Motley Fool Money - Motley Fool Money: 01.11.2013

Episode Date: January 11, 2013

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I'm your host, Chris Hill, joining me in studio this week from Motley Fool Inside Value, Joe ager, from Motley Fool Income investor, James Early, and from Million Dollar portfolio, Charlie Travers. Good to see you, guys. How did you see you, Chris? We have got some big numbers in the smartphone industry. We will head to Sin City for a roll. report from the Consumer Electronics Show. And as always, we've got a few stocks on our radar to share.

But we begin this week with earnings season, which officially kicked off. Wells Fargo was the first big Wall Street bank to report. Fourth quarter profit up 24 percent due to gains in the mortgage division. Joe, I know this is a bank that you watch closely. The headline looks good, and yet the shares were down a little bit on the news. What's going on? Yeah, well, there are a lot of moving parts to any big bank, including wells. And the market right now is concerned that net interest margins are falling. And so interest rates are low and the spreads that banks make on loans are very lean right now. Now, that said, the plus side is that they're writing a lot more mortgages. So a lot of people have gone out and take advantage of that. Now, that's starting to fall as rates are starting to

tick back up. A lot of people have already refied. I know Charlie's desperately trying to get his refunds and counting. Yeah. But ultimately, I think the stock is pretty cheap. and that a lot of these concerns are priced in at this point. And, you know, there's kind of a seesaw with rates. So when interest rates do come back up, the downside is there will be fewer mortgage applications at the processing. But the flip side is interest margins will go up. So there is kind of a natural built-in hedge in the business. And I think the market's probably overthinking this one. James, what is? Joe says it well, as he usually does. When rates are low, banks are supposed to be making up for the interest margin issue on volume. In other words, they should have a lot of loans. Now, if you're not an impassioned bank follower like we are, know that banks basically pay out money at the short-term rate and receive money from the loans they make at the long-term rate. So when those rates don't leave a big spread,

in other words, the rates are fairly similar. They don't make much money. And particularly after Dodd-Frank legislation removed or starting to remove all these obnoxious fees that banks were relying on, in fact, they were making the majority of their money from these fees, but now these are going away, net interest margin is now more important. Charlie, do I have this right that Wells Fargo is doing so much refinancing business that your refi is taking five months?

Yeah, the backlog must be huge. Or they're just playing Xbox all day. I don't know. Joe, you've got to feel good about the fact that Charlie's refi is taking that long because, I mean... As a Wells Fargo shareholder, I want to say, we do value your business. Next week, Wednesday and Thursday, we're going to see most of the other big banks reporting. to what extent, if any, can we sort of extrapolate out the results of Wells Fargo into expectations for the other big banks? Yeah, you can on certain spots.

I think you're going to see a slowdown in mortgage originations, which is going to hurt like your J.P. Morgan's, which are pretty active there. But net chargeoffs are still really low, which is a good sign for all the banks. And ultimately, I think the numbers are overall favorable. I do think you're going to see the big story being net interest margins staying low, and that's where analysts are going to be concerned over the next few quarters. Shares of Nokia were up more than 15% on Thursday after the company pre-announced quarterly earnings. 4.4 million Lumia phones sold. And, Charlie, while that is not necessarily a huge number in the smartphone industry,

it was certainly more than people were expecting. And it's more than the company itself was even expecting, Chris. So when Windows Phone 8 came out in November, I think everybody was holding their breath. This is a completely unproven ecosystem. Nokia bet their entire company on it. And so far, it looks like there's signs that this bet is paying off. And that's a good thing because if it didn't, it'd be game over for them. But we have to put this in a little bit of context here.

The 4.4 million Lummias they sold, while that's a good start for Nokia, it's still a fraction of what the Samsung Galaxy S3 sells and an iPhone cell in a given quarter. So I would not say that Nokia is out of the woods by any stretch of the imagination, but they have a foundation to build upon as they go through this year. Joe, I was going to say Samsung earlier in the week shared that they sold 62 million phones. Always one-up in people. To what extent do you think that if not actually being scared, Apple and Samsung are maybe sitting up and paying a little bit more attention to Nokia? Yeah, well, I think where Nokia has really had success is in emerging markets, and that's a spot where Apple in particular is kind of struggled.

You know, they haven't got a lot of penetration in China, and Tim Cook's actually been over in China this week at a meeting with China Mobile, really trying to expand their presence there. But it's going to be difficult when they're chasing the high end in the smartphone market. And Nokia, which has been more aggressive on the low end, more reasonably priced phones, has been doing well over there. And, you know, this could be the catalyst for continued mojo. I'm still pretty skeptical. It's a very difficult market to compete in, especially at the low end. But, you know, hats off to them.

It's a solid phone, the Lumian. It's off to a good start. James? Well, when you're starving, Chris, even the worst food tastes good. And I'm looking at a graph, and unfortunately, I wish everyone listening could be here because it's hard to convey a graph on the radio. But a graph from the Wall Street Journal showing Nokia's smartphone shipments from 2010 to present. They basically took a nose died, like a roller coaster going down, and now it just barely blipped up. Now, a blip up is better than not.

It's better than a continued dive. But, you know, this could be good. I don't want to knock it, but I think we'll need a lot more to really kind of get our yanks going here in terms of excitement. Charlie, to James' point, fortunately, when you look at the results from Nokia, it's not just the – I know the Lumia phones got the headline, but also their networking business seems like it's improving as well. Right. The Nokia-Semen's network joint venture was a huge anchor around their neck for many years. They've been restructuring that ever since Stephen Elop came on board, and profitability in that division will really help them out. One of the things in the smartphone industry that I should mention that got some attention this week, The Wall Street Journal reported that Apple is working on a lower-end iPhone.

Apple did not confirm that. They wouldn't comment on the story. And it was even written in such a way that said, this is something that Apple's been kicking around for a few years. And they could still pull the plug on it. But if it happens, it's going to happen probably later this year. What do you think of that just as an idea, Joe? Is that a smart move for them or should they just remain in the space they are? Yeah, I think they should keep doing what they're doing now, which is focusing on making the best phone possible.

I think when you start going down market, you're kind of diluting the brand and what it stands for, not to mention you're hurting margins. And, you know, I don't know that Apple has a lot to gain in terms of, you know, accelerating price competition. Ultimately, that's going to come back to hurt them. I think what they're worried about it by making a more affordable phone is the market share losses to Android. And instead of focusing on the profitability of like an iPhone 5, they're worried that their ecosystem as a whole is not as valuable if they're not getting as many people in the door. And so maybe this is a way to do that. But it's a fine line to walk to not cannibalize where they make their money on the iPhone 5.

Right, because the ecosystem, I completely agree. But the trouble is the ecosystem is what sells the phone, right? And if they make their money selling the phone, you know, it's a difficult victory there when you're chasing the low end. Just to bring it back to Nokia, Charlie, when you look at the stock, it's also to refer back to James's graph, and nothing says great radio like a graph. It's blue with bars. Nokia's stock really has taken something of a nosedive over the last couple of years, but you look at it bouncing off of its lows. It's more than doubled off of its lows so far. What do you think of the valuation of the stock right now? And if you are hearing this news and thinking about Nokia, what is the next thing you should be?

watching? I think it's a good buy here. I do own the shares myself. And what you have to watch for is the next generation phone that they're going to launch and how that stacks up to what Apple's going to come out with later this year and what Samsung's going to come out with later this year. And you want to make sure they are at least competitive and they can keep the momentum going that they've built up so far. Nine months ago, Ford Motors started paying a dividend after taking more than five years off from paying a dividend. This week, Ford announced it's doubling the quarterly dividend, James, from five cents to 10 cents, I guess you could look at it as it's just a nickel, or you could look at it as, hey, it's 100% more.

Well, Chris, it's yielding roughly 3% now. So that's pretty good. And as a dividend investor, I actually might be interested if Ford made something other than American cars. To channel, I'm not, I'm kidding, but actually there's a really good story here. To channel Ron Gross, who is sick with the flu today, Ford is really firing on all cylinders. And it's doing it without the help of a bailout, which is kind of, I guess an analogy might be, If you're running a race with another kid and he gets tired and his dad picks him up and drives him along next to you and loads them up with Gatorade and then drops them off, you're still kind of winning the race. So Ford must feel really good, but it's a frustrating good in a weird sense.

But yeah, they're at a 52-week high. They hired, I think, 8,000 100 employees this year, another 2,000 to go. So a lot of good for this company. And it's kind of, I doubted Ford, but I'm regretting. It's a lot better story than I realized. What do you think, Joe? Well, I think a lot of that is good. I don't think that, I mean, not being bailed out as a taxpayer, I certainly appreciate that. But they did issue a lot of shares to make that happen. And the balance sheet is pretty hairy these days. So I'm a little surprised that they're pushing forward with the dividend like that. And, you know, it's a cyclical business. You got a lot of debt. I think the dividend they had was just fine. Charlie, when you look at dividend increases in general, whether it's, you know, Ford or just any company, what, how do you view those as an investor, is it automatically a good thing? Or is it, I guess some could look at this in Ford's

case and say, you know what, they wouldn't be doubling the dividend unless they felt really good about their financial strength. Or if they're just delusional, to Joe's point. A one-off dividend increase doesn't get me all that excited. But if you see a pattern of dividend increases over five or 10 years or even more like some of the best blue chip companies in the world, I do think that's an indicator of financial strength. This is called the I'm Not Dead dividend increase. Basically, Ford knows that people will think if they raise their dividend, Ford must not be dead. Ford must have life left.

So they're trying to capitalize on that regardless of the finances. Coming up, the holiday retail numbers are starting to come in. And for some companies, the news ain't pretty. More after this. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Joe Maeger, James Early, and Charlie Travers. On Friday, guys, the FAA formally opened a full review of the new Boeing 787 Dreamliner Jet.

There have been several incidences in just the past few months, including one earlier this week that caught on fire on the ground at Boston's Logan Airport. I guess the headline risk sort of outweighs the actual risk, but this just seems like one of those things where when I look at the news and I look at Boeing stock only down a couple percent. Still within shouting distance of a 52-week high, I'm just a little surprised that Boeing is not trading lower. Yeah, well, behold, the power of low expectations. In this case, it helps to kind of look through the numbers a little bit. So only about half of Boeing's total revenue comes from commercial airlines. The rest of it's related to defense. And within commercial airplanes, they've also got all the other 747 and less streaming liners that they have,

aftermarket parts, or whatnot. And so it's a more diverse business than just the Dreamliner. I mean, whereas if you look at Nokia, there's quite a bit more hanging on the life of, say, the Lumia phone. Obviously, they need the Dreamliner to work out. They've invested many billions of dollars. The plus side is there's huge demand for it. People are waiting for this plane because it can go farther, burns less fuel. So airlines are excited.

Not when it's on fire. Charlie, what do you think? I think the stock's holding up so well because it's not. not like there's a million other companies in the world that can build commercial aircraft. It's like Airbus, Boeing, and Brayer, and that's about it. So, yeah, they'll have to work out these kinks, but it's kind of like, you know, it's our game and we're going to play it. It's ironic. The plane itself was three and a half years late to production, if I call it.

Now it catches fire. But you're right, what else they're going to do? And these are electrical and, I think, battery-related things. They can probably, compare to the whole cost of the plane, the fixing costs, I imagine, not as expensive as we would think. On the flip side, Joe, if they come out of this FAA inquiry with a clean bill of health, does that mean that on the upside there's going to be very little in the way that we're going to see the stock boosted? I am not actually all that worried about the FAA thing. I'm more concerned about their ability to just fix all these problems.

And if they can do that, I think the next few years are going to be very good to them. Some bricks and mortar retailers had a tough end to 2012, but Best Buy apparently was not one of them. Shares of Best Buy up more than 10% on Friday after reporting, that same store sales during the holiday season were flat. So, Charlie, if I'm doing the math here, flat comps means awesome news, apparently. When you're Best Buy it does. Considering that they're competing with Amazon and Target and Walmart, consumer electronics has not been a good place to be for bricks and mortar retailers in recent years.

And they cite that better employee training to help people out with their decision-making and price matching online, which is key because, you know, You know, these have been long a showroom for people to come and see, you know, $600 TV and then buy it cheaper online. But they've decided to match prices and keep those sales at the expense of margin. But I don't really see long-term optimism here for Best Buy. I think the competitive environment is not in their favor. We also saw Target earlier in the week coming out with a similar, they had had an online price matching program that they had set up in October. They came out this week and said,

Hey, we're just going to extend that through the end of the year. What do you think of that, Joe? Because it seems like, you know, Target's doing well on its own. And this seems like almost like they're baiting Amazon. Yeah, it's a little gimmicky. I mean, this isn't, Target cannot win a price war with Amazon over the long term, and they know that. And what's funny is when you look into the fine print with this offer, it doesn't apply to third-party sellers on Amazon. Well, 40% of the volume on Amazon is third-party sellers.

So 40% of the people who show up and try and claim this are going to get stiff-armed, and I'm sure they're not going to appreciate that. We're going to see more results as more retailers come out with sales figures and obviously earnings for the quarter as well. But, you know, it was not great news in general for retailers this week. We saw, you know, apparel retailers like Errol Postel coming out and cutting their guidance. And, you know, even Tiffany, which has been doing well of late, their sales came in at the low end of the quarter.

What do you make of this, James, when you see, on average, more retailers than not that are struggling in the holiday season, which is so crucial for so many of them. Well, a lot of this stuff is not the most necessary retail in the first place, and that's going to be showing more softness right now. I think our retail has been saturated. I think we're seeing the results of probably a decade-plus-long megatrend, Chris, versus a quarterly issue. I think we have just so much retailer, and the pullback is just more indicative of people's decisions. Consumer spinning is, what, two-thirds of the economy? So it doesn't really surprising. I feel it's a good sign, actually.

How do you guys differentiate between a retailer that is in trouble, that is genuinely struggling? And, you know, to James's point, just sort of like a quarterly blip, just sort of this whole notion of like, oh, look, they just had a little bit of a hiccup. And instead of them being in trouble, the stock is just on sale. I kind of go like this. Are they eBay or Amazon? Yes? Then they're not in trouble. Are they not? Oh, well, then they might have some issues. And there are a couple exceptions to that Costco, I think, being the All-Star membership model, great customer service, great prices. But, you know, for the most part, brick-and-mortar retailers are just really going to struggle to compete with online, which offers better price transparency and better selection. The other exception I'll make is companies with phenomenal brands that can transplant them overseas and avoid some of the saturation issues domestically. that James is talking about. If you think of companies like Starbucks or coach or young brands that are going into Asia and Latin America and doing very well down there. Retail is like a radio show market.

You know, you have the cool radio channel doesn't last very long. There's something else that for a year or two. Once the market turns on you, it's a tough business. After four years as Secretary of the U.S. Treasury, Tim Geithner is stepping down and in his place, President Obama, has nominated White House Chief of Staff Jack Liu. what's most distinctive about Jack Liu, he does have business experience. He was an executive at Citigroup. But what's getting all the headlines, James, is his signature.

What a relief. Hopefully he'll bring that great city experience over. His signature is getting all the headlines. It's this series of loops. You're sort of an amateur evaluator of signatures. It is a fascinating, Chris. You know, high school I got really into graphology, which is the science, if you can call it a science. it's not really a science of analyzing handwriting, and I would analyze all my friend's signatures.

And there are some people. There's a certain body of evidence in graphology that says that loopy sort of notions are indicative of sexual deviancy. Now, this is not some – I'm not diagnosing anything. I don't know. I'm just representing that news here. But it is certainly a very interesting signature, Chris. It looks like your pen's not working, and you're just squiggling it around on the paper to get it to work, and that's what his signature looks like. Hopefully, by the time he becomes secretary, and his signature is actually on the currency. that'll get cleaned up. Joe Mager, Charlie Travers, James Early. Guys, thanks.

We'll see you later in the show. Up next, we head to Las Vegas for a report on the Consumer Electronics Show. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. This week, more than 150,000 people descended upon Las Vegas for the Consumer Electronics Show, the largest consumer technology trade show in the world.

Technology writer Rob Pagararo is one of those, 150,000, and he joins me now from Sin City. Rob, always good to talk to you. Thanks, you too. So, Rob, during the week, there are always news stories coming out of CES. There are companies putting out press releases, trying to get attention. But it seems like so far one of the big headlines is this notion of ultra-HD-TV, sort of four times the resolution of normal HDTV. That's at least one of the big headlines, but you're there. You're walking around the exhibit halls. What's your headline for the week so far. Your HD or UHD, your 4K,

pick your own abbreviation, looks kind of like a boondoggle to me. The biggest problem you have is that to actually see these extra pixels, you need a really hard set. If, like me, you have a 40-inch TV, you're watching from your couch 5 feet away, you already can't see the individual picture elements. You have a retina display

in your living room. So we're talking 60, 84-inch screens, which weren't that cheap in HD form. You know, four times the pixels, prices get into, you know, five significant digits to the left of the decimal point. That is not a consumer-friendly price points. Then you have the problem that there's just about nothing to watch. So what are a couple of things that you've seen that have really impressed you,

either for just how cool they are or for the fact that you think that this is a gadget or a product or a service that has a great market opportunity? In a word, I would say sensors. You know, it's gotten so cheap and easy to put in some kind of widget on a gadget that will, you know, measure your acceleration or your heart rakes or the temperature, all this other data that's been sitting around waiting to get collected, but traditionally required to me, you combine that with how cheap it's gone to add Wi-fire Bluetooth. So suddenly you can make all these devices. Maybe it's some home automation module you plug into a power outlet or a little, key five thing you wear while you're walking around that synchronizes with your phone or your

tablet. So, you know, all this data you can make use of and have all your other connected devices respond to that somehow. It's sure, sci-fi, I think a lot of this stuff will turn it to be difficult to use or not all the practical, but I think you're going to see a neat innovation happening. To suggest for all the tiny companies that don't have the huge exhibits on the show floor, but you have a little table booked in so far off corner. There's an interesting stuff going on in that area.

I am curious because at CES every year, there are certainly amazing products, really cool products, but there are also things that are just flat out weird or strange. I saw one thing, one news item this week about a company called Neuroskyi, which is modeling mind-controlled helicopters. Now, these are miniature helicopters that you would use as a toy. But I'm just curious, when you walk around the exhibit halls at the Consumer Electronics Show, what is the strangest device or product that you've seen? That's a very easy answer for me. Another sort of brainwave connected device that is a company called Neme, I think.

I'm not sure of the presentation. They make a set of brainwave cat ears, basically. A set of what? A set of what? A headset on. Brainwave cat ears. So there's the sort of sensor pod that picks up your neurons electrolytes or anything. And that is connected to a couple of servo motors that make these looking cat ears, cat ears.

cat ears move accordingly. So if you have feelings of interest, they start to wiggle. I tested this the other night. I first put them on. They didn't really do anything. The public relations rep said, well, think of something that makes you happy. So about going to a nap game. They moved a little bit. I looked at a picture of my family on my phone, and they started wiggling. I started giggling, which made the move a little bit more. The demo nearly ended with me collapsing on the floor and laughter. And there's a picture of me wearing these things. And what is the application for something like this? Like, I get that it's an interesting device to model or something like that, but I'm just trying to see it.

Like, other than if you're a professional poker player and you can somehow convince the other people at the table to wear these things, I don't get what the useful application is. Instead of dogs playing poker, we have cat-eared humans playing poker. Exactly. You know, it's a $100 device, so I think it is perhaps you wear this to provoke odd reactions among your friends. jealous longing? I'm not sure. I think it, like I was saying before, about sensors, when it gets cheap enough to combine these features in a consumer device, people will do a lot of interesting stuff. We were talking earlier about high-definition television, and I remember the first time I saw a high-definition TV. It was 1992. I was at an expo, and I thought, well, that's kind of interesting, but it was, you know,

to the point about the ultra HDTV. It was expensive. And you think about it, Rob, 1992, we were at that point still about 10, 12 years away from HDTV's really being in a lot of people's homes. So with that in mind, I'm curious what you have seen at the Consumer Electronics Show that you look at and you think, I think that's going to be a hit. That's going to catch on. But it's going to be a good decade or so before people really start going out and buying

that. 4K, I just don't see it getting too far in the mass market because these screen sizes a lot of people, you know, I live in a house built in 1920. I cannot physically fit a TV bigger than maybe 46 inches unless I'm going to somehow suspended from the ceiling. So I don't know how far that goes. I think that the TV trend I'm a lot more happy to see, and just continuing is the whole connected TV phenomenon. Your TV has apps for Netflix and Amazon and Hulu, MLB.com, TV maybe. I've been calling that TV second digital transition because you're going to a point where

you know, among other things in some cases is what you actually really get rid of the cable box. There's the Roku little web media receiver. They announced to deal with Time Warner Cable where you provide your account credentials and you can watch every channel you pay for over the internet, no big, ugly, stupid cable box required. You're listening to Motley Full Money

talking with Rob Pecorro, technology writer at the Consumer Electronics Show in Las Vegas. Before we wrap up with a round of buy-seller hold, I want to get to the whole notion of disruptive technology because as investors at the Motley Fool, that's something that we're interested in, and that's certainly something that people have done well with,

investing in technologies that have succeeded in disrupting businesses. When you walk around the exhibit halls, and we were just talking about cable TV and people cutting the cord, so to so to something, speak, when you walk around the exhibit halls, what is an industry or a company that you think is threatened by some of the things that you've seen at CES this year? So I'm glad you meant one of the places I've been writing lately is a tech policy blog called the Disruptive Competition Project.

So we've got on the same wavelength here. I think, you know, the traditional pay TV model, it's not like companies like Comcast and Time Warner are hurting, but the whole idea that you're going to do. you're going to keep paying ever more per month for this huge assurbanant of channels, 75% of which you do not want, that doesn't scale. And when it gets to be so much easier to sort of put together what you want from, whether you add a box like a Roku to your TV, or maybe it already has a bunch of apps of its own,

you know, in my own life, my wife and now we haven't paid for TV since 2009. We do pretty well combining over the air with, you know, one Internet app or another. So they're sort of right for disruption. There's an interesting trend to look at in the cell phone business. T-Mobile announced a few weeks ago that they're going to get rid of the traditional handset subsidy. So instead of you pay what you think is $99 for a phone, then recoups endlessly because there's another $20 or $30,000 to your bill, even after you paid back that subsidy, they're just going to charge you what the phone costs and you'll pay less each month. I'm hoping that that's going to open up the market a little bit. Because in that case, you're going to have vendors, fund vendors,

who will want to compete on price, presumably, because the price will be a real number, not this fake thing. You know, you see in the ads that doesn't actually reflect what you want to pay. All right, we will wrap up with a round of buy, seller, hold. Let's start with buy seller hold 3D printing. Buy. The cost of that equipment is coming down, and you don't necessarily need to buy one.

There's a lot of interesting stuff being done, setting up hacker spaces in various cities. If you're ever in San Francisco, you should really check out one called the Tech Shop. That's not far from Moscone Center. You could just go into these places that have a 3D printer and things like a water jet cutter and various other specialized industrial machinery. They could probably hear you really bad if you used incorrectly. The tools of sort of one-off manufacturing are getting a lot cheaper and easier to apps.

This phone has been a long time coming, much. anticipated at least by the people who make it. Buy seller hold to Blackberry 10. I got a hold. They have a huge challenge. It is not enough to have a great interface. One of the phones we've been trying out here is a Windows phone 8 phone, the HTC 8X. It's a nice piece of work. The Windows phone interface is really clean and elegant, but the app support is pretty bad, and one of the apps we've been using most often, Twitter, is the worst Twitter client I've ever used, even though it's Twitter's own software. and has that issue. And a lot of people, you know, there weren't so many people who went out and bought BlackBerry so much as their IT department saw to it that they had a Blackberry. And once you get people who've switched to iOS or Android, do they necessarily feel that longing? I don't know.

Google is one of the companies that's been working on this. Buy seller hold driverless cars. Cars will drive for us, but there's such a huge regulatory burden to get over to have those. I think it is more. likely that you'll have cars that are going to be increasingly, you know, a little more like R2D2 and in the back of the X-Men fighter sort of looking out for you, but not necessarily, you know, taking the wheel, but fixing problems, warning you, you already see it in cars that try to make sure you stay in your lane. Lexus did a whole demonstration about all the different ways their car will come out of the trip with the car intact, you will be in fact. And finally, it's home to the Consumer Electronics Show as well as numerous Bachelor and Bachelorette

parties, buy-seller hold Las Vegas as a family vacation spot. I always see Vegas that's worst. We see if the traffic is horrible. The monorail should be a good alternative, but they don't know how to pack enough people on their little elevated. In particular trade show, you do see enough vendors who choose to attract attention to their exhibits by healthy-looking women in outfits. I would not approve of my daughter ever wearing.

Put it that way. Rob Pagoraro is a technology writer. You can read his stuff at USA Today at Discovery News, as well as Rob Pegararo.com. Rob, get home safe, and until then, have fun in Vegas. Thanks. Coming up, we'll give an inside look at the stocks on our radar. You're listening to 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. I'm Chris Hale, joining me in studio. Once again, Joe Maker, James Early, and Charlie Travers. Before we get to the stocks on our radar, just talking to Rob Pagoraro at the Consumer Electronics Show. And Charlie, there are so many gadgets out there.

And one of the things I mentioned to Rob, the one that sort of blew my mind was this company, Neurosky, which has the miniature helicopters that you control with your mind, which frankly seems like something out of a James Bond movie. But you know what? If the price were right, I would probably pay for one of those. I would terrorize my cat with that. But you're something of a gadget guy. Coming out of CES, sort of what stands out to you?

Well, as a gamer who loves my Xbox, the Microsoft demo in the middle of the Samsung keynote presentation was quite amazing. The current Xbox is seven years old, so the next generation one is coming out very quickly. And what they're using is their connect technology to scan your living room and then using Samsung's projectors to take your game, and you're basically blowing out your TV to the entire wall. So if you imagine your gaming, they showed snow falling on your wall or explosions and fire. It was incredible to watch. Go look it up. That sounds awesome.

It also sounds like you could really mess up a little kid with something like that. Yeah. Or my cat. Or your cat. Let's bring in our man, Steve Brodo from the other side of the glass. Steve, before we get to the stocks, any gadgets from CES that look good to you or anything on your wish list? Because they got thousands of companies working on gadgets. See, I'm going to go off the board and go with a gadget that goes on your keychain,

and it's totally not technological at all, but it has saved me in many ways. Whenever I need a pen, it's called the telepen, telescoping keychain pen. I have a photo up so you can see. It's this little expanding pen, and it goes on your key ring every time you need to sign a check or write something down. I always have a pen with me. It's not like electronic, but boy, do I love that little pen. I thought you were going to say a bottle opener.

No, no, no. The telepen telescoping keychain pen. Google it. It's very inexpensive. It'll change your life. I don't think I've ever heard you promote something in quite this way before. Is it possible you're an angel investor in this company? I wish. Believe me. I wish. Are you getting a little cut? Are you getting a promotional deal? Believe me. I wish. Promotional consideration for Mr. Broydos' wardrobe paid for by. Let's get to the stocks that are on our radar. And Steve will have a question for you. Charlie Travers, you are up first. What is the stock on your radar this week? I am very excited about Baidu. Ticker is B-I-D-U. The stock has sold off pretty hard recently, started to rebound.

They are the equivalent of Google in China. They dominate the market, just like Google dominates search here. All the same competitive advantages. And I think this is a long-term winner as the Internet and e-commerce just continues to grow in China. It's a phenomenal buy right here. Is part of the reason you're excited about it, the valuation, because it has been sold off? so much. Right. This is a stock that has seen its revenues just

explode and it's priced for about 10 or 12% growth right now. It's really on sale. Steve, question about Baidu? Yes. What is its relationship with Google? Is there one? And second question, is Google, did they pull out of China entirely? Are they back there? What happened with that? Yeah, Google did back out of China. I think

they're still operating in Hong Kong. Now, Baidu does use the Android operating system on some mobile devices, so there is some connection there. James Early? Chris, I am going with Bank of America. The ticker is BAC. This is on my radar, not necessarily in a good way, although I am a customer.

These guys were basically two clowns short of a circus coming out of the bailout. It was just one goof up after another. And with this interest margin issue, I see more clouds looming overhead. They're in the middle of settling these mortgage fraud issues, but it's not quite done yet to the extent people think. So I think the clown fest will continue. I was going to say, the big story at the beginning of the week was Bank of America settling for more than $10 billion with Fannie Mae. That was greeted by the market as good news, but you just, you're still looking for more clouds. Now it's being questioned by some watchdog group or something, and there's still some more settlements, smaller ones albeit, but more settlements to be done.

Steve, question about Bank of America? Do you recommend owning stocks of companies that you believe to be kind of slimy? I don't mean that as a joke. I'll answer it like this. I see what you're asking. You can, but you have to sell more quickly. So in other words, a slimy company that's selling for really low valuation could actually be a good investment, but you want to sell that once it hits your valuation estimate.

You don't want to keep holding that kind of company for the long term. But ethically, do you think it's a good idea to own a stock in a company that you believe maybe isn't the most wonderful? Oh, that's not how I roll, Steve. I mean, I realize that other people do that, but personally I wouldn't do that. I do have a company in mind that you're considering that is slimy, and that's the effect. Well, I've owned Bank of America in the past. I don't own it now. But it's just, I don't know, they kind of creep me out.

I mean, it's a big bank. I have a feeling there's a lot of people doing some bad things there. I don't know if I term of slimy, but I understand what you're saying. Maybe poorly run. Yeah. Joe Mager. I'll go with automatic data processing. It's the nation's largest payroll processor.

Now, stocks aren't cheap right now. The market's near a five-year high, so it would behoove people to think about how they're diversified. And if you're looking for something conservative right now, I think ADP is a good fit. It's one of the few companies with a AAA credit rating. I think they're four left, and they're one of them. Nice, rock-solid dividend, and it should do well as the economy bounces back. You get better employment numbers. And when interest rates go up, too, they'll profit.

Before I kick it to Steve, we were talking earlier about Boeing, and Charlie made the point about essentially barrier to entry. It's not like you can just throw up a company that overnight that makes jets. To what extent is ADP in that category where they have a high barrier to entry? Well, the nice thing is they compete at the high end of the market in terms of the size of their customers. So if you wanted to handle all a payroll for Ford, for example, or J.P. Morgan, it would be incredibly difficult for you to step in and do that because you've got to deal with all the complexities of all the complexities of things. So it's a very strong business with incredibly high retention rates because of that. Plus math. You've got to do a lot of math. Steve question on ADP? The question is, what percentage of the market does paychecks currently have, if you had a guess?

It's substantially smaller. It's tough to get breakouts from them, but ADP processes around like one in five, one and six U.S. payroll checks, and paychecks is the next step down from them. So pretty small in the grand scheme of things. Paychecks is more like the small, the middle-sized firms, ADP is kind of the mid to bigger, and they kind of leave each other alone. Yeah, that's working well for them. Steve, by-due, ADP, Bank of America. You got one you like? Hmm, I'm going with Joe's pick.

Yeah. We will end there. Joe Maeger, Charlie Travers, James Early, guys. Thanks for being here. Thanks. That is it for this edition of Motley Full Money. Our engineer is Steve Broito. Our producer is Matt Greer.

I'm Chris Hill. Thanks for listening. We'll see you next week.