive. It's just everyone comes here. They're VCs. They're entrepreneurs. They're all the traditional media companies. I almost wonder if it's gotten too big for there to even be a breakout company the way that Twitter was the breakout company here in 2007, I believe, was the year. But I've been impressed by the amount of VR I've seen, VR and AR, but also just the scale and size. I want to get to VR in a second, but we were talking before we started taping about the way that some of the companies are really, because it's gotten so much bigger,

it's harder to stand out and so you have particularly in the case of the bigger companies that have the deeper pockets they're able to spend more on more elaborate events and you were involved in one where you spent some quality time in a helicopter oh yes oh yes so i think that um what's interesting is that you know everyone wants to reach the demographic of people who are here it's influencers it's um it's people who have the ability to write an article and have it go viral and to really decide what the next big trend is going to be so you really want to reach these people here. And they're also, this is just a great opportunity to get your finger on the pulse of the next big thing. So everyone wants to stand out here. And Lockheed Martin is

here for the first time. And they have a presence in the convention center. They have a cool exoskeleton, a guy built an exoskeleton. They're demoing it, which I thought was very impressive. They have some backdrops of Mars. So you can take pictures in front of it. And they're talking about how they're trying to bring people to Mars. But the most impressive thing that Lockheed Martin is doing is they have a VC arm. They now have a hundred million dollar fund. They're looking to make two to four investments a year. And the way they're drawing attention to this and trying to get the best applications from startups is they're having an elevator pitch competition, but in a helicopter. They're calling it the helo pitch. And they've gotten submissions from about 40

companies who fit their criteria and are in the categories of cyberspace or, I'm sorry, cybersecurity or virtual reality or sort of the categories that could benefit Lockheed Martin. And they're whittling it down and having pitches and learning more about them. And then the 10 final companies, they're bringing up in the air in a helicopter. And yesterday, I had the opportunity to go up in the air and do a story about what Lockheed Martin is doing here and talk about the trend of corporate venture capital in general it's very important for these big entrenched companies to invest in startups to keep their pulse on the

next big thing and to try to get an advantage and make sure they're not disrupted by these startups so we went up in the helicopter and we were about to do our story talking about what the head of the VC division had said we talked to some of the companies that were applying and then there was breaking news so we ended up up in the air for about an hour circling above the cell towers because we broadcast through the cellular technology. And so you have to stay near the cell towers. So it was very exciting. I felt very safe.

You do get a little motion sick if you're going to be going around in circles for an hour at a thousand feet in the air. But it was pretty fun. I just like the idea that it comes through on the headset. Julia, we just need you to stand by for just a moment. Yeah. Just a moment.

I was like, breaking news, we're in a helicopter. And at one point I said, can you just check with the pilots to make sure we have enough fuel? Because we were supposed to take a 20-minute flight and it turned into something much longer. So they were like, yeah, yeah, yeah. This is a fancy corporate helicopter,

two engines, plenty of fuel, don't worry. But yeah, the pilots were good. I was getting a little antsy and ready to get on air, but it was really fun. But I feel like this is the kind of thing that companies here are doing now, really high-flying stunts, if you will, to get the attention of people here

because it's really hard to stand out from the noise. There are movie premieres, there are movie stars, There are panels with big names like Marc Jacobs that was on stage yesterday. So no matter what your interest, there is going to be someone here who's going to pique that interest. But it's hard to stand out. And that's why you have stunts like Lockheed Martin taking entrepreneurs up in a helicopter. Boy, you just think about the idea that if you're a VC, you're really stealing yourself from making the best pitch possible. And it's like, oh, and by the way, now you have to do it in a helicopter just to add to the degree of difficulty.

Yeah, well, the startups we talked to were pretty excited about it. So in terms of VR, when we were over at the trade show, that was one of the things that stood out to us was just compared to last year. So VR has a much, much bigger presence. Absolutely. In terms of the movie studios, where do you think VR ends up applying? Because obviously, 3D movies are a big thing. The economics work for studios and for theaters in terms of charging more for 3D movies.

it's hard for me as someone who looks at that industry and also someone who just enjoys going to movies it's hard for me to wrap my head around how vr is going to have a presence they're not vr and 3d are very different technologies you could sit there for an hour and 45 minutes or two hours there are two and a half hour long movies sit there with 3d glasses on and you're gonna be fine and people complain that sometimes the films are a little dark but the technology is pretty good with vr you only really want to be in that experience for maybe 20 minutes or 30 minutes and then it gets overwhelming. You feel a little nauseated. It's just a lot. And it's also insanely expensive to produce. And it takes a really long time to produce. So I don't think that we are

going to be watching 3D movies the way, I'm sorry, watching VR movies the way we watch 3D movies. But I think that it is going to be an in-theater experience. My theory is that you're going to go to movie theater, pay $12 for a ticket, and then afterwards you're going to go and have an incredibly high-end VR experience. And the best example I saw of this was with The Martian. When The Martian came out last year, Fox, which has been investing a ton of money into VR, they came out with this super high-end VR experience with expensive tethered goggles and also hand controls. Now, this is technology that you have to have a very expensive computer to run. It's not the kind of thing that most consumers would buy. So this is like very

like early adopter technology but you put these things on and then you can basically do a little bit of a game and feel like you're inside the movie and that's the kind of things like you go watch the martian and then you can go pretend to be the martian that is cool and i think that that is a very good use case you could charge 20 for that um so i think that we're going to see a real split in vr you're going to see um some vr that's super high end and that people are doing in movie theaters after they have um after they've had an experience or it's going to be like something where you go to a tourist center and then you have um and then you have like an opportunity to spend 20 at like the you know at the wax museum in hollywood um to feel like you're on

the red carpet of the oscars or something but it's going to be more of an experiential thing and then you're gonna have low-end vr that people do at home so i don't think it's going to be really competition for films when you think about the health the financial health of the movie business. Where do you think it is right now? Because we're seeing the last couple of years, number of tickets sold, that continues to tick down. And yet it does seem like they do have the pricing power. I mean, the overall box office revenue continues to climb just because the ticket prices keep going up. Yeah. But we have to remember that the studios that make movies also make TV shows. And the TV business is doing well in that there's more content out there than

ever there's now selling content also to Netflix and Amazon so I think that the movie industry is trying to recalibrate and trying to figure out if they can shut close the window between when movies go in theaters and when they're available at home and right now the fact that there is like a mandatory three-month delay between in theater distribution and at home distribution means that they miss out all their marketing costs are wasted when it comes to selling movies to people at home and a number of studio chiefs including the head of Fox and the head of Warner Brothers have talked extensively recently about how there need to be changes to this model and right now the the movie theater chains are really holding Hollywood hostage in this and and I think in the

next two years we will see changes and I think that'll enable the theater companies to make more money from at-home distribution I mean we have to remember that 10 years ago the DVD business was massive. And it was just like this huge profit machine for Hollywood that they don't have anymore. So they're trying to figure out the next wave of that home entertainment model. When the Walt Disney Company reported their most recent earnings report, you got the chance to sit down with Bob Iger. And for all of the questions about ESPN, I think increasingly the question about the Walt Disney Company that investors are interested in has to do with Bob Iger. He's due to step down in June of 2018. It kind of seems like the next announcement on

the front of Bob Iger's tenure at the company is going to be one of two things. It's either going to be, here's my successor, or it's going to be, I've decided to stay on longer. Two-part question. One, when do you think that announcement comes? And if you had to bet on which one it will be, which one would you bet on? I think the announcement will come soon because I think investors would like to know a year ahead of when his contract is up, what's happening. So now we're in March and that's just a couple months away. And I also know that Disney had his annual shareholder meeting, I believe it was last week. Yeah, it was last week. And after the shareholder meeting, they have a board meeting. And we know that this is what they were discussing in the

board meeting. So last week, the board met and talked about this. And I can guarantee you that there's no way this wasn't a big topic of discussion. I would also guess that Iger will extend his contract for at least a year because I think he's pointed in that direction. When I interviewed him after earnings, he said, if that's what makes sense, I will be willing to do it. And that was a change of tone before he said, I'm retiring. I'm ready to move on to the next thing. I've had a great run. And then I thought it was interesting that at the shareholder meeting, he talked extensively about how much he enjoyed his experience at the Disney company. What an honor it's been, the privilege of a lifetime. You know, he really spoke in very flowery detail

about how much he loved doing his job and also how he's so optimistic about what lies ahead. So he talked about, you know, changes at ESPN. He talked about seeing growth of the Shanghai Park that he built and opened just a year ago or less than a year ago still. And I think that that was sort of laying the groundwork for him to say, I want to see some of these projects that I've been working on. I want to see them out a little bit longer. And I think investors would be thrilled to see him stay. I mean, I think people would like to know who's going to succeed him eventually. But for now, I mean, he's in great health. He's not that old. Why not have him continue running this company? I mean, I think he's incredibly well regarded. So I would expect him to stick

around for another year. You mentioned Amazon and Netflix. The 800-pound gorilla that is finally getting into original content programming is Apple. They've said by the end of 2017, they're going to have their first programming. It's one thing to have deep pockets to be able to fund the programming. It's another thing to actually execute on it. So we'll see if they can do that. But the people that you talk to, how are they feeling about the prospects for Apple and original programming? Well, one thing that Apple is doing differently than Netflix and Amazon have,

Netflix and Amazon just want to make good content. They want to make good content. They believe people will watch different types of content at home. Short, you know, regular TV-length content, 23 minutes, 30 minutes, and then also movie-length content. Apple has said, specifically,

they want to make content that ties in to their core competencies. So you have Planet of the Apps, which is about apps. That's what Apple does. And you have Carpool Karaoke. It's about music, iTunes. so so far they're really keeping it close to home in terms of music in the app store and things like

that and i think that that's a much more narrow niche than what netflix or amazon are doing if amazon's i'm sorry if apple sticks to that niche into that focus that's going to mean that they don't pose that big of a threat to the other companies and it's also going to limit their potential upside it's a much say it's i would say it's a much safer bet for them because it's just a smaller bet um but with fewer ripples to the rest of the industry all right last thing and then i'll let you go because you got to go to work um when you are off the clock and you are watching a movie watching a television show whether it's streaming or on traditional television um are you able to enjoy it i mean this is this is your job i just didn't know if there are times when you're watching

stuff and you can't shut off the business part of your brain and you start thinking about the economics of the movie you're watching i will admit when i was watching the queen on on netflix which was their their series um recently original series there's this scene that is so expensive and i remember it's like her i think it's her wedding it's her wedding scene and she's walking through westminster abbey and you just watch the scene and all i could think was like oh my god how much did this cost netflix to make this and what was the calculation that netflix must have made of how many people fit into the target demographic for this that that they must have thought that this was going to pay off. I mean, it must have cost $20 million. So there are

definitely those moments where I'm blown away by that kind of thing. Um, but I love to watch content and sometimes I'll be, I, I don't really turn on the TV in our house. We have a lot of remote controls and I prefer to watch on my iPad or on my laptop while I'm doing something else on my iPad. And I think that like, sometimes I'll be like struck by like how good a user interface is and like, Oh, this is pretty good. Or like, Oh, I'm surprised that Netflix recommended the show to me um but for the most part you know you do that and then you turn on the show and you enjoy watching it but I think it's sometimes it's just interesting as a consumer to see what I like um or what resonates I mean I got a chance to see Disney's Beauty and the Beast um and I was really

curious as someone who saw the original animated film you know was I gonna like this and then you see the movie and I loved it and then you think wow like if I like this as the generation who saw the first Beauty and the Beast this will probably do really well so you know it's you know you always have to have a little bit of a personal lens doing one's job. But once you're watching the content, you sort of take it for what it is. Great. Thank you so much. Thank you. Such a pleasure. This was great. For the latest media coverage from Julia Borsten, you can follow her on Twitter and check out Media Money, her column on CNBC.com. Up next, we've got a few 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 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, Chris Hill here in studio once again with Seth Jason, Andy Cross, and Ron Gross. You can check out past episodes of Motley Fool Money and all of our shows. Just go to podcast.fool.com. While you're there, you can also test drive our flagship service, Motley Fool Stock Advisor. The brand new issue just came out, two new stock recommendations from David and Tom Gardner. So go to podcast.fool.com scroll to the bottom of the page and check it out. Let's get to the stocks on our radar. We'll bring

in our man Steve Broido in from the other side of the glass to hit you with a question. Ron Gross, you're up first. What are you looking at? I'm going with Ecolab, ECL. It's a recent best buy now here at The Motley Fool. They provide cleaning, sanitation, and other specialty chemical products and services for the hospitality, food service, and healthcare markets. And I like my hospitality and food service establishments clean. I hope you do, too. High recurring revenues, relatively low risk profile, raises dividend every year for the past six. Stocks looks relatively undervalued. Steve? Don't most companies just do that naturally on their own? Do they need to hire someone?

Big industrial places, big hotels, you need to outsource that kind of thing. Andy Cross, what's on your radar? Same vein. And from stock advisor Centos, which is the largest uniform provider and also provides cleaning supplies and safety equipment to almost a million different businesses in the U.S. Just announced, or last year announced, their $2.2 billion acquisition of a competitor of theirs. Stock is up three times in value in the last five years, generates a ton of cash, but the asset base is actually flat over that time period. So they're just doing a lot.

They're just very effective at doing more with less or with the same amount. So, I like the stock here, and I think it's going to do well. And I'm looking to see what they talk about with this big acquisition. Steve, question about Cintas? So, Cintas is uniforms. Is this a laundering business? Is that a repeat business? So, I wear the thing, it has to go back to them to get clean and comes back to me? Oh, yeah. Yeah, hospitality is one of their biggest markets. So, yeah, you wear the uniform, dirty it all up, Steve, and send it back.

Seth, Jason, what are you looking at? I was going to see if I could be even more boring than those two stocks. How dare you? Dorman products. You win. Dorman. Do I win? They make replacement parts for fixing your car. For the most part, they are sold at places like, you know, Advance Auto, O'Reilly.

And they're one of those sleepers. Recommended them a while ago at Hidden Gems. They were best buy a few times. They seem to be not doing all that great. Kind of forgot about them. Checked them out the other day. They were up 90% or something from the point of being picked. And I looked, and the reason why is that for several quarters, the retailers who stock their parts were kind of going through a de-stocking process

and trying to really lean out their operations, and that was a drag on sales for Dorman. And that has finally turned, you know, the shelves are empty, I guess. Dorman is also doing a better job of changing its product mix. They are selling higher-value stuff, getting rid of the lower-value stuff. And some of these complex electronic modules that they're selling replacements for are even pricier. And so the stock is higher than it's been for a while, but I think as vehicles get older and they continue to get older, that more people are going to have to fix them, going to sell more stuff.

D-O-R-M is the ticker. Steve? What makes me want to buy a Dorman product versus the generic thing off the shelf? Well, you may not even know that the generic thing on the shelf may actually be the Dorman product, but what happens is you go to Advanced Auto, one of the others, and you see what they have. The Dorman products tend to be, I think, better engineered

than something you're going to get kind of a fly-by-night generic product out of China. But, again, you're going to have to do some experimenting to find out which one you really want. I look at kind of the Wrigley or the Buffett thing. You don't pay a whole lot more to get an Amy Trust. Steve? I'm going Cintas. Fixed. All right, guys, thanks for being here.

That's going to do it for this week's edition of Motley Fool Money. I'm Chris Hill. Thanks for listening. We'll see you next week.