Motley Fool Money - Motley Fool Money: 03.25.2011

Episode Date: March 25, 2011

Is Amazon's new venture with Google a serious threat to Apple? Are the television networks becoming Netflix's worst nightmare? And could Warren Buffett's next acquisition involve a talking duck? We tackle those questions, share some stocks on our radar, and talk tech with Washington Post columnist Rob Pegoraro. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Thanks for being here. I'm your host Chris Hill, and I'm joined by Motley Fool Senior Analyst, Seth Jason, James Early, and Ron Gross. Guys, good to see you. Good to see you, Chris. We have got the latest from CBS, Bank of America, AT&T, and more. We'll talk consumer technology. with Washington Post columnist Rob Pagararo.

Plus, as always, a look at the stocks on our radar. But we begin overseas. Warren Buffett was in South Korea earlier this week and said that despite recent events, he's not looking at Japan's economic future any differently and that the events, quote, offer a buying opportunity. Ron Gross, I'll start with you. You agree with him?

I'm not so sure, Chris. This is certainly standard Buffett Fair where he's saying the events of the last couple of weeks doesn't really change the whole entire future of the country. But this is a very large thing that happened. $300 billion of losses. It could plunge the country back into tough economic times. Stocks weren't necessarily that cheap in the first place in a lot of sectors in Japan. So I'm not sure this does create some amazing buying opportunity where you can swoop in and buy stocks on the cheap.

But you're not Buffett. Of course, it is different for him. The rich are different from you and me. Buffett, of course, can buy whole companies, not that I think that that's all that much easier for him in Japan because of weird and nested shareholding and all sorts of other strange stuff that goes on there. And, of course, also remember that Buffett has all this cash and he's accustomed to being able to lend it out at really great rates. So he may have opportunities in Japan that we would never see. James? So far, Buffett has been more talk than action. He doesn't own much in Japan to begin with. And not that I doubt him, he may start buying, but Japan is not a shareholder-friendly country.

And moreover, the nuclear situation is far from resolved. I disagree with Warren Buffett. I don't think you can say this doesn't change the future of the country. It has, and it will continue to. So I think he's premature. I think an interesting play. Maybe down the road, not yet. We have to see how it shakes out.

Would be Aflac for him, which is obviously in the insurance industry. He loves the model. They do 75 to 80% of their business in Japan, but it's an American company. It could be an interesting play if the stock gets cheap enough. Yeah, and they got rid of what's his name. who made all the jokes after the tsunami. Gilbert Godfrey, yeah, which you got to think, did the guy even know who he was working for?

Well, and the Affleck CEO came out this week and said that they're conducting a nationwide search for a new voice and that the job pays six figures. Wow. I have a pretty annoying voice. I've got to get on this. Give him a call after the show today. Buffett also had some comments on the EU.

Obviously, guys, first we had Greece, then Ireland. Now it's Portugal. EU leaders had promise to understand. unveil a solution at a summit when Portugal's prime minister abruptly resigned after his austerity measures were rejected by parliament. How much more bailing out can Germany in these other countries do? Well, you know the country is sketchy, Chris, when the prime minister just quits, I mean, that's like something out of the Simpsons. These are the sorts of things that make Portugal, Portugal. Let me just speaking of Germany bailing out, let me just say there's a good Wall Street Journal article

that shows the percent of people who have working age Europeans who have completed high school, and it's only 28 percent for Portugal. So they're really, really being carried by Europe. I mean, if they're a company, it would have been bought out and liquidated by now. But France and Germany have to carry them. Seth? Portugal, I love Portugal. I've vacationed in Portugal.

I would buy a piece of property in Portugal. He's sitting up for a very bad point if it starts out with. If you talk about paella, we're in trouble. No, and when you go. go to Portugal, anytime over the past few years as I did, you can see what happened. And it's pretty obvious in the city of Porto, for example, up in the north. It's a city built on cliffs made of really hard rock along a river, and they dug out a subway system. I mean, they have all these brand new super highways. They put in all this wonderful infrastructure, an airport that was virtually

empty when we flew in all sorts of empty exits. They overbuilt, and they did that with money that was cheap after they got into the EU, and now they're paying the price. They're not getting any return on a lot of those investments, and it's hurting them. You're listening to Motley's Fool Money, Chris Hill, Seth Jason, James Early, and Ron Gross, as we go through some of the big headlines of the week. AT&T is acquiring T-Mobile for $39 billion. If the government approves the deal, AT&T would become the largest mobile company in America. Seth, your thoughts on the deal? I really wonder if the government is going to okay this. And I guess from a shareholder perspective, it looks like an okay deal.

This will really help AT&T get another big chunk of the market in the U.S. But from the consumer side, we also think about that here at the Motley Fool. I have to look at this as bad news. The less competition we have, the less innovation we have. People already complain about AT&T's network. I use it myself and find it to be just fine. But I would always love for there to be more competition in order to shake the big company. and he's up, and we're certainly moving in the opposite direction of that here.

James? I'll say this, Chris, this is bad news for a couple, I mean, for maybe some of the smaller players, they might have to merge, but it's also bad news for all the, I'll say cheapskates, but people who are looking for lower price phone plans because that's what T-Mobile did. So you're not going to see that. I don't think with AT&D, I think those are going to go away, but it's going to save money on advertising on overhead and things like that. So it's probably a good deal overall, but like Seth, I'm not sure it's going to go through.

If it does go through, I think Apple is certainly a beneficiary of the deal, and they could actually be the biggest winner out of everyone. Why is that? Well, I think one of the biggest complaints that comes from Apple is the AT&T network and how good it works. And Seth has just indicated that he doesn't have an issue with it. I actually use the AT&T network with an Apple as well, and it's quite poor where I live and the coverage where I live.

And most of the people that live near me, really, I've just fed up. When Verizon offered a plan for the iPhone, that was a potential solution, but the functionality there is not so great. So I think if you improve the network and you really can then take hold, you know, be happy that you have that iPhone, Apple definitely is the beneficiary. Revenue per unit is materially higher at AT&T than it is at TeamMobile. So if you bring those people on and then you push iPhones onto them, it's going to jack up revenues overall. This week in banking. I know. You can control your excitement. City Group announced a one for ten reverse stocks flip, which is always hilarious, and that it would resume paying a dividend.

Meanwhile, the Fed rejected Bank of America's dividend hike. James, let's start with the Citigroup piece first. Your thoughts? Well, I can actually bundle it all together. So remember, guys, the Fed has seen all these guys naked. And to be clear, I'm speaking metaphorically. about the companies, not the people. That's not my business. Thank God. So they know stuff that we don't because of these stress tests. And in general, the Fed is the one to be trusted here. What is interesting is that Citigroup's request to initiate a penny per quarter dividend got approved. Bank of America got denied when it tried to pay slightly more than a penny. That's worse than it seems, though, for Bank of America because its stock prices three times higher than Citigroups. So Citigroup's actually paying three times as high a dividend yield with that same penny as Bank of America.

Bank of America can't raise any more. So it says better things for Citigroup. I mean, the reverse split is a financially neutral move, but what it's going to do is bring their stock price from $4 to, what is a 10 to 1, so $40-something, that is going to make it a lot cheaper for institutional investors who pay by the share to trade their stocks. So there are a lot of institutions that don't trade cheaply priced shares, they will be able to trade Citigroup now.

So it actually does have a material impact that's legitimate. in the liquidity sense. It makes them look a little bit more respectable. Look, it's transaction costs. Yeah. But am I the only one surprised by this? I look at the big banks, and to me, Citigroup is sort of the screw-up of the group, and Bank of America is the largest bank in our country, and the fact that they were the

ones who got rejected, I mean, to me... Remember Bank of America? Remember the junk they bought? It's a little company called Countrywide Ring a bell? The Fed... The Countrywide purchase didn't. work out for them? The Fed knows what the Fed knows a little bit more what that balance sheet looks like, I think, and they probably have a good reason for saying, no, no, no, no, no, you guys

hang on to that money. The Fed has x-ray glasses, Chris. We talked earlier in the week about this topic 820, formerly FAS 157-4. This was a very exciting discussion, actually, but this is working by the edge of my seat. Please continue. Institutions were given leeway to mark down certain assets or just mark their own values as certain assets as they felt appropriate. So it's quite possible. The Bank of America took that and abused it, and that's what the Fed is responding to here. Oh, it wouldn't be abused, though. It would just be, you know, being on. Just waiting as far as they can. Just waiting around for things to change. Coming up, Apple is competing with Amazon by using an old type of technology, the lawsuit.

Details shortly. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Seth Jason, James Early, and Ron Gross. as we hit the big headlines of the week. Amazon opened its App Store for Android smartphones. Apple responded in an innovative way, suing Amazon and claiming it has trademarked the phrase App Store. Seth Jason, I'll start with you.

Is Amazon App Store a threat to Apple? I don't think it's a threat at all. We're talking about the difference of whether or not there's a space. Is that what this comes down to? Yes, I believe Apple's App Store has a space. That's the Sway store. Amazon's App Store. The store is the sticking food.

Clearly they're different. Pretty original thinkers there. I mean, it seems, let's admit, App Store is a really generic term. However, Apple does have a trademark on it, right? And so you have to defend those. Otherwise, they kind of go away. So in some ways, they're forced to do this.

In the other hand, it does seem pretty silly. I don't think it's a threat at all because obviously Amazon cannot start selling Apple software for iPhones and iPads. Apple just won't let them. do that. So that doesn't really matter. What's interesting is that Amazon has moved into a space that Google has just completely flubbed. Google's App Store is, you know, they're the ones who let those 50 or how many dozen malware-bearing applications onto people's phones. They don't

vet the programs the way that the Apple App Store or the Windows Phone 7 Marketplace do. And so Amazon is promising to kind of curate a little bit, and that is something that consumers will probably respond to. I think they're just stepping into a vacuum that Google created because Google is kind of either clueless or egotistical and doesn't think that it matters. So just to be clear, Google has an app store?

Well, Google, did they, did Android. Android does have an Android marketplace, yeah, but I don't think it does. They did a great job of hiding that news in the title. 150,000 apps versus Amazon's less than 4,000, so Amazon's going to start slow here. Well, no, no, no, that's one of the things that that sticks in my craw.

I'm getting uptight here. A hundred-some thousand apps is exactly the problem. Well, they're not all great. They're not all great. How do you find some that are even decent? I mean, people make fun of Windows Phone 7 for only having 8 or 10,000 apps or whatever it is now. It's still way too many. It's impossible to find the stuff you want.

I would be much happier if all of these app stores kind of threw out 90% of the crap and there were only a few hundred good programs. Before your craw got all worked up. I was going to add what I do like about the apps. Amazon idea here is, A, it'll recommend apps to you based on your buying history, perhaps recommend something that you'll like or not, you know, that will be useful to you. But then to let you try it out and, you know, test it a little bit before you actually purchase it. So you can see if you're buying one of these junk ones that are on the Android store. James? As I said earlier

in the week, when I see this title copying, just adding a space, all I can think about is coming to America, the Eddie Murphy movie, where the guy has the McDowell's restaurant with the curved M. Instead of McDonald's, the obvious copy. Cap cap. No sesame seeds on the bun. Exactly, no seeds. But at the same time, to Ron's and Seth's points, I think, to what degree does this just sort of propel Google? I mean, Amazon is huge. So, I mean, once we're done talking about the title, even if they call something else, I mean, in a year from now, what sort of bite does this, I shouldn't say, I was going to say, bite does this take out of Apple without meaning a pun? But I can't now.

Well, and one of the stories that's starting to percolate in the tech blogs is the notion that Amazon may be working on a tablet of their own. So if that is, in fact, the case, and Amazon is working on a tablet, doesn't that point to even greater things, not just for Google with this Amazon App Store, but for Amazon? I wish everyone could see me rolling my eyes. We need another tablet is what we need. Yeah, exactly. We're already in a situation where everyone either has to have the Apple or they have to choose from 25 different competing tablets, some of which may be better than the iPad, but nobody cares about because it is not an iPad.

Coming in mid-April, the Playbook from BlackBerry. Going to go nowhere. Nowhere, even if it's great, it'll go nowhere. I don't believe that Amazon has any interest in that. Amazon has stuck with the Kindle, which is sort of a one-use device, and people have been buying it specifically because it only does that one thing, but it does it really well. It reads e-books.

Yeah, and I would hope if Amazon does decide to go the route of the tablet, please do not go up against the iPad, because that's a losing battle. If they want to go something way lower priced, even less functionality, there might be a small niche for it, but they're not going to beat Apple at their own game. Interesting week for Netflix. CBS announced it will stop streaming some of its first-run Showtime, programs, stars followed up by announcing that starting April 1st, it will delay by 90 days the release of their shows to Netflix streaming. Seth, all of that sounds like bad news, and yet shares of Netflix up more than 8% this week. Yeah, and I told you that would happen. It doesn't matter. The valuation of Netflix is not an issue at all anymore. The inmates are in charge of the asylum there. Everybody thinks that there's nothing that can go wrong with Netflix. The news this week is amazing because it shows you the number of things that can't. go wrong. Hollywood is waking up to the huge threat to its profitability that is Netflix,

and they're realizing at the same time that with all these content delivery networks out there and software developers, it's not that hard for them to come up with their own apps and their own online distribution, cut Netflix out, maybe put a couple of advertisements in and collect all that money yourself. And we're just seeing the beginning of that. I think Netflix shareholders are going to wake up very, very sorry someday, but not right now. What do you think is, because as you said, there are a lot of threats to Netflix, what do you think is number one on the list? For CEO, Reid Hastings, what is the number one threat that keeps him up at night? I honestly think he just thinks about keeping the Netflix

hype alive, really. Ron? Two major things. Competition and higher cost of content. I mean, those two things are going to be what kills the valuation one day down the road. And finally, there are hedge funds that focus on niche areas of the investment world. So let me tell you about precious time, a hedge fund that invests in the most expensive watches in the world. A quote from an executive there. Our objective is to generate 15% returns per year in the next few years. Ron, you're a former hedge fund guy. This is unbelievable. It gives us all a bad name. So they've already raised $10 million, which is unbelievable in the first place. From whom, right? And they say they're going to raise approximately $200 million more. How many watches are out there? I don't know.

But the $10 billion, they say, will only get them four of the world's most expensive watches. So this is not going to be a diversified basket anytime soon. It just, I don't know. I don't know if we hit a bubble here. I once had a guy called me and pitched me a stamp collection for the hedge fund I was managing. Really? Futures, like you couldn't imagine, you know, this futures on almost anything you could think of. This is just ridiculous.

And it ends badly. There's a, I believe, it was a state of Ohio that had some pension funds, I think it was. There was a huge scandal because they were going to rare coins. This kind of thing happens again and again and again. The art market actually is okay, but the problem with any of these kinds of items is that they are worth what people say they are worth, and often the price discovery on what they're worth is really less than forthright.

But it would seem like watches are becoming extinct now with cell phones. Might there be like some kind of antiquity value in these? Yeah, I mean, I don't wear a watch. Me neither. I enjoy my watch. and the new... They're fashion accessories. They are.

They are. But leg warmers were fashion accessories also. And parachute pants, which I believe in you said, you had several pair of. I had two pairs. Watch sales at Fossil, which I've tapped in here a couple of times, are actually one of the stronger parts of that business. And I thought that that would dwind a little bit. I'm wearing a fossil watch more... It's kind of a fashion accessory, but...

Do you think the precious time hedge fund people are going to be calling you about your fossil watch? Well, they should. It certainly looks... It certainly looks appropriately aged. There's a lot of cracks in the crystal. Wow. some great craftsmanship they got going on there. Well, I beat it against a brick wall by accident one day.

Precious time sounds kind of impureful. It does. It's like an R&B artist or a porn star or something. On that note, Seth Jason, James Early, Ron Gross, guys. We'll see you later in the show.

And a reminder that you can always weigh in with your comments and suggestions at Radioat Fool.com. Let us know if you think Apple has a case in their lawsuit against Amazon. Our email is Radio at Fool.com. That's Radio at Fool.com. Coming up, Washington Post columnist Rob Peggeraro is one of the best consumer technology columnists in America, so I figure he's as good a person

as any to ask what apps I should get for my brand new smartphone. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. A lot going on in the world of technology, and here to help us make sense of it all, is Rob Peggeraro, Consumer Technology columnist for the Washington Post. Rob, always good to talk with you. Thanks. So I want to get your take on sort of the technology ripple effect of what has happened over the past couple of weeks in Japan. We're seeing more reports about a disruption in the supply chain from Japan. It looks like Toyota will halt some production at its North American plants. What do events in Japan mean for tech companies like Apple?

Well, you know, I guess first I have to note that, you know, the fact that, you know, those who've perhaps ordered some new gadget will have to wait longer, really not, that should not be the biggest concern in the world. No, no, definitely not. When you're thinking about global concerns and worries, yeah, the fact that your iPad 2 is going to be an extra week late, that's definitely not topping the list. Things could be worse. Absolutely. So, yeah, there's all sorts of verbal effects that go on when a country has had so much of its interesting. infrastructure, you know, trashed, shaken, flooded, what have you, hopefully not melt it down. So, yeah, it's going to take a while to figure out, you know, how far things have been set back.

It's not like all the manufacturing takes place in Japan. There's no lack of factories in China and Korea and Taiwan and Thailand and whatnot. But, yeah, Japan is still a pretty big part of the Consumer Electronics universe. You're listening to Motley Full Money. We're talking with Rob Paguerararo. consumer technology columnist for the Washington Post. Rob, want to get your take on some of the recent tech news. Let's start with earlier in the week, AT&T announced plans to buy T-Mobile. What does a deal like that mean for consumers? I don't think it means anything good. In the

short run, if it goes through, which is not at all clear. I don't know why AT&T is so confident that you know, they'll be, they'll get through the antitrust review without any issues. But should it go through. Certainly AT&T customers might get better coverage when AT&T can fold in T-Mobile's transmitters and network and basically staple that onto its own. But if you take away one of the competitors in a four competitor market, they're only four nationwide wireless carriers, that's not good for competition. When that competitor going away happens to have some pre-favorable pricing and pre-favorable terms of use compared to AT&Ts, that's not good for the consumer. Another tech story from earlier in the week, Amazon launched its App Store for Android phones. Do you think Amazon can compete with Apple

when it comes to apps? Well, I'm not sure how the Amazon, we have to say it's App Store, one word, not App Store. Or Apple Legal will get mad at us. That's all I need in my life is Apple Lawyers calling me. Right. So, I don't know. I think what Amazon has done a pretty good job at is, you know, trying to sort of gently guide consumers towards making further purchases. You know, Google's Android market doesn't have any sort of referral features that suggests that, hey, because you downloaded these apps

and you got rid of these other ones, you might like this one. So that might sort of bring an extra level of marketing polish to Android apps. On the other hand, the process, it's not really a quick or easy thing to add to your phone right now. And on one carrier, AT&T,

you can't use the Amazon App Store at all because AT&T alone among Android carriers locks out the ability to install applications from anywhere but the Android market. You're listening to Motley Fool Money. We're talking with Rob Pagoraro, Consumer Technology columnist for The Washington Post. All right, Rob, help me out. I just last night bought a smartphone. It is still in the box.

It's my first one. What are one or two apps that I absolutely should get? I have to ask, is this an Android phone, an iPhone? This is an iPhone. This is an iPhone. Okay. Let's see. One application I use a lot, and if you happen to be the person who takes notes for work, I think you would as well. Evernote. It's a free program. Also, it's available for Windows, Mac, Android, pretty much every phone platform out there. Bring it up, take notes, hit the save button. They're synced to the cloud.

Fire out this program on another computer or phone. It sinks, and all the things you wrote on your iPhone show up there as well. That's really neat. I would get some kind of location-based service. services application, say maybe Yelp, if you want to look up interesting restaurants near where you're at. It uses the phone's GPS to figure out where you're standing in the world and shows you nearby places. Four Square, if you're into that sort of game mechanics of checking into as many restaurants, bars, shops, offices, whatever as possible. You know what? I'm married and I have three kids, so it's not like I'm spending, I have a lot of free time to go to as many bars and restaurants. You can also check into daycare center

playgrounds. There you go. There you go. Okay, so Evernote. You had me at free program with that one, so that's good. Right. Exactly. I want to spot you up with a couple of different companies, because at the Motley Fool, obviously, we're all about studying businesses. I'll give you a company name. You tell me what you think is the biggest question facing these companies in terms of their product line. And let me start with Microsoft. Yeah, okay, biggest question for them, I think, Windows Phone 7. The company realized a couple of years ago that they had been

sitting on the rear for way too long and Windows Mobile, which certainly looked competitive with the old Palm OS was not going to cut it against the iPhone or Android. They went back, rerower from scratch, shipped Windows Phone 7, which is a really good OS. It's very elegant, sleek,

completely misnamed, since there are no Windows on the screen of a Windows Phone 7 phone. But anyways... That's all about branding. Yeah, exactly. The problem is the whole update process for Windows Phone 7 seems to have gone off the tracks already. You know, these funds have not been in the market for more than about six months. But the first round of updates for, I guess for AT&T, they're in testing for other carriers. They're somewhere out there.

You know, if you can't get updates out to customers on time and reliably, that's a problem. And in this case, it's a major update. It's going to add copy and paste, which that's the other problem. That should have been there from the start. Microsoft needs to have, you know, some kind of viable smartphone operating system. And beyond that, you know, if they're ever going to be competitive in tablets, they're not going to do it with a version of Windows. So at some point, they need to recognize that Windows Phone 7 should be their tablet OS. And I don't think they've gone to that point yet.

What do you think is the biggest question facing Google in terms of their product line? Tablets, again, I would say. You've got – there's a version of Android called Honeycomb, which I've tried it on one tablet. the Motorola Zoom, and it's nice, but they need to get a lot of developers support quickly. They need to make it as easy as possible for people to write tablet-friendly Android apps. I suspect that will happen. The quality of it is another thing. And, of course, part of this picture is out of their control. They can't do much if manufacturers choose to ship a lot of high-end, uncompetitively priced tablets.

They can't do a lot already if wireless phone carriers ship Android phone. loaded down with a lot of junk applications that nobody wants and that, you know, make a mess of the Android experience in extreme cases. And they're the leader in a lot of product line categories, but what do you think is the biggest question facing Apple? Facing Apple. How are they going to count all the money they're making? That's going to be a real problem, I think. Now, Apple's biggest question, I suspect, you know, I think the App Store, it's worked very well so far. in terms of, you know, people know that they can look for a program on their iPhone, and it won't do anything bad to the phone. It may be ugly and badly designed, but it shouldn't trash their data.

It shouldn't make the phone crash. But the problem is when Apple has taken on this claim this right and this need to curate the App Store, you start to see increasing political messes where people were demanding that this church that aims to convert gay people back to the street lifestyle had an app in the app store. and Apple Yanked it after a couple of days, you know, that's not a healthy dynamic overall. I'm sure it's not going to really hurt Apple in the long run. But, you know, can you keep scaling the App Store? That, I don't know. You're listening to Motley Full Money.

We're talking with Rob Pegararo, Consumer Tech columnist from the Washington Post. Rob, before we wrap up with Buy, Seller Hold, I want to get your thoughts on video. I know that more than a year ago, you cut the cord in your home. So I'm interested in your thoughts on sort of the future of video, but let me start with, what's it going to take for the cable providers to win you back? They would have to let me pay for the channels I want. They would have to, you know, give me a much better set-top box experience. You know, the cable standard issue cable DVR is not really a triumph of user interface design.

And I don't know that they're ready to do that. I am really starting to think that it's more likely that the selection of online video will just get better or better. Two things do have to happen. One is you can't continue to have such a random selection of movies available online. It's absurd that, you know, Netflix can give me far more movies in disc form, you know, sending a disc in the mail, than online. You know, the studio should be making the same amount of money either way. And it's idiotic that, you know, the selection is so much worse for online streaming. and that movies become unavailable, even though they're popular.

What other kind of market does a popular item vanish from the shelves at a preset schedule? And the other thing is sports. In some cases, it's pretty good. You know, I've been able to watch, oh, I'm sorry, I was able to watch Georgetown basketball online a lot. So much for that. That's no longer the case, is it? But, you know, most of the major pro sports leagues, they have these regional blackouts have got to go. It's ridiculous that, you know, I can.

pay to watch some other city's baseball team online, but not my own because of where I am. My money should be just as green to Major League Baseball wherever I live. All right. Let's wrap up with a round of buy, seller, hold. And let's start with, there's been some speculation that Amazon is working on this. Buy seller hold, an Amazon tablet. I would buy. I think it makes sense. For one thing, that's one way they can guarantee that the Amazon app store will be a convenient, easy, and experience for users. They're facing more and more competition. Buy seller hold the future of Groupon.

I would hold. There are a lot of companies in this market. Of course, there's Living Social based in D.C. The post itself, I should note, we have two different services offering daily deals along the lines of what Groupon does. So I don't know that Groupon has quite established itself as a brand name that people will ignore all these other companies. buy seller hold Twitter as a public company. I would hold on that. It seems like they don't seem to be hurting for revenue.

They're just moved into a very large suite of offices in San Francisco. They're growing and growing all the time. I don't know, you know, if they've got enough money to finance their operations and they don't need to subject themselves to the discipline of the stock market, why would they? I mean, if Facebook hasn't had a public debut, then they seem in no rush. Twitter seems like they might be following that pattern. Another popular online company recently experimented with this, buy-seller-hold streaming movies on Facebook. Hmm.

I would buy. I wouldn't buy too much of it. But, you know, realistically that... You can't really buy too much of it. They're only streaming one movie. Right, exactly. But when you think about it, I mean, so many companies have had to set up an outpost on Facebook. You know, my employer does, yours does. you know, why not try to connect with customers directly? The risk could be, you know, if this is done on terms,

we have to fork over too much of your revenue to Facebook, you know, if it's done in Facebook credits, which is really a scary concept. Facebook has its own currency. I don't know. But if that's where the viewers are. Hey, the GAO recently recommended that we get rid of the paper dollar bill, so you never know.

I mean, we could be 50 years away from our currency being Facebook credits. Facebook.gov. It's a scary thought. Rob Pagararo from the Washington Post. If you want the latest on consumer technology, you've got to follow him on Twitter and read his stuff on Washington Post.com. Rob, thanks so much for being here. You're welcome. Coming up, a look at GameStop, the video game and entertainment software retailer, and we'll give you a look at the stocks on our radar.

This is Motley Full Money. As always, people on the program may have interest in the stocks they talk about. Don't buy ourselves stocks based solely on what you hear. I'm Chris Hill and back in the studio with me, our trio of senior analysts, Seth Jason, James Early, and Ron Gross. Guys, time to welcome a news station to the Motley Fool family of affiliates, business radio 550 in Providence, Rhode Island. We love Rhode Island. We got Hasbro, we got CVS, some good public companies up in Rhode Island. All right, one story we did not get to earlier in the show was GameStop.

GameStop, the video game and entertainment software retailer reported a 10% rise in. in fourth quarter profits this week, and shares were up on the news. Ron, I'll be honest. I thought GameStop was the next blockbuster. What's high? I still think they are. What's happening to my prediction? The CEO got all mad, didn't he? The founder? I'm going to say a bunch of good letters. I'm going to say a bunch of good things, but I really don't want to. So I echo. So they're doing a decent job. Their rewards program is driving revenue. They're now into the digital, you know, downloadable content area. That's their guidance for the coming quarter, based on really robust sales from that. The Nintendo, the new 3DS game is supposed to be

good for them for the coming year. They're buying back stock. They're paying down debt. They're closing stores that are underperforming that shouldn't have been opened in the first place. Doing a good job. I just don't think this model they have where there really is no competition right now is sustainable in the long term. There's got to be something else that comes in and kind of kills to at least some extent what they've got going. Seth, you're a gamer. What do you think? I've never been in a GameStop. I buy games at places like Tarjeet or Walmart. Is there a French pronunciation for Walmart? I don't know.

Or online from Amazon. But I think that some people do like to go to the GameStop and sort of browse. So I'm not sure GameStop goes away completely, but certainly we're seeing with the various app stores that the wave of the future is downloadable game content. The issue, of course, for GameStop, for console games, you know, the kind of thing that GameStops. sells a lot of is that those games are huge and they're only going to get bigger in future iterations of these consoles. And they don't really download that quickly even with high internet speeds. All right, guys, time to talk about the stocks that are on our radar. And Steve Brodo will have a single question for the three of you. Ron Gross, I will start with you.

Okay, great. I just started looking at an interesting company called Techni Corporation, symbol T-E-C-H. And it's not a typical company that I would look at because they're a supplier of specialized proteins to drug companies and universities. You generally from our un-specialized proteins? I'm going to let that go. They have a really nice niche, and what's great is that they're profitable. So you have a biotech-focused company that is profitable, generating really high margins, high return on equities with a solid balance sheet, and even a dividend yield.

So this is something that really looks interesting to me. Okay. James? I'm going back to the well, Chris, with a gas company this week. What are the odds? Sticking with Piedmont Natural Gas, this is a company that has raised. raised its dividend for 33 years in a row, provides gas service in the southern U.S., which is a regulatory environment that's friendly to utilities, yields just under 4%. It's an income investor recommendation, and the ticker is PNY.

Okay. Seth, Jason, your stock? Back to the grocery stores. I have to thank one of the Hidden Gems members, I believe it's Stillwater 999 or something. Anyway, one of the guys on our boards, yeah, who reminded me to look back at Arden Group, which is a small grocery company out in California, owns Gelson. markets, and some others. And this is a company that is a long history of nice cash flow profitability and occasionally gets very cheap. And now is one of those times trading at about, let's see, a free cash flow yield of about 8%. It tends to pay out the excess cash flow it accumulates over the years with special dividends. And, you know, once in a while, this thing shoots up into the

$120, $130, $140 range, then dribbles back. So when it's in the sub 70 range or the sub 80 range, I like to look at it, and I may buy some of this myself. And the ticker symbol? A-R-D-N-D-N-A. Steve Brod-A, one question for the group. My question for the group is most of these names are ones that I have not heard of. How does a stock go up? I've asked questions like this before and the best,

but how can a stock go up in a company that most people may never know about or learn about? Paid plumbers. Yeah, can I say something? That's a great question. You could have the Hope Diamond buried under our company's headquarters, but if nobody ever knows, there will literally be no catalyst to go out. So you need, in general, companies that I buy, and probably these guys here too, incommunally do better and better over the years.

And with those improved earnings, the stock gradually goes up. But it is true that a company can't stay hidden and covered forever. It has to be an unhidden prize or gym. And you don't want to buy a value trap. You want to buy a value that in time will get recognized for putting up better earnings and better cash flows year after year. Eventually, an analyst, an investment banker, somebody will come in and take note of that. I was going to say, don't confuse companies.

you're familiar with, with companies that the market is familiar with. There are billions and billions of dollars that are sifting through every single one of these companies every day, trying to find opportunities to make money. So if you've never heard of it, you can bet that there are tons of people on Wall Street to have. Ron, did you see that a lot when you were running your hedge fund? Did you see sort of a greater sense of these hidden gem, no pun intended, Seth, hidden gem type of companies? Well, I would specifically go seek those out. The smaller, the better. The microcap companies are the ones that are typically not covered by research, by analysts. The investment bankers tend to ignore those companies. And theoretically, because that's

the case, that shouldn't persist year after year after year, yet it kind of does. So those were kind of the waters that I would go sifting through. And the reason it persists, of course, is that most microcap companies are actually pretty lousy. If you can find the couple that are good and eventually they get some attention, they can make you a lot of money. But there are lots of the very small companies out there have been that size for decades, and they're not going anywhere. All right. Seth, Jason, James Early, Ron Gross. Guys, thanks for being here. Thank you, Chris.

Thanks for our special guest this week. Rob Pagararo, Consumer Technology columnist for The Washington Post. If you haven't already, check out Market Foolery, our new daily podcast online at Marketfulery.com and on iTunes. That's it for this edition of Motley Fool of Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill.

Thanks for listening. We'll see you next week. Thank you.