Motley Fool Money - Motley Fool Money: 07.29.2011

Episode Date: July 29, 2011

The government reports weaker-than-expected economic growth. The debt ceiling drama continues.  Amazon, Starbucks, and Whole Foods serve up big earnings. And Dunkin' Brands serves up a hot IPO. ��Our analysts discuss those stories and share some stocks on their radar. Plus, we talk about the future of Google with Douglas Edwards, author of I'm Feeling Lucky: The Confessions of Google Employee Number 59.   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 joining me in studio this week for Million Dollar Portfolio, Ron Gross, from Motley Fool Global Gains, Tim Hansen, and from Motley Fool Hidden Gems, Seth Jason. Guys, good to see you, as always. How are you doing?

We got a lot of earnings this week. We've got the latest on Starbucks, Whole Foods, as well as a couple of hot IPOs. Plus, as always, a few stocks on our radar. But we begin, unfortunately, with the big macro. With the debt ceiling drama continuing as the August 2nd deadline looms, on Friday came the news that America's economy in the most recent quarter grew just 1.3%. Tim Hansen, I'll start with you. The word I kept seeing in all the media reports online was anemic. Yeah, if this were Shakespeare, I think we've moved on from drama a tragedy at this point relative to this whole whole debt ceiling and issue but comedy's coming soon right

yes one can only hope it's interlaced throughout you know 1.3% GDP growth is obviously pathetic and rising interest rates that could result from any sort of default or downgrade would obviously compound that problem and frankly I'm getting pessimistic that a deal is done obviously we're taping this before we know what exactly is going to materialize but I would say I'm not optimistic You know what's more pathetic than 1.3% growth? How about that 0.4 from the prior quarter or whatever the... Well, that vision was revised. I thought you were going to say that John Boehner is now the most reasonable man in Washington.

I know. Come on, folks. There's an orange man who cries all the time, and he's the one we're looking to for leadership here. Now, this... I was reading a Morning Star report, and they were going through a possible bond market fallout from this. And they said, yeah, really not such a big deal. Downgrade, probably not a big deal. You know what? You know what's really going to be horrible, though? Maybe that 10% GDP drop in August if we don't pay all the bills.

And let's remember, this is not necessarily to do with spending right now. It's a little bit more like you ate the dinner at the restaurant, and now you're trying to skip out on the bill. Certainly we need to address spending, but the spending being addressed by not raising the debt ceiling is really spending that's already been authorized. Ron? Yeah, I continue to believe that we will get a debt ceiling increase.

I don't think it's going to be tied to any kind of deficit reduction plan in any meaningful way. We'll just do what we've done dozens and dozens of times in the past. We'll raise the ceiling. We'll kick the can down the road to next month or next year, and then we'll attack our troubled economy. I can't believe I'm saying this, but even more troubling than that debt ceiling issue to me is the GDP numbers. I think the likelihood of dropping to negative growth, recessionary environment is a real concern for me. Ron said he is very confident there's going to be a deal by August 2nd. Jim? I don't think, you know, with all due respect to Ron, I don't think you've counted...

I don't think you've counted the votes, right? I don't see where this comes from. I think when the feet are to the fire and the default is looming, the one-sentence bill hits his test. There's a countdown on almost every major newspaper. You don't think the feet is to the fire yet? I think it can be worse. It can get hotter out there, and it's going to get hotter. And although, you know, it's impossible to predict. None of us really know. But I am sticking with the fact that I do think. think the debt ceiling gets raised and we don't default. No, I'm with Tim on this. The crazies are in charge here. And as a friend of mine put it on Facebook, this is the only hostage negotiation I've ever seen where both parties are threatening to shoot the baby. Thanks for that image.

For the sake of argument, if Ron is incorrect and the government does default come August 2nd, what does it mean for consumers? What does it mean for investors? I think there's obviously a huge reputational damage that would be done the United States. But to some extent, that's already done. I mean, the fact that we're going through this debacle, this tragedy already speaks to that. Don't you think Europe feels slightly better about itself watching us? I mean, so this is the... But if it weren't such a basket case, what would our yields be? Well, this is where the good news is where we can find comedy in the tragedy. And it's at the bond market, essentially, is a zero-sum game. If you want to put money to work in the bond market,

you've got to pick somebody. And even though the United States might get downgraded slightly, you know, I think you'd still, given the size of the United States and the resources that we do have in terms of manpower and those sorts of things, I think you'd still rather invest here than in some of the AAA-rated economies like Switzerland. And obviously, no one with bond money is going to feel safe in Europe right now, let alone somewhere like China or Brazil. You know, there are issues everywhere. I don't know if that's good news or bad news, but. And even if I am right, which I certainly may be, and the debt ceiling does get increased, a downgrade is still a real possibility. It doesn't preclude us from a downgrade. One piece of advice for investors as they watch all this unfold? I don't think an individual investor can time the market very well. It's very, very difficult.

I wouldn't be rushing money in on the hope of a pop or anything like that. If you own good stocks and you're happy with them and you have a five-year time horizon at least, I think you have to stay the course. Tim? I would say make sure you never invest in equities more than you can afford to lose or don't invest money you need in the next six to 12 to 24 months. And the reason is just it is an unpredictable world out there. I mean, who would have thought 12 months ago that we'd be here and that Harry Reid and President Obama and John Boehner and Michelle Bachman would be major players in this now bizarre situation?

Seth. Have a good shopping list. Hopefully you've got cash. I think that we've been in a big bull market for quite a while. And I still have always had some cash on the sidelines. And that's not because I was just waiting for the market to drop, but because there's always good companies going. on sale. And so make sure you have your shopping list ready and some cash if you do, because some good companies may go on sale.

Let's move on to earning. Starbucks third quarter profit rose 34 percent, and the company reported higher same store sales in the U.S. and abroad. Ron Gross, what's not to love? I think Starbucks is actually getting it done, right? Same store sales is a good. VIA is looking really strong. Is it VIA? VIA. VIA. This is the powdered coffee that we all made fun of. The instant coffee drink that we thought perhaps wouldn't take hold that is on target to be a $1 billion product one day. Even the revamped food and the little mini desserts they have in the stores now for those.

You love those, don't you? Oh, what a scam. Here, pay a bunch of money for this tiny thing. They're getting the job done. And as we're seeing with most food-based companies, they're getting hurt on rising commodity costs, rising raw material costs. But yet Starbucks margins actually increased as a result of their sales leverage. So they're really doing a good job. a good job. Do you like the stock at this level? At $40, I'm not a buyer of Starbucks. If I owned

it, I would own a small piece of it and I would hold it. I think you have to hold on to it. It's going to be one of these days that cash has to be diverted to bigger dividends and dividends. It's just one of those ones where I think you hold it for the long term. Tim? Or a pet project. Who knows that that cash will be diverting to do? Maybe I'm giving them too much credit. I see another spelling the movie in their future. I think they've learned their last. They've learned their life. Starbucks shareholders like me always get a little nervous when they're a little pet projects

on friends. Yeah, Akela and the Bee. Do we need to get, just go to the archives on all our Akela and the B stuff, you know, put that in and post-processing. Exactly. Shares of Amazon hit an all-time high this week on the company's latest earnings. Sales up 51 percent, but profits were actually down around 8 percent. Seth, what did you make of the quarter?

How does that happen? How do you do that? Spend. spend. You spend a lot of money. And Amazon is putting a ton of money into capital expenditures, as well as the regular kinds of expenditures that do the kinds of things that knock your net down. They're also building fulfillment centers. They're investing in their web services infrastructure. I think I read that in the call that year over year, they've added 15,000 employees, which, hey, if you like jobs in this American economy, you'd probably need to cheer for Amazon.

It is unclear to me why the market didn't react to this and send the stock spinning. In the past, whenever Amazon had these big sales gains, not whenever, but very often when they had these huge sales gains, and then they spent a bunch of money, the stock would go tumbling back. Now people seem to be giving them the benefit of the doubt for those big sales gains. I really like Amazon and the way they're sort of wrapping up just a ton of the commerce in this country. I order so much stuff from Amazon just because it's easier than going to the store. On behalf of all shareholders, thank you. Yeah, but I don't know whether that's a good deal for Amazon shareholders or not.

I'm in prime, and, you know, I had to deliver something that weighed, what was it, you know, 400 pounds one time. I'm pretty sure that cost a lot of $300. Knock that off. Does this pending sort of sales tax litigation worry? Would that change your behavior at all? No, it doesn't. And in fact, I've always thought, please just go ahead and add it on. Just add it on and make it easy for everybody.

I don't really think that it affects Amazon as much as they like to claim it does. They say they want a federal solution to it. Maybe that can we get a federal agreement on anything? There have been a lot of studies done that say Amazon's prices are still lower than the competition, even if you add in sales tax. Maybe I'm wrong, but I shop Amazon for the convenience of not even get my car and get stuck in traffic. So it has nothing to do with saving some money on sales tax. What do you think of the stock? You know, I have a hard time saying by, but I actually think that everybody maybe should consider buying some Amazon at some point in time and just hanging on to it because I think they're just wrapping up a ton of the future economic activity in this country.

Ron, your evaluation guy. You can't abide by that, can you? So, $480 million negative free cash flow in the latest quarter as a result of that spending. Investing on. So that would normally keep a value guy away like me. the growth potential they have, this is not just a discount retailer, whether it be in media distribution, digital distribution, the cloud, the growth avenues are pretty significant. The problem with the value guy like me is I don't know how to quantify them. That's why I would probably stay away, but if it got cheaper, I would love to be an owner of Amazon.

And that's why I just advocate, close your eyes and think pleasant thought. Coming up, a couple of hot IPOs this week, and for once, we're not talking about overprice.coms. Stay right here. This is my best. Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in the studio with Seth Jason, Tim Hanson, and Ron Gross. And, you know, if you can't wait a whole week to hear from us, I got some good news. Check out our daily podcast, Market Foolery.

You'll get our take on a few of the big business and investing stories of the day. So take a few seconds. Subscribe to Market Foolery on iTunes because, you know, it's free. Back to some of the company's reporting earnings. Shares of Whole Foods hit a new 52-week high as the company reported. earnings. Tim, profit up 35%. The company raised its forecast for the fiscal year. Very, very strong results. I think the most impressive metric was the approximately 8% same store sales growth, which is a combination of both more traffic and bigger basket, which, you know, more items, higher priced

items that are being checked out. You know, if anything is evidence of the two-speed economy that we touched on earlier, you know, this is it. I mean, Walmart, for example, struggling in the United States, Whole Foods knocking out of the park. Apparently consumers who like to shop Whole Foods and people who live near Whole Foods, which obviously would index more towards the affluent end of the spectrum, are doing very, very well. We talked a little bit about this the other day on Market Foolery, and it's this notion of the same store sales. Why do you think Whole Foods' same store sales numbers are so much stronger than other competitors out there?

Well, A, I think their customers are feeling better about themselves and therefore loosening up their wallets a little bit. But also, B, Whole Foods does a really nice job in the higher margin areas of the grocery business, which are prepared foods, that sort of thing, where you jack up the price a little bit, and you get fatter profit margins. You know, what they do is pretty ingenious. You know, they stock all the produce and as the produce would get near spoilage,

and if you don't have a prepared food segment, and you have to throw it out and write it off, you know, whole foods whips it into a carrot hummus and sells it for $7.99 a pound. I also have noticed that they seem to have some clever leverage on what you would consider the low end. I'm a store

brands type person, and so whenever I'm at the grocery store and for most things I'll just buy the store brand because it's equivalent to me. But I noticed one time when I was, I think I was looking for goldfish type crackers or something at Whole Foods that they had their store brand there, you know, it was 10 cents less than one of the name brands or something. But when I looked at how much was in the box, it was about, you know, 15% less. So it was actually a crumbier value. But if most people aren't doing the math in their head and they just reach for it,

or they're not even looking at the part on the tag where it gets priced out for you, price per ounce. But most people don't look at it. And so, you know, it's ingenious, and it seems, you know, probably works for them. But it's one of those things where I go, ugh, I go to Whole Food for the cheap milk. That's just me. Ford's second quarter profit fell nearly 8% due to higher commodity costs and higher spending on R&D. Ron, would you make of Ford's latest quarter?

Not a great quarter, but I think it's important to put it in a larger context. Ford has done a really great job of largely bailing itself out of the Great Recession. And they have to be given credit for that. They're still selling cars. They're paying down debt really nicely. The Japan supply chain issues, those are somewhat subsiding and we'll go away shortly. So things weren't great in this quarter. They're having some trouble. There's weakness there. These GDP numbers don't bode well, I think, for the rest of this year, even perhaps, or longer. But in general, Ford is doing what it needs to do.

Some good news for Yahoo shareholders. After a four-month dispute, Alibaba Group, has reached an agreement with Yahoo, which is Alibaba's largest shareholder, which ensures that Alibaba will get between $2 and $6 billion if the lucrative AlliPay business goes public. Tim, there was really a fear over the last few months that Yahoo is not going to get anything for its investment. Right. So Yahoo owns about 43% of Alibaba Group, and we recommended the stock in the million-dollar portfolio

on the basis that at some point Yahoo would monetize their stake in that company and, you know, shareholders would benefit as a result. Then this sort of scandal hit whereby it looked like Alibaba CEO, Jack Ma, had walked off with AliPay, which is the payments processing side of the business. There were some legal issues around foreign ownership of payments businesses in China, so they did have to change the ownership structure, but the way they did it left a lot of people very unsettled. What we have now is the assurance, basically, that AliPay will, A, continue providing services to Taubau, which is the e-commerce platform that Alibaba group owns.

and then B, that when there is a liquidity event, Alibaba Group will yield somewhere between $2 and $6 billion, depending on how much money the company or what Allie Pay gets valued at. Obviously, there's Yahoo still needs to figure out how, when, and how much, you know, for to monetize its stake in Alibaba Group. But the value of the asset, I think, is intact, and that's good news. The stock on Friday was up and then down, but I think that has more to do with the big picture in the stock market than this specific company situation. And finally, two hot IPOs this week, both involving hot caffeinated beverages.

On Thursday, Tivana Holdings, which sells tea in stores across the US, went public, shares up 64% on opening day. And on Wednesday, it was Duncan Brands, the parent company of Dunkin' Donuts and Baskin Robbins going public, shares up nearly 50% on the first day of trading. Seth, Jason, you gotta love these. Dunk, Tiavana. Tiavana. Can we just call it Tiavana? There are no direct flights to Tiavana. Giovanna.

Yeah, I don't like the way they pronounce their name. No, that one I have a little bit of trouble with the valuation. They make a little bit of free cash flow. They're going to need to grow that store account huge. They're trading at a real premium to revenue, but that's based on some growth, but that's all predicated on opening a whole bunch more stores. So I'm not sure how that one plays out. Duncan was a lot more interesting to me, at least at the price that it IPO, not the price.

How much did it go up this week? $40, $19. IPO to 29 now? Yeah, it looked like a reasonable buy based on the price and the free cash flow it's producing, kind of saddled with some pretty heavy debt, and a lot of that was owed to the fact that the buyout shop that owned it paid themselves a $500 million dividend before flipping it onto the public markets. Pay yourself first, Seth. Always pay yourself first.

So it looked pretty reasonable. The trouble with Duncan Brands is they've had sort of slow same-store sales growth going forward, and is the market already saturated for their product. But even if it were, if you get in closer to the IPO price, I think you're getting a pretty decent deal. Ron? I like the expansion potential as they move west. It's largely a northeast story right now.

The IPO price was reasonable. Here we're frothy. I'd wait for a pullback before jumping in. Do you have a favorite donut? I like the coconut donut. Blueberry crumb. Blueberry crumb. I love the blueberry crumb.

I love the blueberry crumb. All right. Speaking of IPOs, we have a new investment report, the hottest IPO of 2011. you can get it by going to hot ipo.fool.com. And no, we are not talking about LinkedIn or Zillow or any of the other overpriced.com. How dare you? Overpriced. The hottest IPO of 2011 report gives you the name and ticker symbol of a stock with a proven business model

and a huge potential market. It's a free report. So just go to hot ipo.com. I'm sorry, Chris. Where do I go again for that report? Thank you, Steve. Interesting. Where do I go? Steve just woke up. Hot IPO.com.comful.com. On the internet, correct?

On the interwebs. The World Wide Web. I'll be there. Anything with hot in it, I'm there. Is it safe for work this link? Oh, absolutely. Sweet. It's hot IPO.com.

Wait, I got to write that. Not hotchicks. Not hotchicks.fool.com. All right, Seth Jason, Tim Hitz, and Ron Gross. We'll see you later in the show. Up next, a former insider gives us a behind-the-scenes look at the early days of Google. When you walk the streets, you'll have no cares. If you walk the lines and not the squares as you go through life, make this year go.

Watch the donut, not the hole. Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. In the past seven years, Google has gone from its IPO to having a market cap of nearly $200 billion. And one of the people who was on the inside during the early days is Doug Edwards, author of the new book. I'm Feeling Lucky, the Confessions of Google Employee Number 59. Doug, thanks for being here. Thank you very much for having me.

So you were the director of consumer marketing and brand management at Google from 1999 to 2005. What surprised you the most in your time at Google? Well, I think what I was unprepared for coming from a very traditional corporate background. And, you know, the Mercury News had been publishing for 150 years. I was part of Nightgitre, a big corporate chain, was just sort of the chaotic nature. and, you know, flat structure of the company, of the staff when I joined. Because I was used to being told, okay, here's your job. You know, here are the walls around your responsibilities,

and don't go past there. And, you know, everything needs to be approved one, you know, level at a time. And when I got to Google, the assumption was, hey, if you have a good idea, you should just go ahead and do it. You don't need to ask permission. In fact, if you're asking permission, you're wasting time. So it took me a while to adjust to that. And the energy level and the productivity expectations were just off the charts.

So it was not comfortable in the way working for a traditional company is where you might have pressure to get things done by deadline, but it was, you know, it came and it went. At Google, the pressure was continuous. It never stopped. There's a company that only gets a couple of passing references in your book. and that makes sense because it wasn't nearly the size it is now as it was, say, five, six years ago. And that's Facebook. How much is Facebook on the minds of the people at Google?

Well, it's hard for me to say because I haven't been at the company in several years. So I can't speak to what is going on inside the walls of Google now. But I can tell you that based on what I've seen in their product and the announcements that they've made about, Google Plus, I think it's very much on the minds of people at Google. And I know that Larry's goal was always to organize all of the world's information. And I think he was maybe a little late to realize that a lot of that information was, valuable information was contained in social networks. And so I think he's awakened to that now.

And I think he realizes that if Google can't access all of that valuable information in Facebook, it could be quite a problem later on, that the value of Google would diminish. So I see Google Plus as his effort to start generating some of that valuable social content within parameters that Google can access. Google Plus has certainly gotten a lot of good early reviews. What do you think of it, and do you think it can make a serious dent in Facebook? I like it quite a bit. I've been using it since almost the beginning of the launch, the beta launch.

much. And I find it very intuitive in terms of setting privacy levels. You know, the ability to just say, send this message out or post this and make it available to this circle, this circle, and this one, but not these other five, is a lot easier to manage than Facebook's privacy settings. But Facebook has, you know, half a billion users in Google is at 20 million plus at this point for Google Plus. So I think it's going to be a very long and particularly. interacted battle for ownership of the social space. And I think that's to the benefit of consumers. I mean, I'd love to see them both innovate new and, you know,

delightful ways to share information. Google really started as a search company. Facebook started really as a social network, and it seems like as they mature, they are both attempting to be much, much more than where they started. With that in mind, what do you think is Google's biggest advantage over Facebook as a competitor? And what do you think is Facebook's biggest advantage over Google? I think probably is better at technology development.

And I know some of the people at Facebook are excellent technologists. I just think that Google has more critical mass and more momentum behind its technology development. They have a long history of learning and massive, you know, massive. computational effort. So I think I would give them the edge on developing new technology. I think Facebook has the edge of understanding the behavior of users in a social atmosphere. I think Google still struggles with trying to get what people are doing in social networks and how they want to do it. So I would give the emotional intelligence to Facebook, and I would give the more technology, the intelligence, information technology, intelligence to Google.

You're listening to Motley Full Money? My guest is Doug Edwards, author of the new book. I'm feeling lucky the Confessions of Google Employee Number 59. As the director of consumer marketing and brand management, I'm guessing all manner of ideas made their way to your desk. What's the craziest idea you heard during your time at Google? Well, one that I mentioned in the book, you know, Sergei pulled me to one day in a meeting and said, you know, instead of doing all this marketing stuff

or thinking about advertising, we should just take the entire budget for marketing and spend it on inoculating Chechen refugees against cholera. And that would get us wonderful press. It would be a real public service, and it would be more effective than advertising, because, you know, advertising, you can't really measure the effectiveness of. And if we were inoculating Chechen refugees, we would know that we were doing good. So that was one of the more more extreme ideas that came up and then when we convinced them that wasn't probably an effective use of our marketing budget, his backup solution was well then we should give out Google branded condoms to high school students, which certainly has gotten a lot of press.

That would have gotten you a lot of press. Yeah. You know, we weren't really looking to target that market particularly, so I'm not sure it would have been the best expenditure of our budget. I want to spot you up with something you wrote at the end of your book. And here's the quote. The company's biggest flaw in my estimation. Impatience with those not quick enough to grasp the obvious truth of Google's vision.

This is something that for me as a reader seems to come up at various points in your experience at Google, which is almost a level of arrogance, especially. with regards to the founders, how do you think that arrogance has either helped or hurt Google's success? Well, I think it helps to the extent that you have to have some level of self-confidence to even attempt the things that Google has done. You know, to think that you can enter a crowded search market where they're already established players like Yahoo and its site and Likos and Info Seek and all of the other ones, Altivista that were in play at the time, and think, and as they said,

original VC presentation, you know, we're going to own half the search market in two years. Well, you have to have a fairly, you know, high self-esteem to go into that situation and say that. So I think it helps in terms of making their vision and their ambitions greater and often helps them to achieve that because they set high goals and then they believe that they can get there. You know, I think it hurts them in the sense that sometimes they get way out in front of the public or they make assumptions that the public will understand what they're trying to do when the, you know, it's so clear to the founders, but it's not at all clear to the public. So things like scanning all the books in the world and putting them online.

From the founder's perspective, you know, to Larry, that's an obvious benefit to humanity. There's no reason not to do that. everyone benefits to increase the sum total of human knowledge and making it available to everyone is by definition a good thing. But, you know, it takes a certain arrogance to think you can do that without clearing all the copyright issues and some of the legal concerns before you go ahead and begin doing it. You're listening to Motley Full Money talking with Doug Edwards, author of the new book. I'm feeling lucky the confessions of Google Employee Number 59.

Doug, before we wrap up with a round of buy, seller, hold, relatively speaking, Google is still a young company. What, in your estimation, does Google want to be when it grows up? Well, you know, I talk a little bit in the book about Larry's vision of what Google could be. And I think, you know, when people ask what's Google going to look like or what's Google going to be known for in 10 or 15 years, I don't think it'll be any of the things that it's doing now. I think that it will have already evolved into a whole other. enterprise where it's pushing new boundaries in terms of information access. So I can't really predict where that's going to be because I don't have Larry's vision implanted in my brain. But, you know,

I think they're going to keep trying to cross the lines, you know, to decrease the friction of accessing information wherever you are, whenever you need it, whatever you want to know. and I would expect Google to keep developing along that line. All right, we will wrap up with a round of buy, seller, hold. Let's start with its parent company IPO this week, and you're a marketing guy. So buy seller hold, Duncan Donuts, the brand. You know, I lived in Massachusetts and Rhode Island. I would never sell.

I would buy, buy, buy, you know, give me a dozen right now. As a native New Englander, you and me both. We talked a little bit about how you worked in the newspaper industry. Buy seller hold the likelihood that the Washington Post will still have a daily print edition in five years. I would probably have to sell on that one. I mean, I hope that they still do, but I'm not optimistic. I just don't see the future of print lasting. Five years seems about the right window.

I think by then they'll have figured out they have to be entirely online. It celebrates its 30th anniversary next week. Buy-Seller Hold, the future of MTV. MTV? Are they still on the air? You know, that generation is past. I don't know. I'd probably, I'd short that one. And finally, Buy-Seller Hold, a movie version of I'm Feeling Lucky. Well, I know my wife would really like there to be a movie version in which I'm played by Johnny Depp and she gets to play herself. So, you know, I'll put that one on hold. I'm not really sure.

Is that the one, is that who you're angling for, Johnny Depp to play you? I know your wife's interested in that. No, you know, I don't think Johnny Depp is going to stoop that low. I think, you know, they're more like, you know, Zach Gallifinacchus, maybe. The book is I'm Feeling Lucky, the Confessions of Google Employee, Number 59. It is an Amazon bestseller. Doug Edwards, thanks so much for being here. Thanks, it was fun.

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 or against, so don't buy ourselves stocks based solely on what you hear. I'm Chris Hill, and joining me in the studio once again, Seth Jason, Tim Hanson, and Ron Gross. You know, you can always drop us an email, RadioatFool.com.

We love to hear from our listeners out there, and let's bring in our man Steve Brod up from the other side of the glass, because Steve, you actually heard from one of our listeners, but it was not through email. Can you share that with the guys? I did. It was bizarre. My father was talking to you on the phone, and he said, I have a funny story. Your uncle was trying to book a hotel or something staying somewhere in Delaware.

And a nice gentleman said, your last name, Broido. He said, are you related to Steve Broido from Motley Fool money? Wow. From the Motley Fool. And he said, that's my nephew. And my dad had requested an autograph photo. He said, do you have a photo? that you could autograph for this.

That is unreal. Wow. And I said, I really don't, but this is wonderful. I feel validated for the first time of my life. Are we buying this story? Do we believe this actually made up? It could be a giant ego boost for my dad. Could be.

I am buying this story, whole hog. It's incredible. I don't wonder why he's been sauntering around a little bit. This is the second Steve Brodo super fan, right? Because there was one person in San Antonio. Yes. Yes, yes. We got a call one time last year from a guy in San Antonio who said,

Essentially, I love the show. I listen all the time. The guys are really smart. Oh, yeah, and Steve Brodo's the best. You know, there are pictures of Steve Broido at hotipo.fool.com. Exactly. Drop us an email, radio at fool.com. Particularly if you, too, would like an autograph photo of Steve Brodo.

And particularly if you'll send us something like, aren't we getting some weird flavored tank? We're getting some more. Yes, we also got an email from a guy in Columbia south of the border. Who said he was sending a mule with tang? with some too low orange flavor tang because you had requested it. Interesting. I need to beg more often on the show.

Yeah. Can you beg for money and diamonds and that kind of thing instead of tang? Gold. It's great that people are sending us tang. Please send us gold, so we're not poor when everything bad happens. All right.

One story we were not able to get to before. Guys, we've talked in the past about Groupon and in particular a creative accounting metric the company is using in its filings as it prepares to go public. Wall Street Journal reported this week that the SEC has asked Groupon to answer some questions about something the company is calling, and I'm quoting here, adjusted, consolidated

segment operating income. I'm guessing that one of the questions the SEC has is, what the hell is that? Oh, but they know what it is. What is this? It's earnings if you don't count most of our expenses. Specifically, marketing expenses, yes. They have some splain in to do. That's fine. Groupon is not really a marketing business. So what's the big deal? I mean, what are we to make of this? I'm shocked it's taking the SEC this long to do. to sort of come out about this, I mean, as soon as the Groupon perspectives hit the wire, they highlighted this adjusted CSOI.

Consolidated segment operating income. It rolls off the tone. We all call it. One of their key performance indicators. Everybody said, whoa, whoa, whoa, whoa, whoa, whoa, what is that? No, we should be fair and give their side of the story. Their side of the story is that marketing expenses are higher than they will be significantly down the road. And therefore, if you want a true picture of this company, you should back out those higher

than normal marketing expenses. I think that's a bunch of spin personally. But I think it's . Can we say that? I think Steve has a bleep button. It's one of the ways he adds value to the show. It's by bleeping out Seth's profanity. I've been very good the past few weeks.

You really have been. Especially when I wasn't here. So grabbing hold of this notion that Groupon is putting forth this notion that, hey, we're just going to back out our expenses. Don't focus on our expenses. is focus on our profits. If there's one thing you'd like to back out, you know, as we're, like, measuring your health wrong, what would it be? Would it be donuts?

I think my family would attest to the fact that I have a big chili problem. I love chili of all kinds. Beef, chili, turkey chili, vegetable chili. Let's not go any further down this. It takes its toll after, like, the 90th bowl. The fourth gump of chili over there. He really is. Steve, what's one thing you'd like to back out?

You bet, I'd like to back out the number of times I have to hear about Ron's love or chili. Actually, no, it's soda. I drink too much soda. All right. In the time we have left, let us get to the stocks that are on our radar. And Ron Gross, we will start with you. Yeah, I like our favorite maker of funeral caskets at the moment, Hillenbrand, ticker symbol, H.I. They also have an industrial division that they acquired recently. Stocks pulled back over the last few weeks, making it attractive. Now, once again, at a million dollar portfolio. We recently raised it back to a buy. I think it looks good right here.

I can't help but ask. I'm sorry, an industrial division for caskets? Well, the caskets right now is not a high-growth business. Although when the baby boomers start cashing it in, we'll see some growth. So they went in and they bought Ketron to spur growth. It has absolutely nothing to do with the casket business. Normally, I would not like that. In this particular case, I've bought into it. Okay. And the ticker symbol one more time? H-I.

Tim, your stock this week? is a little company that is located very near Fool HQ here in Alexandria, Virginia, and it's called VSE Corp. And what they are is they're basically a government contractor predominantly serving the Defense Department and the Energy Department. And as you might guess, as we near debt default apocalypse and people worry that the government can pay. I thought it was an Armageddon't parse. Technically, I think it's debt apocalypse. As we approach debt apocalypse, people who are getting paid by the government, like VSC, are obviously people are growing skeptical of them.

The stock has just been slaughtered. Ultimately, I think it's a very well-run company. At the end of the day, I think the U.S. government comes back and pays its bills specifically with regards to things like defense and energy, which we need. When he said it came back, he had a fist pump there. I want everyone to go. A couple hundred million dollars. Maybe our friends at Mantec try to buy them?

That would be interesting. They both live in that nexus of Beltway-buddy government contracting-type company. But VSE, it's run by some ex-Navy guys. They're pretty good at what they do, and I think it's a pretty good little company. Okay. Seth, Jason? I got to go to Super Value. This is a large grocery chain. They own, you know, Albertsons and Save a lot and a bunch of other banners. We have had this one for a while under the – the thesis was they have to just suck less. They have to become less of a terrible operator. And the latest earnings report, it appears they have done that. they had a lot of trouble having effective markdowns, and if you have ineffective markdowns

in the low-end grocery business, it can really kill you. But management, which is largely imported now from Walmart, seems to have turned that around. They still produce really healthy cash flows, which enables them to pay down their giant mound of debt. And the stock hasn't really moved up very much in the past months or so. It's actually down a little bit. So I think it still looks like a great buy. I own it. We own a Hidden Gems, SVU. All right. Seth Jason. Tim Henn. Johnson. Ron Gross, guys, thanks for being here. Thanks to our special guest this week. Doug Edwards, author of the new book, I'm Feeling Lucky, Confessions of Google Employee Number 59. That's it for this edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Mack Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.