Motley Fool Money - Motley Fool Money: 04.19.2013

Episode Date: April 19, 2013

Our analysts discuss earnings news from Google, Microsoft, Chipotle, Intel, Coca-Cola, and Pepsi. And we talk with Kenneth Cukier, co-author of Big Data: A Revolution That Will Transform How We Live, Work, and Think.  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 in their life are free, but you can get them to the pond. From Fool Global Headquarters, this is Motley Fool Money. Welcome to Motley Fool Money. Thanks for being here. I'm your host, Chris Hill. Joining me in studio this week for Motley Fool income investor, James Early,

and for a million-dollar portfolio, Charlie Travers, and Ron Gross. Good to see you guys. How you're doing, Chris. It is earnings paloza. We've got the latest results from Google, McDonald's, Intel, and more. We've got Coke and Pepsi both hitting new all-time highs, and as always, we've got a few stocks on our radar. But before we get into all of that, it was a crazy week for reasons that had nothing to do with the stock market. And I'm referring, of course, to the tragic bombing at the Boston Marathon and the ensuing manhunt for those who committed the crime. This is personal for us because we have family and friends in Boston, but also because two of our colleagues, Seth Jason, and Matt Koppenheffer, both of whom have appeared on this show, ran the Boston Marathon this year, and they were in a hotel at the finish line when the bombs went off. Fortunately, they are okay, but just wanted to express that our hearts go out to the

victims, their loved ones, and also the fact that we salute the many, many heroes this week from the first responders, police, firefighters, EMTs, to the people who helped the authorities with tips and photographs, or just by being patient and doing as they were asked when the entire Boston area went into lockdown. This is a story that obviously continues to unfold, but Boston is stronger than ever, so hang in there, people. With that, let us get back to the business of talking about business, and we will start with big tech. Shares of Microsoft up on Friday after third quarter earnings came in higher than expected, and Charlie, a lot of numbers to chew on. I'll just choose the big one. Revenue of 20.5 billion, which tells me that Windows is

still very much a lot. Yes, it is, Chris. It's another record-setting quarter from Microsoft as far as revenue and earnings per share. The earnings were up 20 percent. That might surprise a lot of people considering the data we saw out of IDC earlier this month, which said PC sales were in a complete collapse with Dell and HP and the like not doing very well. So how did Microsoft pull this off is the real question here? They saw a lot of commercial sales of Windows into the enterprise unit. So while their retail sales through, you know, retailers like Best Buy, we're not doing that hot. They're upgrading a lot of enterprises off of Windows XP still, believe it or not, and on to Windows 7. And then their server and tools and office divisions both show double-digit growth.

And you take it all together, and it's a pretty good quarter from Microsoft, despite the fears we had going in. And Ron, you've made this point for a while now. Anytime I've sort of taken shots at Microsoft, you push back at like, hey, they just, they turn out a lot of cash. They turn out a lot of cash. As Charlie knows, we have a large position in a million-dollar portfolio. The thesis really is that it was not priced for much, if any, growth. It's really a value investment. And as Charlie just pointed out, they are growing. There were some accounting things that made growth seem a little bit more robust than they actually were. But even

if you strip those out, nice growth, stock very cheap, still at current levels, and the company continues to produce oodles of cash flow. It has been cheap for a while, though. What is your time frame? I am a value investor, James. We are patient. The last couple of times we talked about Google's earnings, Mobile was kind of a struggle, but first quarter profits for Google came in just under $4 billion. So it seems like mobile is maybe less of a struggle now? Yeah. Okay. So the whole story with Google of late has been as they move to mobile,

volume has increased because the amount of transactions over mobile is large. But prices have come down because it's not as profitable at the ad business over mobile. But what we saw this quarter is those price decreases seem to be moderating. It was a much lower decrease than in previous quarters. And in fact, there's some evidence to indicate that perhaps they will be increasing in the future. So that is huge for Google. It's really turning the story around, and that will flow to the bottom line in pretty significant ways.

At what point do some of the other enterprises that we hear about? Because we do, Google is one of those companies that gets almost an outsized amount of attention for what are largely ancillary projects, Google Glass, the driverless car, that sort of thing. Their bread and butter is very much search and advertising, that sort of thing. As an investor who is looking at Google, do you expect at some point that one of those side projects is going to pay off in a significant way, or are you just focused all on the search and advertising? We're focused mostly on what's produced in cash flow now.

But we do give them a lot of credit for things that we can't even envision five or ten years from now. And we don't do that for all companies. We do that for companies that we think have visionary leaders and are innovative. And whether Google Glass hits or there's something else, they have a lot of irons in the fire, they're doing a lot of different things. We do give them credit for things that will happen down the road. It's like a soft advertising, too, that kind of builds the persona of Google. Yeah, sure.

Intel's first quarter profit of $2 billion, much lower than last year. year's first quarter profit of 2.7 billion. James, overall revenue down 2%, but they are not changing their guidance, which makes me think that they're betting on a pretty strong second half of the year. Yeah, and the stock rose, Chris. You know, it's bad when your earnings drop 25% and your stock goes up. It's like going to a party and hearing everybody say, wow, you know, I really don't mind your breath tonight. It's just a statement. It's a pleasant surprise. PC sales did drop 14% last quarter, which is probably more than people expected. Intel struggled a little bit with mobile.

That's been the ongoing struggle. The thing is they've got a new CEO coming in about a month, so we'll see what goes on after that. Do you think that, first of all, they haven't named who the new CEO is going to be. That's correct. Whoever this person is, they're coming in in mid-May. What do they need? Because the guy who's leaving has been at the company for nearly 40 years, and I'm just

wondering, is it a situation where they have? absolutely have to promote someone from within. The fact that they haven't named someone makes me, and I don't watch the company that closely, but the fact that they haven't named someone makes me think that they're going to be looking outside the company. It kind of seems that way, Chris. I would agree with you. I mean, nobody knows. We'll have to see whoever it is has got to really focus on mobile. Intel spending a lot there, they've obviously got plenty of money. They've got strong relationships, but they just have yet to execute. The stock, as you mentioned, up this week, but over the last year, losing to the market,

Do you like it at the range it's in right now? I think there's upside. I think there's more risks than I was appreciating, let's say, six months or a year ago. Before we move off of technology, Microsoft, Google, Intel, the combined market cap of these three companies is over $500 billion. And I'm just wondering, as investors, is that something that gives you pause? Because there are certainly people out there who look at technology companies and they are interested in investing in them up to a point. It's not a situation like a Coca-Cola or an Exxon

Mobile where there is essentially no such thing as too big. There are people who look at technology companies and say, there comes a point when they get to be too big to the point where I no longer am interested in them. What's your view? Oh, that's fine for them. I think as long as the earnings of the business can support the market cap, I'm not bothered by it at all. Ron? I think you also have to be realistic. So can a company triple, or quadruple? And what would that mean? Would that be a multi-trillion dollar company? And is that realistic? Is the market potential available to it for it to actually grow to that size? You do

have to think that through. James, do you focus on stuff like this, or is it just all about the dividend for you? Well, it is always all about the dividend. But tech is no longer tech. It's no longer just tech. And tech is a big, diversified ecosystem. So we are in a gradual period of reframing expectations. You don't have to grow 20% every year to be a tech company. You can be a dividend pair, and it's okay. It's just okay. People like Ron and I and Charlie will still like you. Let's move over to food. Chippotle's first quarter profits up 22%, shares up more than 9% on Friday. Ron, profits are looking good, but the same store sales is starting to slow down a little bit. Yeah, that is part of the story. Only 1% increase this quarter. But they continue to open up stores at a nice clip. What's interesting here is that the increases in raw materials, food prices, had been going up. We see them moderating

here. And the company has indicated that they may actually raise prices later this year, which they may not need to do. They've had to do that in the past to keep up pace with rising food prices. Now, if they don't need to do it, but they do it anyway, that will fall right to higher margins, fall to the bottom line, and we'll see increased profitability. Shares of McDonald's down after global sales dropped in the first quarter. James? What do you think? Chris, McDonald's sales are inversely correlated with my hopes for humanity. So this is good.

Technically, revenue income were up slightly, but comparable store sales fell. The company says it's soft consumers, but that didn't stop McDonald's from posting pretty good results during the past recession. So I'm thinking it's maybe a combination of two things. One, consumers actually changing their preferences realizing McDonald's does not serve real food and instead going to places like Chipotle, which on balance have done pretty well. The second thing it could be is McDonald's, you know, Wendy's, those guys fighting over these dollar meals, and that's going to hurt margins. Shares of McDonald's last week hit an all-time high is part of what's going on here just sort of a natural pullback from that? And if so, what do you think of the stock valuation?

You know, I'm not a crazy buyer at these prices. I think it's done so well over the past, let's say, five years, that we're kind of adjusting our expectations. Everyone is. First quarter profits for Johnson and Johnson came in higher than expected. the Consumer Sales Division, which produces Tylenol, Motrin, Listerine, etc. 3.7 billion. James, this stock is up more than 30% in the last year. What is going on? It's great.

Johnson Johnson has learned a lot over the past few years, Chris. They've learned if you put middle shavings in pieces of formaldehyde-soaked shipping pallets, and your products, your sales go down. And if you remove those things, your sales go back up. So that's simple math. That's part of it. They've also got some acquisitions helping, too. So it's a good company.

It's got a lot of obvious headwinds, tail wins, baby boomers, and such. So they're just not screwing up. And these recall products are coming back onto the market, and it's just getting better. It's reverting, basically. I think this is the second quarter in a row where they didn't have any kind of recall or significant snafu. If they keep this up, aren't people just going to expect it all the time? It's just going to be crazy, isn't it? Yeah.

Coming up, the battle for the living room just got a little more interesting. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with James Early, Charlie Travers, and Ron Gross. Before we get back to earnings paloosa, shares of Sprint hit a four-year high this week after DISH Network made a bid to buy Sprint for 25.5 billion cash in stock. Charlie, they are swinging for the fences over a dish.

Yeah, you've got to be loving this. If you're a Sprint shareholder, there's a bidding war going on. There is already an offer on the table from Japan's SoftBank, which owns the third largest wireless carrier in Japan. They wanted to buy 70% of Sprint to get into the U.S. market. Dish said, hold on not so fast, put in a 13% higher offer. And what Dish wants to do, their core business is satellite TV and broadband, and they want to get Sprint's wireless spectrum so that they can bundle packages with phone, internet, and TV and make it a truly mobile offering where consumers can use video on their tablet outside the home as well as within. So the stock, interestingly, is trading higher than Dish's offer,

the market's expecting a higher bid to come through, possibly from SoftBank upping its previous offer. And DISH shares up this week as well. So clearly there are people out there who are looking at this and thinking, boy, if they can pull this off, this is going to be great for them in the long run. Even though, as you and I were talking about earlier, DISH is a $17 billion company making a $25.5 billion bid. Is this something where you're at all interested in the stock, or is this one of those situations

where you kind of want to sit on the sidelines and wait to see how it all plays out. So I think over time, DISH's CEO, Charlie Ergen, has proven to be an exceptionally shrewd businessman, and I think the package of his current offerings with what Sprint has makes a lot of sense. Shares of Coca-Cola and Pepsi both hitting new all-time highs this week after their latest earnings results. And James, I think we've seen this movie before, the basic theme of strong international growth, declining soda sales here in the U.S. That's been the trend. And Coke's volume was up, whereas Pepsi's volume was down a bit.

But whatever, the market has decided that any news is good news for these companies. So they're big highs. I like them both. They're both IRAX. I think they're around 20 to 30 percent overvalued right now in each case. The weird kind of funny backstory with Coke is they've had this on again, off again, relationship with their bottlers. They own them, they spun them off.

They bought the biggest bottler back in 2010. And now they're saying, again, well, maybe we need to go back to, more of an outsource distribution. They're giving the existing bottlers kind of some more rights. So it's just kind of weird. They clearly can't make up their mind, which I find funny. I was going to say earlier in the week, Coca-Cola shares, I think were up about 5 percent, which, given the size of that company, I can't remember the stock moving that much in either direction ever. Yeah. Yeah.

When you look at the international growth, it seems like Coca-Cola may, at least in the latest quarter, have a little bit of an edge just because of where they are expanding. when you look at Brazil and Russia and India, is that how you see it as well, or is this just sort of like a one-quarter thing? Yeah, I think so, right. Coe clearly has the momentum. Pepsi, up until now, has had a lot of momentum. They had some problems.

Particularly in India, right? Yeah, yeah, and they're turning around, but I think that's kind of hitting the point of diminishing returns. But I think long-term, these are both great companies. The issue is just right now with bond rates, with CD rates low. I think we've got a lot of money piling into these stocks saying, I just want these steady dividends, and that's what's driven the prices up. Intuitive surgical's first quarter profit rose 32%. They had double-digit sales growth.

So, Ron, why are shares down this week? Oh, Chris. You know, it's a funny thing. It's because they didn't raise forecasts, which they're notorious for doing. So guidance trumps results once again. Exactly. Now, this has been an incredible success story. They're really kind of innovating the way surgery is done. There's a lot of negative press lately. There's a bunch of lawsuits from people claiming they were harmed during surgical procedures. So that's certainly a negative for the stock.

And then add on to that the fact that they didn't raise forecasts, which investors want to see for a growth story like this, have the shares selling off. Would you trust a robot to perform a surgical procedure on you? And if so, what would be the most aggressive procedure? I believe I would. One of those kind of non-invasive, you know, that's what they're for. I certainly would want the surgeon to be skilled with the robot,

which is actually something we're seeing. We're seeing there is a learning curve here. So I would, you know, I don't know. They'd have to have done at least 100, 200. How many for you? I would negotiate for a discount. I mean, someone's got to go first, right? I mean, that person would get a little cheaper.

Surgeries aside, Charlie, this FDA investigation, how big a red flag is that for intuitive surgical? I think when investors see the phrase FDA probe, they get spooked. But you have to remember that. It sounds good, doesn't it? Right, right. Hundreds of thousands of Da Vinci's surgeries are performed. formed every year. So when you have a few hundred complications, I don't really view that as too big a deal. And finally, if you ever wanted to invest in Shamu the Killer Whale, now's your chance.

SeaWorld Entertainment went public on Friday. The IPO was priced at $27, shares a big the opening day. Who doesn't love Shamu, the killer whale? But it did have us thinking, Ron, about sea creatures in general. And let's face it, as is the case with stocks, not all sea creatures are really. rated properly. Do you have any underrated or overrated sea creatures out there? Absolutely underrated is the blobfish. And I implore our listeners to Google the blobfish

which looks exactly like Ziggy. And perhaps it was the impetus for the Ziggy character. I can't say for sure, but it's hysterical. James, what about you? You know, I actually saw Ron's blobfish when I was doing my hours of research for this show. It is worth Googling. I will have, you know,

underrated without a doubt, plankton, Chris, especially the zoo of plankton. These are a tiny thankless little creatures that live on the surface of the ocean and basically eat stuff and dissolve them down to the ocean, making the ocean the world's largest carbon sink. Trees get all the credit, but without zooplankan, we're toast. Trees get all the credit. Trees get a lot of credit. I'm not anti-tree, but that statement is true.

Charlie? I'm also going underrated with the sea cucumber. It is a creature without a brain, and yet it has this innate instinct when it's under threat to puke its guts out at the attacker. just like sticky, poisonous mess so it can then get away. It's like my college roommate. Let's bring in our man, Steve, from the other side of the glass. Steve, underrated sea creatures out there, overrated?

I'm going underrated for angel fish, which are just beautiful. They do look like angels. He's so sweet. So tasty. That's a nice thought. I'm going Aquaman. Wow. Out of the box.

I thought you were going to say Luckness Monster. I had that down. You know, Aquaman, I mean, and Ron, who is sporting his Superman cufflings today. Happy 75th birthday, Superman. Happy 75th to the man. of steel. I mean, I think you can appreciate that Aquaman just never gets the credit that the other members of the Justice League get. That's true. I think that's fair. And when you consider just how much ocean there is out there. I mean, come on, he's the king of the sea. Just

absolutely. Cut Aquaman some slack. All right. Ryan Gross, James Early, Charlie Travers. Guys, we'll see you later in the show. Coming up, a look at which companies are the best at gathering information and using it to their advantage. This is Motley Full Money. Welcome back to Motley Fool Money. I'm Chris Hill. Google, Facebook, LinkedIn. Those are just a few of the companies gathering information on you and me and the hundreds of millions of people around the world who use their services. But what are they doing with all that information?

And what does it mean for us as consumers and investors? That's one of the topics tackled in the new book, Big Data, a revolution that will transform how we live, work, and think. Kenneth Cuckier is the co-author as well as being the data editor of The Economist, and he joins me now from London. Kenneth, thanks so much for being here. Yeah, thanks. Let's talk about the book.

Big Data is one of those phrases that seems like it gets thrown around a fair amount. First and foremost, what does it mean to you and what got you interested to the point that you wanted to write this book? Sure. So there's no real strict definition of big data, and that's probably a good thing because to define something as to limit it, but there is a there there, and it's the idea that we can find in a large body of data or do things with a large body of data, things that we simply couldn't when we have smaller amounts.

And the term big data was rumbling in the sciences in astrophysics and in biology because the human genome system and the digital sky surveys were just such huge orders of magnitude compared to what came before in those disciplines that I liked the term big data, and I used it in my special report, and I was pleased to see that the term stuck. The special report was well received, and I teamed up with a friend of mine, Victor Mayer, Schoenberger, and together we produced a book that appeared last month.

Now, this is a business show. We focus on companies as investors. So I want to spot you up with a few companies and get your thoughts as to how they are using big data. And let's start with Google, which I mentioned right at the outset. I mean, Google, in the way that we search, in the way that people use Gmail, they're certainly collecting lots of information. What are your thoughts on Google and how they're using big data?

Yeah, so Google is a pioneer in big data. Google is out ahead of other people, and they have many years' advantage of other people. In some ways, you could say, they're crushing it in big data. How else would you possibly explain why Detroit and Stuttgart have a burning, interest in the future of personal mobility and transportation, yet it is a Silicon Valley search engine that created the first self-driving car that actually worked at scale. It's because Google understands the value of data and applying data and machine learning to all domains of society. They've done it brilliantly 15 years ago when they unveiled the page rank algorithm, which is

the basis of Google's mechanism to rank web pages. They have a record business model as well, with AdSense, so they can create an auction in a millisecond to take everyone's money. All of that makes it a very strong and lucrative company. But their approach to data as a way of understanding the universe and learning from every interaction that a person makes as a signal for something else means they have a big data advantage that goes far beyond everyone else. And I think it's going to be a long time before the rest of society actually catches up with where Google is.

They thought through these problems a decade ago, and that's why they're able to unveil things like Google Glass today that really is so futuristic that a few other companies, if they wanted to do it, could actually do it quickly. So in terms of extracting value from big data, it sounds like Google is far and away at the top of the class. Yes, I would say that. There's good contenders as well.

So let's just shift up to Amazon right now. Amazon in some ways, Netflix as well, but particularly Amazon, is a close rival with Google. The difference is that Amazon focuses like a laser beam on creating value for the company using data in clever ways. So the whole recommendation engine is, you know, an example of big data in action. But where Google is looking at answering markets that they're not in today, where there is absolutely zero business model for today, like a self-driving car or like Google Glass. Now, of course, we can concoct a business model.

For them, they can as well. They're smart people. Amazon doesn't do that, right? Amazon doesn't do flu trends, i.e. using past search terms to identify the outbreak of flu in America, but Google does. So Google spreads its wings more broadly to cover the waterfront of society and using information. Amazon's like a laser beam at its business, but it does it really, really well. So I would say after Google, certainly Amazon would be the second company I'd put in that cohort. Another company that you touch on in the book, UPS,

which I think most people probably know UPS, certainly seeing the trucks driving around town and that sort of thing. But I guess I've never really thought of UPS as a company that is a likely candidate for using big data. Well, it is. In fact, all of the logistics companies, to be a logistics company from the very term of it, is about using information to do what it does, in this case deliveries. So it's also FedEx, although UPS is highlighted in the book, and it's because they have a burning interest to optimize what they're doing, and the only way you can optimize what you're doing is through information.

So the first thing you need to do is you need to collect it, you then need to analyze it, and then you need to act on it. And delivering packages is actually an informational problem if you want to wreak out efficiency in that process. So what UPS is doing is route optimization. They're finding out what is the best way to get from one place to another, That's a very easy, basic level. More interestingly, is how they're putting sensors into their vehicles

so they can monitor different parts of the engine. That way they can predict from the data signature of the heat or the vibration when a part is likely to fail prior to it breaking down because they can recognize that this digital signature, if you will, of how it's performing resembles what it looked like in previous instances when it broke down. So by doing so they can have managed the search, servicing of that part and exchange it before it fails and not have to exchange it on the road

where it costs a lot more and you might actually have missed deliveries and have to reimburse customers. And this technique, although it's being applied by UPS today, is probably going to become customary and standard in most cars in the next five and ten years, and most businesses are going to adopt this sort of mindset and look for areas that they can use what's called predictive maintenance or predictive analytics for all aspects of their business. What about a company like Facebook? And again, bringing it back to the world of investing, I don't own shares of Facebook and I don't own shares of Google, but over the last couple of years, the people who are Facebook Bulls, part of their case centers around how much

information Facebook has about hundreds of millions of people. Whereas Google is about what people are searching for, Facebook, the Bulls would argue, is more than that. It has their lives, their preferences. Essentially, in the cases of how much people want to share, everything they could possibly want to know about a person. How does that stack up in terms of Facebook and how they're using big data? Because I'm just basing this on what you said earlier about Google. It sounds like Facebook is not even close to where Google is? Well, Facebook is, look, Zuckerberg is really smart. And so Facebook knows that the biggest threat to its business is to actually do something

that freaks people out and then, and slaughters the golden goose. So if you were in that position, what you'd want to do is build up the competencies to use big data in the back office to do it well so that, you know, people who like this might like that so you can rank content, you can rank individuals who they might know and should become friends with. But you wouldn't want to go out the gates too soon with something because the information is so valuable, and they have so much of it and better information than everyone else is. And just as one small example, Facebook knows everyone's real name. Google doesn't know that. The best thing they have is your Gmail account, right? So they have a bit more

than that, but that's basically, that suffices to understand the vast differences between the two. Also, Facebook has warmed its way into web pages through the buttons that they've put in there. Google is sort of exterior to everyone else's web page. So they're vastly different companies. But in regards to data, it is true. We have not seen Facebook unveil any interesting big data initiative. It's not because they can't, and it's not because they're stupid. it's because they're really, really smart, and they realize that once they start actually not just collecting the information, but actually acting on it and processing it, they're in a much different ballgame, and the regulators are going to come down on them like a ton of bricks.

So they have to be super careful on how they do that. But the data that they have on one-seventh of humanity is enormous, and that is probably why they're actually not acting on the big data information that they could. could, even though they have all of this wealth of data. So if I'm hearing you correctly, it sounds like one of the big issues that they're wrestling with on Facebook is how best to monetize all of this information they have on one-seventh of humanity to become not just an attractive vehicle for advertisers, but arguably an even more attractive vehicle than Google is. Yeah, well, absolutely. Just think about how if you had data,

Facebook's data assets, what you could do with it. So imagine you could find a correlation between people who like certain content and had this sort of network structure of their friends, what their credit rating would be. Suddenly, people who are in the business of giving credit scoring like FICO could be replaced by people like Facebook. Very, very different business. We would not naturally have seen Facebook going into the credit scoring business,

but that's precisely the thing that they could do, and they know the relationships of people and have more information than other people in terms of how people have preferences, interact with others, and interact on the web. So it shows that there's this sort of schism between what companies are doing as their core business and what their potential ancillary business can be. Facebook is really sitting pretty because they have this goldmine of information, that few other companies have. They have not worked on it yet because they know it's so valuable

and they don't want to go out the gates with it quickly. And in truth, they're having a hard time even just optimizing their advertising. So I think that I don't want to say I'm a Facebook bull, but I do think that Facebook is one of the smartest companies around. But more importantly, they have data that nobody else has that they could partner with a myriad of other businesses and start going into these answering markets that they're not in today that other companies simply couldn't get into.

Before we wrap up with a round of buy-seller hold, I have to ask you a question that is actually the first question posed on the book jacket of your new book, and that is which paint color is most likely to tell you that a used car is in good shape. And I should mention that I'm asking for very personal reasons, because I'm actually in the market for a used car. So, spoil the ending for me. What color car, used car, should I be looking for?

Well, what do you think? I'm assuming it's not red. Why? Because aren't red cars the most often stolen? Well, it's different. I mean, if you want to buy a used card and you probably are afraid of it breaking down, not of it getting stolen. So I've asked you why, because,

the human mind loves to concoct causality, reasons, cause and effect for things, and you reach for that right away. So it turns out that the nice thing about running these sorts of correlations with huge data sets is it forces us to divorce the idea of causality and just trust the correlation. So when a Silicon Valley startup called Taggle ran a test of this data, what they found was that the color that was least likely to break down was orange. Now, we don't know why orange cars, when they're used cars, bought an auction, are less likely to break down than other colors. It could be because it's a customized color, and so it's been made in other customized ways, and so therefore more care was put into it.

It might be because it's so visible on the road that it gets into less accidents, but we don't have to know that. All we need to know is a simple correlation that orange color correlates more strongly with cars that are less likely to break down than other colors. That might be a tough sell with some of the people in my home, but okay, I'm going to go with it. I'm going to push for orange. We will wrap up with a round of buy, seller, hold. Microsoft, Samsung, and Apple are all reportedly working on one of these. Buy seller hold, the smart watch. Okay.

For the smart watch or for the different companies? The device, the smart watch. Oh, buy. No question. Because you're a big fan of Dick Tracy, or why is that? Well, no, this is a technology that's been begging for an overhaul for four centuries, right? The best that we could do is go digital and get rid of the mechanism and go for a course. But to think that we can link the watch and do so many more things with it,

a watch today is a single-purpose device in a world in which we try to avoid single-purpose devices and everything's shifting to general-purpose computing devices. So why should you bother having a cell phone in your pocket when it could be your watch? Why should you ever have a fit bit around your wrist when it can be your watch? Why would you ever want to have your child go off to school in public transportation without their watch on? Just stretch your imagination and think that the watch no longer has to be just a watch. Once it's a general purpose computer strapped to your wrist, you can do lots of things with it. So I think it's an absolute buy.

Before working at The Economist, you worked for the Wall Street Journal and the International Herald Tribune. buy seller hold the printed newspaper oh there's no question sell sell sell anyone who's holding on to print is nostalgic and the papers that you mentioned as well as the economist isn't even holding out to print anymore so we're not in the world of just sentimentalism we have to look at the direction that readers have an expectation to read on and that media companies need to furnish the content on She got some initial negative press. Buy seller, hold, Apple's voice recognition for the iPhone, Siri. Hold. Let's see where it goes.

Let's be honest. Siri's got to get a new voice, right? I mean, if I'm talking to Tim Cook, and there are any number of things I could talk to them about regarding Apple's products, honestly, the one thing I'd say is you've got to change that voice. Well, the point is that why she would have just one voice, you could have a choice of many. Hence, hold. And finally, the book has generated a lot of buzz, and at first blush, it wouldn't seem to lend itself to the big screen.

Buy seller hold, big data, the movie. Bye, baby, bye. Would you care to break some news on this show? I would love to say... Or is that just hopeful? Oh, it's absolutely hopeful. I would love to say I'm playing on the cameo against Angelio Lee, but we'll see. I'm crossing my fingers.

Hey, you know what? The Freakonomics guys got a movie, so I don't see why you and your co-authors shouldn't get a movie out of this. I absolutely agree. The book is Big Data, a revolution that will transform how we live, work, and thank. Ken Kukke, thanks so much for being here.

Thanks, Chris. This is great. Coming up, we'll give you an inside look at the stocks on our radar. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for organs. So, don't buy or sell stocks based solely on what you hear. I'm Chris Hale, joining me in studio once again, Ron Gross, James Early, and Charlie Travers. Time, once again,

for the stocks on our radar. We'll bring in our man, Steve, to hit you with a question. But Ron Gross, you're up first. What do you got? Going for a little company you may have heard of called Apple. Apple. Apple. They report on Tuesday, and I'm really interested to hear what they have to say. I know there are challenges here. I know competition is increasing. Nine times earning the company is just too cheap. You strip out the cash five or six times earnings. Despite the the risks, despite the challenges, the company is a strong buy here. Steve? Do you think when a company gets, their share price gets to the four or five, six hundred dollar level, I know

it's under 400 now, that inherently investors are just scared by a stock that feels that expensive? I think there actually is something to that. Lower price stocks, I think, are typically more liquid. In a case like Apple, though, you can't really get much more liquid. than Apple. It's obviously traded in volumes that are astronomical. But I do think there's something to that. I think if this company decides to do something with their cash, increases their dividend, it will, you'll see many good things happened in terms of who owns the stock, the value people will move in, the dividend people like James will move in, and I think we'll see some nice appreciation.

James, your stock? Speaking of dividend people, I'm going with Wisconsin Energy, Chris. The ticker is WEC, by 3.6, 3.7 percent dividend. This provides electricity in Wisconsin, it is hard to get excited about an electric utility, so I'm just going to fake it. Basically, this company had underinvested in infrastructure for a long time. And in 2003, a new CEO named Gail Klapa came in and put in money into infrastructure and got a great deal with regulators to sort of get repaid. And stock is up 300 percent. It keeps jacking up its dividend every year since 2003.

The only downside, this guy pays himself a boatload, but I think he's worth it. Steve? Is there something about Wisconsin that makes for good energy? The favorable regulatory relations, Steve, it's really critical that a utility have good relations with its regulators because they're the ones who set the return. So that's going for them there. A lot of cheese, too. Charlie, we got less than a minute. I'm going with Coach, ticker C-O-H, fashion retailer, well-known business.

They also report on Tuesday. The stock has been crushed over the last year over fears that competitors like Michael Cores are going to start taking their market share. I think that's a bunch of nonsense. Coach is doing great in Asia and has a lot of opportunities. in Europe and Latin America for long-term growth. Steve? Do you have a coach wallet? No, but I would actually own one.

So hint, hint, gift. I have one. Apple, coach, Wisconsin Energy? I'm an Apple shareholder, so I got to go with Apple. Yeah. That'll do it. Ron Gross. James Early, Charlie Travers, guys.

Thanks for being here. Thank you, Chris. That's going to do it for this edition of Motley Fool Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.