Motley Fool Money - GoPro's Surprising Shot

Episode Date: May 26, 2016

Costco posts strong profits. Monsanto rebuffs Bayer. And GoPro gets a shot of Red Bull. Plus, corporate governance expert and film critic Nell Minow talks Disney succession, Buffett wisdom, and must-see movies.  Learn more about your ad choices. Visit megaphone.fm/adchoices

If you're a small business owner, you already know what it takes to keep everything moving. You're juggling customers, invoices, and about 100 decisions every day. Thankfully, taxes don't have to be one more thing on that list. With Intuit TurboTax, you can get your business taxes done for you with a full service expert. TurboTax matches you with your dedicated tax expert. Who knows your industry understands your business write-offs and gives you the personalized advice your business deserves. upload your documents right in the app, hand everything off, and still feel like you're in the loop the whole way through. You can even get real-time updates on your expert's progress right in the

app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Everybody needs money. That's why they call it money. The best thing they'll life are, but you can get them to the press on. 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 Million Dollar Portfolio, Matt Argusinger, from Motley Fool Pro and Options, Jeff Fisher, and from Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen.

Hey, hey, hey. Hello, Chris. It is our Memorial Day weekend special. We've got news. We've got Nell Minow in front of a live audio. It's at Fool Fest, and as always, we'll give you an inside look at the stocks on our radar. But we begin, once again, with the retail industry. Shares of Costco up this week after third quarter profits came in higher than expected. But for the first time in six years, Maddie, same store sales were flat. Right.

I was trying to figure out what investors actually liked about this report, because comps were flat. If you strip out foreign currency, gas sales, okay, up 3%. But overall revenue, just up 2.5%, really only because they're open. opening new stores, profits of 6% a little better than expected. But these aren't exactly the growth numbers that, in my view, justify a P of 30. And my only guess is... You're such a hater. I know. My only guess is that the retail, the traditional retail industry has been so bad

over the last six to nine months that Costco's slightly better than expected results is giving it some love. Did they talk about retention at all? Are they seen any slippage there? There's no slippage of retention. And I'll point out that there was a... They had better and then expected membership fee growth, which of course is a pillar of the business. So that probably is giving it a little bit of a boost. So six years of same store sales growth, that's phenomenal and that was bound to end at some point. I think the question, Ron, becomes three months from now, if we're looking at

this same number again, then it's no longer a speed bump. Then it's actually a point of concern. I think that's fair. But as Maddie pointed out, I don't really think it's as bad as it looks of foreign currency and because of gasoline. I think the numbers still are pretty solid, perhaps not as robust as they used to be. But they're still opening new stores. They're growing on a per store basis. The retention is still good. You still have the model working. And I'll add that you probably are ripe for another rise to the membership fee at some point, which is another lever they can pull, assuming the economy is strong enough and the member base is

strong enough. So we can see growth there. They also have a shift now going on with the moving to the new credit card, which we'll see. That could either be a good thing. It could lead to a lot of growth membership or could not. We'll have to see. I have a question for you two guys who I know follow Costco closely. Does management talk about Amazon much at all in conference calls? Would you if you were Costco? I would.

No. Costco doesn't really mention Amazon by name, but they talk a lot about their own e-commerce efforts, which are on a relative basis doing actually quite well. They've got, of course, a relationship with boxed, which is working out. You can, as you can with Amazon, not to this extent, but you can buy a lot of junk. That amazing kind of assortment you can obviously buy online as well. And I've bought some interesting things myself. I would just think over time, Amazon will eat into that. Even Costco's business is vulnerable with subscribe and save on Amazon and all the prime members

on Amazon. We're buying more and more of those basics from Amazon. But on like a Best Buy where we say, Best Buy is really just a showroom for Amazon. I don't think you'll ever say that about. Costco. You're going to Costco. You're leaving with a cart full of stuff. If you're going to make that effort. If you're Ron. I don't think you're going to say, oh, I see seven dozen pieces of licorice. I'm going to go now on Amazon. No, right. But you might just not go to Costco, period.

Could be. Let's move to niche retail. William Sonoma's first quarter profits in revenue came in higher than expected and shares moving higher as well. This is a good quarter, Ron. Yeah, you know, tough time for retail, as we were saying. But I like this report, beat on both revenue and earnings. West Elm, their furniture division, up 19%. William Sonoma, up 3.5%. Pottery Barn, which has been the weak spot, actually pretty robust. E-commerce now more than 50% of sales. That was up 8%. A very strong report. William Sonoma has struggled over the last, let's call it, year after having a great, great run. Shares are off quite a bit. But now I think

with these numbers looking good and the stock where it is could be a nice entry point for investors looking to get in. Well, that's a surprisingly good number. I had no idea that their e-commerce sales were already 50 percent of revenue. That was the thesis two or three years ago. They said, this is what we need to do. We need to increase that business. And if you didn't buy into that concept that they'd be able to, you didn't want to own the

stock. And they executed. I was just going to say, that's the difference with William Sonoma. They've talked about this Omni Channel approach for years. And unlike a lot of other retailers that give lip service to their particularly e-commerce efforts, William Sonoma is actually delivered on it. And I missed it. I didn't believe they would, and therefore I didn't get into the stock. I don't think it's too late, actually. Seven times I beta right here at this price, probably

as long as things stay on the right trajectory, it could be a good time to get in. Shares of agricultural giant Monsanto up this week after German conglomerate bear made a $62 billion bid to buy Monsanto outright. Monsanto rejected the initial bid, Jeff, but they definitely left the door open. This would form the largest agricultural seed company in the world with about 30% market share if the two merged. They'd have about 24% market share in egg chemicals as well. So it would be an absolute giant.

I would be surprised if European and US regulators let it go through. Chris, before the show, you were saying they didn't even let in the US the Office Depot and Staples merger go through. How can you let this merger happen? But the market is skeptical to the share prices. well below the offer price. Monsanto has about a $50 billion market value, and the $62 billion offer is not popping the stock that much. You have a similar transaction going on in the industry with KempChina trying to acquire

Syngenta out of Switzerland. They're running into some regulatory issues as well, especially here in the U.S. And it'll be interesting to watch that, because that one is further along. As Jeff said, we don't even really have a deal here with Monsanto. But that one, you do have a deal. So we'll be able to continue to watch how that unfolds to kind of get a signal of what the regulators are going to do. Yeah, and that's a $43 billion potential merger, China National Chemical, Buy, and Syngenta. And then you have the Dow and DuPont merger last year as well. So all of these are kind of like merging Darth Vader with Darth Maul.

They're all... I sleep, but. Just to go back to the good old Uncle Sam angle here, I'm going. I'm going to... I don't know. I guess I would be stunned, but maybe I shouldn't be. I'd be stunned if this actually goes through. This would be the largest German takeover of a U.S. company ever. And as you said, Jeff, I mean, look at the deals that have been shot down. Much smaller deals. In much smaller industries have been given the stop sign from some form of the U.S. government. So the fact that one single company is going, I mean, you throw out a couple of stats there, Jeff.

83% of U.S. corn seed sales would come under this one company if it went through. I don't know. If you went for a very recent proxy, I mean, the government didn't ever explicitly come out and stop it, but Halliburton's purchase of Baker Hughes really kind of got the red flags from regular laders. And that would have formed a really dominant oil services business, kind of similar to what Bayer and Monsanto would control in the seed business. And the right, the fact that this is directly related to our food source and there's so much controversy as it is, I think this will get double the scrutiny and therefore it's even less likely to go through versus if it was like an office supply company.

Yeah, it's too Orwellian to think of one company controlling so much of our food. Fourth quarter profits for Lionsgate Entertainment came in much higher than Wall Street was expecting and shares up more than 10 percent on Thursday, Maddie. Yeah, nice gain. I mean, you have to remember that these results simply beat guidance that was already lowered significantly earlier this year. But here the stories on the TV side, revenue from TV productions up 71% to nearly 250 million. They had a really big licensing deal with Netflix for Orange and the New Black early in the year that really drove the results there.

But really not getting it done on the box office. I actually want to ask Steve, Steve, did you happen to go see Gods of Egypt? I don't even know what that is. Is that a film? Exactly. And apparently no one else did either because, I mean, that was just a really big miss for them in the quarter. They sunk a lot of money into it, didn't do much of the box office. And so in many ways, Lionsgate is still that hit-or-miss business. But certainly on the TV side, I think that's where the trend for content is going.

And if they can continue to hit home runs there, the business should do very well. Four of the five biggest box office hits from Lionsgate are the Four Hunger Games movies. Can they get that woman to write a few more? I'm going to say, they could revitalize that. Do a prequel? I don't know. Do something. Coming up, we've got some stocks on our radar, and we've got some tips to help you out this summer. Details next. 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 ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here in studio with Jeff Fisher, Matt Argusinger, and Ron Gross. GoPro, the camera behind video cameras popular with fans of extreme sports, struck a partnership this week with Red Bull, the Energy Drink Company. I wish I were making this up. It must be a great deal, Jeff, because shares at GoPro up more than 10% this week. Well, GoPro needed a little bit of help, but they need a lot more than this because it doesn't look like they're on deck to earn profits, earnings per share until at least 2018.

And that estimate is... And that's important. Why? And that's a small estimate, and it's speculative as it is. So GoPro is worth $1.4 billion right now, market value, which by itself is a great success. for a company that's 12 years old, but the problem is the stock was eight times higher just in the past couple of years. So it's had a really rough ride down some 90%. Their sales, of course, are down sharply. Chris, their margins are down right along with that into losses. It's hard to see what's going to really propel the business back to the heights that it hit in 2013, even

2014. Some people hope it'll be drones that come out this holiday season, but I think drones, just like the GoPro camera itself, is not a mass market product. Can someone explain to me what the deal with Red Bull actually is? Is it just a marketing deal? Okay, so I guess there is that news, too, before I just pile on GoPro. So, GoPro is going to be the only and the official camera of any Red Bull event, and Red Bull has some 1,800 events around more than 100 countries across the planet each year. So that increases the visibility of GoPro at any Red Bull event.

But that said, they've had a partnership a long time. That's why I haven't talked about it much so far. I don't see much leverage from the formality of this partnership because they've had an informal partnership for a long time. I'm calling it the Jump the Shark moment. It's downhill from here. I hope not, but they do have a rough road. Memorial Day weekend is the unofficial start of grilling season, and normally this is the type of segment where we just go around the table, guys. But, Jeff, Maddie, no disrespect to you and certainly no disrespect to myself.

None taken. But we are in the presence of a grill master in Ron. Pressure. Bow down. And I don't know that our listeners know that about Ron Gross, but Ron, since you are a grillmaster, before we get to the stocks on our radar with Steve Broido, share, if you could share a few grilling tips, because I don't know about anybody else, but I could use them. We could do a whole segment, but we won't. Two words. Salt and booze. You need more of both.

More than you, you need more than you think of both of them. You can't be afraid to use salt. Just in day-to-day life? This is the number one thing that distinguishes a professional chef from a home chef. Home chefs underutilize salt to a significant extent. Booze have some fun for crying out loud. It's Memorial Day. Have a couple of cocktails. A couple more tips that I think typically people make mistake.

You don't add barbecue sauce in the beginning of the grilling cycle. It will burn the sugar in the barbecue sauce. You got to wait till the end. Certain cuts of beef you've got to marinate. Flank steak, strip steak. like London broil, will be tough as nails if you don't marinate them. Can I just stop you right there? No, I'm on a roll, man.

Just one thing on the marinade, because here's one frustration I have as someone who attempts to grill, is the range on how long I'm supposed to marinate is anywhere from 30 minutes to four days. So, for example, for fish, if you marinate fish in something citrus, it'll start to cook the fish, and you don't want that to happen because it's going to start to go bad, and it'll get really mushy. like a beef, you can marinate until the cows come home, no pun intended, and you'll be okay. So you want to be careful about the cooking process. And I will end with, you must, you must

let your protein rest for five or ten minutes after it comes off the grill so the juices can redistribute into the meat and you'll get a much juicier piece of meat. Oh, man, this was great. That was great. More salt, more booze, let it rest. I mean, I was in on more salt and more booze. Anything on kebabs? Do you have any guidance on kebabs? Because here's the thing. I told I told Dan Boyd, one of our producers, we were going to be talking about this, and he immediately went to kebabs and says, don't mix the meat and the vegetable. Well, no, I think you can. That's okay. If you don't have metal skewers, which most people don't, you end up using the bamboo. You've got to soak the bamboo for a long period

of time so they don't burn when they're on the grill. Yeah, no, I don't know. Who has that kind of time? Can I add one more tip as an amateur? Undercook. You can always put it back on for a bit And during the resting period, it will come up to temperature, too, and continue to cook. That's a perfect tip. That's a good point, yes. All right. We're going to go to our man, Steve Brodo, on the other side of the glass for stocks on our radar, and he'll hit you with a question.

Also, on the other side of the glass this week, longtime listener, Harry Yang, visiting us from the great state of Wisconsin. Thank you, Harry, for stopping by. All right, Ron Gross, you're up first. Steve Brodo is going to hit you with a question. What are you looking at? Steve, Mo Dean Manufacturing, M-O-D, a microcontacturing. microcap manufacturer of thermal management systems for vehicles and ventilation and air conditioning

systems, industrial equipment. Only a $500 million company. They reported earnings earlier this week that looked actually pretty good, despite the fact that they sell into some end markets that are really troubled, such as agriculture and mining. Really strong balance sheet company is cutting costs and doing what it needs to do to get them through this tough period. It's only an $11 stock. I think it's worth actually $17. 50% upside from here. And again, they're cutting costs during this bad time. So they're going to be lean and mean when the tide eventually turns. Steve, question about Modine manufacturing?

How does Matthew Modin be able to be such a great actor and also in a company of this? It's actually a very large lawsuit against Modine for the use of the name. No, I'm just kidding. I think Matthew Modine would be a perfect spokesman for this. All right, Maddie. You know, I'm looking at Starbucks, SBUX. It's creeping closer down to $50. And if you can get the stock For less than 50, you're paying only about 25 times forward earnings, which seems still expensive. But actually, for a company like Starbucks, with what they're doing in China, for example, the growth they still have overseas, I think that's a great multiple to pay if you can get it. So, Starbucks, it's on our watch list, a million dollar portfolio.

We've been waiting for a better price to get it into the portfolio. Steve, question about Starbucks? I don't drink coffee. Should I care about this business at all? Yes, because tens of millions of people do drink a lot of coffee, and they love going to Starbucks. What does success look like for them in China? They've got, and it's understandable, they've got some pretty robust targets that they're trying to hit. Is this a situation where, as we talked about before, with Alon Musk and production targets

for Tesla Motors, where it's like, hey, even if he comes relatively close, that's fantastic. Can Starbucks come close in China, or do they have to hit those numbers? No, I think they can come close. They're trying to double their store count right now. They have around 2,000 stores. They're going to double that probably by 2020. I'm actually watching revenue per store more closely because obviously revenue per store in place like the United States and Europe is going to be much higher for a long time in China.

But if they can actually do well with that number and it doesn't drag down overall sales so much, that's key. The growth is great, the store count is great, but I also want revenue per stores in China to be good as well. All right, Jeff Fisher. What are you looking at? Steve, what do you drink? If coffee is not your daily ritual, do you have a day Coke?

Is that you, in the morning, you get up, crack open up? Yep, love it. We got to get you on to coffee, man. All right, we're talking about cell gene, an $84 billion biotech behemoth. Their biggest selling drug is for blood cancer, and they just recently protected it from generic sales until at least 2022. The company right now is on track to grow earnings per share, about 20 percent annualized through at least 2020.

And they have a really rich pipeline, product pipeline, a lot of things coming up, a lot of key data coming out in 2016, 2017. company at a mid-teens multiple to earnings looking about a year forward, even while it's growing 20 percent-ish. And the ticker symbol? Selgene is C-E-L-G. Steve, question about Selgene? Does patent protection that these drugs deal with? Is this a good or a bad thing for

them? Patent protection generally lasts 17 years from the time of discovery or filing. That's a good thing. It protects their profits. They put a lot of money into research and development. They need some time to earn that money back. And, you know, it protects their profits. Given the long development time for a drug and approval time, they don't have that many years to really make their money back. That's part of the reason the prices are so high, unfortunately. And then patent protection goes away, and generics roll out, and that eats away their margins. So yeah, they need to generate real profits. And they need patent protection, definitely.

Seljean, Starbucks, Modine Manufacturing. What do you like, Steve? Modine. I'm 100% Vision Quest, Matthew Modi. Ryan Gross, Jeff Fisher, Matt Argusinger. Guys, thanks for being here. Thanks, Chris. Last week, I got the chance to interview our friend Nell Minow in front of a live audience at Fool Fest. We will bring you that conversation next. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill.

Last week, we hosted Fool Fest, our biggest investing conference of the year. One of our guests was Nell Minow, corporate governance expert and film critic. Here's part of our conversation. Before we get to corporate governance stuff, and I think I have a way for us to sort of get into corporate governance, let's talk about your family for just a second. It was, I believe, I have the math correctly, 55 years ago this month that your father, Newton Minow, gave the famous television as a vast wasteland speech. He did?

For those unfamiliar, what is your memory of? of that because this is one of those quotes that gets thrown around on Twitter all the time and I think more so than many quotes is sort of misappropriated. They just focus on the vast wasteland part. Well, it really hit home. My dad was the chairman of the Federal Communications Commission. He was just 34 years old when he was appointed. He had just turned 35. And you have to remember that at that time the television industry had been besieged. set by all kinds of scandals. They had the quiz show scandals and the Paola scandals. At that time, also in 1961, there were three broadcast networks. There was no such thing as PBS. All of the

news that was on television was 15 minutes at 6 o'clock. That was it. There was not one national program for children. And so he spoke to the National Association of Broadcasters, which previously had had nothing but love and valentines from the FCC chairman, who all went and had jobs in the industry afterward. And he told them that the airwaves were a scarce resource, and he was going to allocate licenses based on who served the public interest as according to the law. And they didn't like that at all.

And as a result, Sherwood Schwartz decided to insult him by naming the sinking ship on Gilligan's Island after him. The SS Minow. We're super proud of that. The show was banned in your house? Well, we weren't allowed to watch television. So the medium was banned in your house. We were allowed to watch very special programs that my parents picked out for us,

including Rocky and Boinkle, which they liked. And the early days of what became PBS was at that time National Educational Television. The same day Dad gave the speech, he also signed the first license for WETA, which is now public TV here in Washington, produced the Civil War and the News Hour. So we watched very select programs on television with my folks. But that taught me how to be a movie critic. They made me a critic very young. I want to get to the movie critic in a minute.

But on the corporate governance side, I mean, you have, to borrow from the Godfather, you've made your bones going after boards of directors. Yes. And early in your career, that put you head on with your father. Yes, it did. I just have to say he's the greatest dad in the world. He's absolutely wonderful.

But yes, I was at the then very new institutional shareholder services, which was the first company, large company set up to advise institutional shareholders on proxy votes. And it bugged me that nobody was paying attention to boards of directors. And I said, well, they have to tell us two things. Do they have any stock and did they go to meetings? Let's not vote for them if they don't have any stock and they don't go to meetings. So the second name that came up was my dad, who had... who had missed more than 25%.

That's the cutoff. So I had to call him and tell him. And I said, hi. And he said, hi, how are the kids? Oh, they're fine. Listen, I have something to tell you. You've missed too many meetings on the board of Aeon, and we're going to recommend a vote against you.

And our clients include the California Public Employees Retirement System and Tia Kref. and they're going to vote against you. And he said, well, how many meetings did I miss? And I said, well, the cutoff is 25%. You missed 27%. And he said, that's really close. And I said, Dad, when I came home at 1215,

and my curfew was 12 o'clock, you told me that close didn't count. God, that is every kid's dream. And I've got to say, my dad is so great, I was very embarrassed by this, and I never told anybody. He thought it was a hilarious story. He told it to Fortune magazine, and it's been reprinted now many times. So let's talk about investing, and our role as individual investors.

How much influence can an individual investor wield when it comes to things like boards of directors? Because on the surface, it seems like not much at all. Well, you know, I checked before I came over here today. 200 companies over the last couple of years have done something that nobody would have said could happen a couple of years ago. And that is they have adopted what's called proxy access, giving shareholders the right to nominate board members, because I have a secret for you. You know how they tell you that the majority of the board members are independent? I don't know what they think that word means because they're not independent. They were all picked by the CEO.

They're approved by the CEO. They're informed by the CEO. If shareholders don't have the right to nominate their own directors, there's no such thing as independence. And even if they never use it, just knowing that that option is there is going to make them do a better job. So the fact that 200 companies have adopted proxy access is stunning. We've had since Sarbanes-Oxley,

the opportunity to vote against pay plans, and even though it's non-binding, I'm sorry, since Dodd-Frank, even though it's non-binding, it's had a huge impact on the ways that companies think about pay, what they put to a vote, how they respond to votes against. So, yeah, I mean, that's the good news. There is some bad news. Shareholders cannot remove directors, and there was one company where not one of their nine directors got over 50% of the vote. So what did they do?

They tendered the resignation to themselves, and then they turned themselves down and reappointed themselves. So that doesn't always work. But generally speaking, I think individual investors can have a big impact, especially if you're working with an institution, if you have a 401k, and you ask them, how are you voting your shares? Just last week, Vanguard had an Ask Vanguard hashtag on Twitter, and a bunch of my friends and I got together and asked them a lot of questions about what a bad job they do on voting their proxies

and why they don't do what Jack Bogle, their founder, told them to do. Interestingly, we never got an answer to any of that. That's almost hard to believe. We have, although recently seen a couple of examples of public companies, price line, lending club, where the board, I mean, we've talked before about the sometimes way too cozy relationship that the CEO has with the board of directors. But in case of price line and lending club, those are situations where the board took an action. that ended up with the CEO being shown the door immediately.

Yeah, right now I'm looking at Tribune Company, where it looks like the board is mute. I mean, it's ridiculous that the CEO, Gannett made an offer for Tribune. It seems what you're supposed to do in that situation is the Committee of Independent Directors is supposed to retain counsel and investment banker and look at the offer.

Apparently none of that happened, and now the CEO says he's going to buy Gannett. I think he thinks he's going to get in a time machine and have Mike Milken give him some junk bonds. I don't know how he thinks he's going to finance that. But I have a suspicion that once those board members talk to their lawyers, they may end up growing us fine now and then. Let's talk about succession planning. That's an issue you've written about recently. Why do you think it really seems like it's hard for companies to pull off well?

And I'm wondering, first, is that true? or is that just my perception? And secondly, if it is true, why is that? I think it is true. It is getting a little bit better, but generally speaking, when I worked on a report for the National Association of Corporate Directors

about succession planning, we talked to one CEO, we said, what is the plan that you guys have? And he said, I'm going to look for those guys who cloned Dolly the sheep, and I'm going to try to get them to create another me.

So that's basically the ideal. You don't get to be a CEO without having a very healthy ego and a very healthy sense of competition, and those are not qualities that go well with the idea of finding a successor. And Jeff Sondenfeld's wonderful book, A Heroes Farewell, is still the key book on kind of the culture of the CEO when it comes to succession planning. But I think the boards are increasingly realizing that it is a constant obligation of the board. It's not something that you do when the CEO is getting near a certain age or when he's getting, looks like he's not as interested anymore. You have to have it all the time.

You have to have a short-term succession plan and a long-term succession plan. And one thing that I advocate, which so far I don't think anybody's doing, is that part of the CEO's incentive compensation should be on attracting and retaining top talent who could take over. I'm pretty sure that Walt Disney Company had a succession plan for Bob Eiger, and it involved Tom Staggs, the chief operating officer, got elevated. and then a year later he was basically told, it's not going to be you.

So now Walt Disney is in the position of needing to find, in the short term, a chief operating officer, and unless he's changed his mind, a replacement for Bob Eager when he walks out the door in a couple of years, where do you see that going? And to the extent that Bob Eiger would pick up the phone and call you and say, what should I do here, what would you tell him?

Well, I'm available. To give advice or be the CEO of the Walt Disney company? As to be the CEO of Walt Disney. I love Disney. As a movie critic, they're having an unbelievable year. With a Jungle Book was a huge success. Star Wars at the end of last year. I'm telling you right now,

Finding Dory is going to be the biggest film of the summer. So they seem to be doing very well. And while Warner's is making terrible superhero movies, they're making great superhero movies. So it shows you that the Disney magic is still. very much alive, they've made some great acquisitions. So I think what they need to do, they need to start by getting a stronger board. You know, Disney has historically not had the strongest board and they need to create a committee

that will look right now. It's going to be difficult. They may need to bring somebody in from outside, but they've got something really special there and they could, as we've seen with Disney before, they could come close to losing at all if they don't get somebody really good on top. Coming up, more with Nell Minow. Stay right here. This is Motley Full Money.

I feel so good. Come pay day. I think of all the things I'm going to buy when I pick up my pay. Welcome back to Motley Fool Money. I'm Chris Hill. Here's more of my conversation with Nell Minow in front of a live audience. What is a red flag and it can be regarding executives or can be regarding members of the board of directors and obviously

certainly the chairman of the board what is a red flag that we should look for as investors to give us a sense that a company that we may own shares of might be in trouble at the corporate level every year business week and the Wall Street Journal come out with articles on CEO pay who is being overpaid who's being underpaid. There's a really excellent report that is free that you can download from a group called As You So, A-S-Y-O-U-S-O-U-W, that I helped with a little bit, not on the analysis, but just on the approach. And if you look at that, that is your short-cell Bible, because that will tell you if a board cannot get CEO pay right, they don't know how to say

know to the CEO, they don't know how to tell the CEO what the priorities are, and that is a big red flag. So I don't think there's any more effective, more clear red flag than that. And in fact, a study some years ago said that in that time, repricing options was very popular that if you just shorted every company that repriced options, you could basically get island money. So I think that's the biggest red flag. flag there is. And we'll have time for questions from the audience for a couple of questions in just a

minute, but you mentioned some of the big movies this summer. I would be remiss if I did not ask you about an investing movie recommendation. It can be recent. It can be, I'm thinking in terms of something that you watch and you think that actually is a great representation of the investor experience. Well, recently, of course, the big short is the best there is. but there's a 1954 movie called the Solid Gold Cadillac about a shareholder who has 10 shares, goes to the annual meeting, objects to the outrageous CEO pay, which was $100,000. But if you just add three zeros onto all the numbers, you will see that every single thing that that conglomerate does wrong is exactly what companies do wrong today.

And you see what the shareholder does to turn it around, and it's absolutely great. So that's my favorite. And then I also want to recommend if any of you out there feel that the only person who could possibly explain the financial meltdown would be a member of Monty Python, you are correct. A member of Monty Python did a great documentary earlier this year about the financial meltdown called Boom Bust Boom. And I really recommend that one. This is something we've talked about before, but not in a while. It seems like when you're watching a superhero movie, the villain is very obvious. It's another person.

For a lot of other movies, a lot of other very good movies, the villain is a corporation. Yes, I wrote an article about this, and I had examples in every category, comedies, thrillers, even horror movies. The bad guy is always a corporation. And somebody once suggested to me that this is because Hollywood is anti-corporate, they're socialist, et cetera. That's not it. They're corporations. You think Disney is not the most capitalist enterprise in the world? Of course they are. And they understand that the nice thing about having a corporate bad guy

is that generally speaking in movies, the hero is somehow fighting against the man, fighting against the establishment. And a corporation, there's no anti-defamation league for corporations. It's very hard. You know, you've got, if you're going to look for the worst villain of all, you've got dinosaurs, you've got not. but they're not contemporary.

And so if you're going to have a story that is set now, you know, we've done Colombian drug dealers, we've done Middle Eastern terrorists, we've done, but there's going to be somebody who's going to get offended by that. There was a couple of years ago, they made a remake of Red Dawn, which is about a communist invasion of the United States, and they made it with Chinese.

The first one was the Soviets, okay? We can't do them anymore. So they had the Chinese invading the United States. But in the time that they were, making it, somebody figured out that Chinese buy a lot of movie tickets. And so they went in and they digitally changed them all after the movie was shot to North Korea. So if you're looking for a bad guy, the faceless corporation is a reliable one.

I'd just like to think that somewhere someone suggested we need to make the villain a corporation because we don't want to offend dinosaurs or Nazis. A couple of questions before we wrap up. Do you have a favorite company and least favorite company in the corporate governance realm? Wow. Well, I'm going to take the easy way out and say my favorite company is Berkshire Hathaway.

I have one share of Berkshire Hathaway stock with a basis of $150. It was from when I was a child. My father owned stock in a company that was bought by Berkshire, back when they were giving out stock as in exchange. And so I've met with Warren Buffett. I'm a big, big, yeah, it's the real deal.

So I'm a big, big fan of Berkshire. And there's a guy, you cannot complain about his CEO pay. You cannot complain about his incentive compensation. And I trust him when he says that he's got succession planning on lockdown. So I think that's very, very good. And, boy, my worst case scenario, I would say in the history of my studying this over time, Citigroup was probably the very worst.

Last question, and then we'll let you go, because it is graduation season. For anyone in the audience who has a graduate or soon-to-be graduate in the family, what's one piece of advice you would pass along to young people heading out into the world? My most important piece of advice, and I wrote not one but two articles for the Huffington Post about my advice to graduates, so you can look that out. But my most important piece of advice is never, ever, ever, ever use the word busy. That's one four-letter word that I would never use. And the reason for that is that people use that word as an excuse, and it's a genuine insult to whoever you're talking to. It pushes them away instead of bringing it in.

And it also makes it impossible for you to think honestly to yourself about what your own priorities and choices are. So never use that as an excuse. Never use that as a brag, very popular here in Washington. Just don't use that word, and you will become much, much more in tune with what you're doing and much more open to hearing from other people. Thanks for being here now. Thank you.

No, Minow. That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Mac Career. I'm Chris Hill. Thanks for listening, and we'll see you next week.