Motley Fool Money - Motley Fool Money: 10.07.2011

Episode Date: October 7, 2011

Our analysts reflect on the legacy of Steve Jobs and the future of Apple.  We debate the relative merits of the Occupy Wall Street protests, discuss Costco's fee hike, and share some stocks on their radar.   Plus, Pulitzer Prize-winning author Daniel Yergin talks about his new book, The Quest:  Energy, Security, and the Remaking of the Modern World.    Learn more about your ad choices. Visit megaphone.fm/adchoices

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From Motley Fool Hidden Gem, Seth Jason, from Motley Full income investor, James Early, and for million-dollar portfolio, Ron Gross. Guys, good to see you, as always. Good to see you, Chris. We have got the latest on Apple, Costco, and the Occupy, Wall Street protests. We've got Pulitzer Prize-winning author Daniel Yergan talking about the future of energy, and we've got a few stocks on our radar. But we begin with the big macro. Guys, the latest jobs numbers are out. Employers added 103,000 jobs in September. Unemployment

holding steady at 9.1%. Seth, Jason, I'll start with you. 103,000 jobs? That seems good. Is it good enough? Seems good. Faky, faky a little bit, because you take 45,000 striking Verizon workers, and you get back to work. and then you get an extra $45,000. But hey, we can take the whatever near 60,000 increase that's left over and say that that certainly is better than going the other direction. The revision of the backwards numbers upwards is also nice. In general, you need stronger job growth than this just to set offset population growth, the entry of workers into the employment pool.

But this is certainly better than the alternatives we could get. James? I agree. In general, I think we need around 120, 125,000 jobs per month to counteract just population growth and worker attrition, and closer to 200,000 would start taking a dent out of the unemployment rate. So we're nowhere near there yet, excuse me, but at least we are moving in the right direction. Ron? I don't want us to be all too happy here. Let's not forget. Let's not forget that the real unemployment rate, which actually ticked up, is that 16.5%. There's a lot. There's a lot of unemployed people out there. And, Job growth creation is good, but we've got to get 120,000, as James said, or north of that, to start making a dent. I know that here in America we're not really good at looking back at history, even recent history, to gain an instructive outlook on our current situation. But let's remember that all of the employment we had, say, from 2000 to 2007, a lot of that was all related to the housing boom. It was construction work. It was related to construction work. It was financial engineering related to accredited.

to a credit bubble, and that is not coming back. At least most of it isn't. So it's really tough to replace that bubble segment of the economy with healthier, smaller. We need a new bubble. That's what the social media bubble is for. Is that what this is for me? But how many people can work at Facebook and Twitter making no money? You're listening to Motley Fool Money for daily analysis on the latest money news. Check out our daily podcast, Marketfulery, on iTunes and at Marketfulery.com. Guys, the big business story this week, Steve Jobs died at the age of 56. Obviously, our condolences to his family and friends and all of his colleagues at Apple and Pixar.

James Early, this is someone with an amazing business legacy. Sure, I'm an Apple fan, so I'm obviously a little bit biased. Steve made tech cool probably more than any other person. And one thing that's really notable is that some people are successful by luck, and maybe a little bit of skill but he was really he really built his own success he succeeded a number of times in a number of ways many almost independently of each other so he's really me he deserves the the lauding that he's getting wrong

yeah I mean the fact that he Apple is now the biggest company or the second largest company by market cap depending on where the stock happens to be is a tremendous thing to have done for a consumer electronics company and uh... he really was an innovator that we we rarely see in business and he'll be missed. Seth, I know that you're an art history buff. There were tributes pouring in from all around the world, one of them from Eric Schmidt at the chairman of Google, who made a point of saying that Steve Jobs was someone who really merged art with science. I believe that was the

designers that worked for Steve Jobs. You did that, and I certainly wouldn't call it art. I mean, there's a big history of industrial design. Let's give Steve Jobs the credit that is due to him and maybe avoid the kind of overwrought attempts to canonize him. Steve Jobs was a great businessman. If you read some of the very interesting obituaries out there, you find that at least as far as I'm concerned, he was a lot of more of P.T. Barnum than he was an artist. In other words, Wozniak, the Was, right, says that over and over again.

The other co-founder, he would say, you know, I'd invent this cool thing, and Steve would say, let's sell it. And I would invent this cool thing. And Steve would say, let's sell it. Well, Steve found a way to sell all those things. more. I mean, everybody has to have the iPhone. Everybody has to have the iPad now because, like James said, Steve Jobs made that cool. Speaking of the iPhone, earlier in the week, Apple rolled out its latest iPhone, the iPhone 4S, not the iPhone 5, as some were expecting. And there was much gnashing

of teeth. There was definitely some gnashing of teeth in the social media sphere. But James, what did you think of the device that they've rolled out? And, and what? Tim Cook, the new CEO, this was his first performance on stage. Is it a good example of what could go wrong and may go wrong in the future? I mean, the device was sort of a mild improvement, and Tim Cook is, sorry, he just knows Steve Jobs. And that's kind of the whole problem. Apple has good gadgets, but Steve Jobs makes them must-haves. Obviously, Windows, Microsoft has good stuff, Google, Android, good stuff, but Steve Jobs is the pitchman.

So we'll see what happens. Ron? Yeah, it was a little bit, you know, anti-climms. The is that I pronounce that word? It needs more syllables at the end. But I think we're all kind of spoiled when it comes to Apple rollouts. It didn't go to the five. It's an iteration before that.

There were improvements to it. It's a pretty interesting device that we all really enjoy using. So like, let's all just calm down. The five is coming and it will have something cool, I'm sure. These guys know what they're doing. So let's just maybe be a little less well. Well, it better because this is a phone that I know Apple's having some trouble with new ideas when they introduce a phone that the two new features are things that my year old Windows phone

has been doing for quite a while and some Android phones as well. Actually, I was really impressed. This goes to design. I'm not being facetious. If this thing really does, like, have eight or nine hours of Wi-Fi surfing in the battery, then that's actually pretty impressive. A lot of people this week trying to speculate, what is the future of Apple without Steve Jobs.

When you look at the rollout of this version of the iPhone, I heard one analyst say that he thought Apple was set for the next 10 to 15 years. That seems ambitious for any company. Much less a tech company. But when you think about the future, James, what do you think of? Well, as we're talking before the show, in another couple of years, it's going to be time for a new big product. And Steve Jobs has been the driver of those things.

What is that new big product, some kind of integrative? of, I don't know, they haven't gotten the TV to work just yet, but something on the we don't know what that is. So we don't, we can't answer that question yet, but the clock is definitely ticking. It's a bigger iPad. Earlier in the week, Costco's latest earnings were reported up 11% in the latest quarter, but the company made headlines because it also announced membership fees are going up 10%. Ron? Yes. We talked recently in this room about another company, Netflix that raised membership fees. That

didn't go so well. I don't think this falls into the Netflix. category. What about the name change? Costster. You have to go to two stores now. If you want toilet paper, you go to one place. Let's put it in context. So raw material prices are rising and Costco is holding their prices to the consumer steady. That means their margins shrink. Jim Sinigal and the rest of the management team does not want to raise prices to the consumer. So they're making less money. One way to offset that is to raise this annual membership fee $5.10. 10

10% sounds more than $5.00 does. It helps to offset that. It could actually add maybe even 25 cents a share that $5 because it all kind of falls to the bottom line to the company's profits. So it allows them to make the money they need to make. They hold the rest of the prices steady. It looks good to me. This company missed expectations a little bit this last quarter, but business is very, very strong. This is the evil genius here because of course they're raising the prices to consumers. If they're charging more on the membership fee, right? But you all, they only, the members only have to go out the one time rather than than seeing the added nickel for the toilet paper every time. And they get 80%

of their operating income or something like 80% 75% from that membership fee, not off the stuff you buy. And it has other effects of keeping people loyal once they've been over the hump because probably the psychology is every time you're in the store, everything looks cheaper than everywhere else you've seen it. You've long forgotten that membership fee. It just looks to you like you are making a big savings. And retaining that member, their retention rates are about 88, percent or essential because you want that membership fee, which goes almost all to the bottom line, to keep recurring. And the best way to do that is to make sure the 400 roll of toilet paper doesn't get jump in price. How much would the price of toilet paper have to go out where you

start reducing your usage? Do you have a number? No, it's inelastic. I believe it. There's no amount. There's no amount by which you could rise. There's not going to be a two-square rule at Ron's house. Coming up, two of our colleagues went to New York City this week to check out the Occupy Wall Street protests firsthand. We'll get a report on what they saw and where it's all going. This is Motley Fool Money. Welcome back to Motley Full Money.

Chris Hill here in the studio with Seth, Jason, James Early, and Ron Gross, and also joining us in studio, the editor-in-chief of the Motley Fool's editorial operations, Mr. Brian Richards. Brian! It's a fancy title. You have a badge. It's a much fancier title than any of you guys. have. Brian's here because earlier in the week, Brian and Matt Greer, the producer of Motley

Full Money, went up to New York to get a firsthand on the ground look at the Occupy Wall Street protests in New York City. Brian, what were your impressions? I wasn't really sure what to expect going in, but when we got there, you know, we saw, the cliche we saw, which was hacky sack playing hippie kids who were just sort of there to hang out with their friends. But there were a surprisingly large number of very articulate, thoughtful people who were just fed up with the way that the financial system let us down and the incentive structure on Wall Street. We talked to one guy in particular about credit unions and how credit unions in their nonprofit cooperative status are better aligned with the communities that they serve.

I think the theme overall was that there was just a general rage against the economic inequality in America. Occupy Wall Street's been going on for a few weeks, but it's certainly a growing protest movement. It's certainly gotten growing media attention. Guys, what do we think? Seth, is this something that is going to fizzle out, or do you think this is something that could catch fire and provoke some real change? I think ultimately it fizzles out, and I think the reason is, at least as I see it, I've been inside the old protest movement myself back from my journalism days. I actually followed the Coalition of Immocally Workers on their cross-country protest of Taco Bell. And you had some of the similar stuff.

Oh, boy, these guests, they bring in phones and old-fashioned ones, too. You had, you know, some of the hacky-sack-looking thing going on. But they had beforehand, they had very focused points. They had a smart focus on what they were trying to accomplish. Their demand was pretty much a single demand, and it sounded eminently reasonable to anyone who heard, which was just, hey, we are picking the tomatoes that. are used at Taco Bell, among other places. We want a penny more a pound.

And so they ultimately succeeded, I think, because they reached out to other affiliated groups. They reached out to church groups and others, but mostly because they were focused and they were driven and they had a really good command of how to handle the media. And that's one of the things that I haven't seen so much, at least in what I've seen of Occupy Wall Street, when I see these little vignettes of people and they're complaining because they can't pay their credit card bills because they have, you know, too much stuff in their your house. It's hard for most people to identify with that. I think they can identify with it, but it's hard for them to have sympathy for people who overspend and just want to see debt relief

so that they don't have to pay their bills. Ron? I think in order for this not to fizzle out, it has to bubble up from a relatively disorganized movement to something coherent with demands. But then it's got to make its way to senators and congressmen because, for example, one thing they want to do is have the Dodd-Frank bill not repealed. How are they going to get that done unless they go to their Congress people? You're saying they're in the wrong city? They're not in the wrong city. They need to make themselves heard by the people that have the power to make change.

And right now, I think they're largely being ignored up to this point by those folks. I'll take the other side of that and just say both Ben Bernanke and the CEO of BlackRock, the largest asset management company in the world, have come out to say that they're sympathetic to their plate. the Occupy Wall Street movement has no official list of demands. And I think that is both a blessing and a curse at this point. It's a blessing because anybody can attach themselves to the movement. There is a strong libertarian bent down there. A lot of Ron Paul supporters, a lot of people wanting to end the Fed,

a lot of people against the bailouts. There's a strong, very liberal groups down there where people want debt relief and they want $20 an hour minimum wage. The fact that they don't have a coherent message, I think, has helped it grow up until this point. Now they're starting to get student groups involved. They're starting to get labor unions involved. They're starting to get some big name support. They sort of got into critical mass, and then they'll figure out what to do.

One thing that bugs me, quite frankly, is the whole 99% thing, where they seem to be painting everyone that works on Wall Street or in the financial services industry with the same brush. And my experience is that 90, 95% more, perhaps, of the people that work on. Wall Street are hardworking young men and women with families who are honest and want to do the right thing and they're not all the devil and they're they're not all you know to be hung in effigy to me that's that gets to the crux of the issue there's we've screamed about some of the unfairness of what's going on in Wall Street and we'll paint with the broadbush here we've got the huge bailouts you know benefiting okay maybe benefiting everyone we don't know because the catastrophe didn't happen maybe it didn't happen because of the bailouts but it's then you've got bank you know these

large banks and investment banks giving out huge bonuses to the executives, and it looks to the public very much like it's on the public, it's on the public diamond in many ways it is. And so those are really terrible things that they do need to be addressed. And I'm afraid that they won't be addressed. The best thing about this is if this allows us to recapture that lost moment. In other words, this administration should have broken up all those too big to fail banks into smaller pieces a while ago. Instead, they continued what we had seen previously,

which was kind of making those big banks even bigger. And to the extent that this movement can make us revisit some of those bad systemic decisions, then I think it will be really helpful. I want to close with general thoughts on one thing that they can focus on. But first, Brian, while you were up in New York, you were tweeting, and some of them were very informative about sort of the size of the crowd.

of thing, but my personal favorite tweet of yours was at one point you wrote regarding the way you and Mack Greer were dressed. You wrote, apparently the banker dress standard has fallen. Sneakers, jeans, and a shirt with a collar scored us multiple. Are you bankers? Questions. Were you getting threatened? People were thinking you were a banker? Well, yes. Don't get me wrong. It was pretty shocking. Anybody who... You look fine to me, but I've never mistaken you for a banker. Yeah, my mother would never mistake me for a banker. I I didn't even shave that day. And Mac and I had shirts untucked.

We looked fairly disheveled. And if not for a collar on our shirt, I think we would have blended in mostly. Just so everyone knows, I can actually see Brian's boxer shorts right now. That's how Button-Dun Banker he's rolling. That's dress code here at the Motley Fool. Yeah, Wall Street has fallen a long way if I'm being confused for them. All right. So what's one thing, whether it's in terms of message,

in terms of a change they should be advocating for? What's one thing you think the Occupy Wall Street group should be focused on? Well, I'll cheat a little bit because we interviewed a lot of people and we asked that exact question. And so my favorite answer, and this is hard to implement, but I think we should begin advocating for it. And it's for personal finance to be taught in every public school in the country, as alongside science, math, literature, etc. So that people can make better decisions regarding their money and interest rates and credit cards and things like that once they're in the real world. James Early?

They need to make a list of community banks or local banks that are deemed responsible in some way. And everyone can know what those banks are or who those banks are and patronize them. And for the banks, the banks need to get a PR department and actually realize that they shouldn't be jacking up a debit card fees five bucks a month like Bank of America. is doing, they've missed a golden opportunity, and now they're paying a price. Seth? Yeah, get out to those community banks. I would say to the protesters, you need to walk the walk, and that is not using the ATM that gives Bank of America $3 every time you make a withdrawal. If you want to be serious about this, you can start voting with your pocketbook right away. All right, Seth, Jason, James Shirley, Ryan Gross, guys.

Will she see you later in the show? Brian, thanks for joining us. Thanks for showing us your boxers. Sorry about that, Seth. Coming up, a conversation with Pulitzer Prize-winning author Daniel Yergan on the Future of Energy. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill.

Daniel Yergan is one of the world's leading authorities on energy, and he's the chairman of IHS Cambridge Energy Associates. He also received the Pulitzer Prize for his best-selling book, The Prize. and his latest book is The Quest, Energy Security, and the Remaking of the Modern World. Dan, thanks for being here. Delighted to be on with you. Thank you. So you won a Pulitzer for the prize. The New York Times says that this latest book of yours is even better. What inspired the quest?

It was, really, it was a personal quest that inspired the quest. On the one hand, so much had changed in the energy world since I had written the prize. And the second thing is I wanted to write a book that covered the entire energy spectrum to see how all of these elements fit together. And so it was really a broader story, a more ambitious story even than the prize. Oil, coal, natural gas collectively make up more than 80% of the world's energy. Are we running out of energy? Periodically, people think we're running out of energy. And I have the story in the quest going back to the 1880s when it was thought we were running out of oil. And a famous oil man said, I'll drink every barrel of oil.

You find west of the Mississippi because at that time, most of the world's oil came from Pennsylvania. And then they discovered oil in Texas and Oklahoma. And he kind of rethought his promise and moved on. But I think that we've seen a period in the last few years where there's a lot of fear of that. But now we've seen that once again, as it keeps happening, technology opens up new frontiers and there's new supply coming on, including in the United States, which is really a big surprise for many people to see it happen. But at the same time, we are looking at a world economy that, when we get out of the current crunch that we're in and get back on a growth path, could be double the size of what it is

today. So it's still a big challenge to assure that the energy is there that a vibrant world economy requires in, say, 10 or 20 years. What do you think is the biggest misconception or the biggest thing that people get wrong when it comes to the topic of oil? Well, one thing is I think that we import all of our oil from the Middle East, and actually it's a pretty small share these days. Canada is the biggest source of it. I think that's what I find as I travel around is one of the things that I run into all the time. Because we always hear we want to end our dependence on Middle East oil,

but we don't really have much of a dependence on it. You're listening to Motley Full Money, talking with Daniel Juergen, author of The New Bestseller, The Quest, Energy, Security, and the remaking of the modern world. Dan, to what extent can our energy problems be solved by people just being more energy efficient? I think that this energy efficiency or conservation, whatever you want to call it, is we should see it as a major energy resource, and we should see it in very practical terms.

You look at the numbers, I checked them again last night. The U.S. today is more than twice as energy efficient as it was in the 70s and the early 80s when the year of the oil crises began. Imagine what our situation would be if we were using energy at the same rate as we used to then. So I think it's a major energy resource. It has to be part of energy strategy, and I think it can continue to. to make a major contribution.

And one of the things I notice, it's not only in the United States, not only in Western Europe, but you look at Japan, it's so deeply embedded, and you look at China. It has moved to the top of their energy strategy, because they realize if they're not more energy efficient, then the amount of energy they're going to use is just going to be overwhelming, and it's just going to be a tremendous weight on the overall economy.

Another thing that you touch on in the quest is the whole notion that the, the way Winston Churchill considered oil. And his approach was essentially, we're not going to bet on one thing. We're not going to bet on one process. It's all about variety. Right.

And he said safety and oil, and we could say safety and energy, lie in variety and variety alone. And that was at a time when Churchill was converting the Royal Navy on the eve of the First World War from coal to oil in order to gain speed and maneuverability against the German Navy because people could see this conflict coming.

And that meant switching from safe Welsh coal to oil from, of all places, Iran, Persia. And so he was attacked in Parliament, and he kind of laid that out as a precept. You've got to diversify. And I think that's a very, for me, that's a starting point for energy strategy today and tomorrow. You're listening to Motley Full Money. We're talking with Daniel Yergan, author of the new book, The Quest, Energy Security, and the remaking of the modern world. Dan, before we wrap up with a round of Buy, Cellar Hold, a couple more questions. about energy. It seems like every few months the big story in the consumer world is the price of

gasoline and how much it costs and is it going to go to $5 a gallon and that sort of thing. Certainly with the presidential election next year, it's sure to become an issue of to what extent it can be lower. I'm curious what... It already is an issue if you listen to some of the debates. Absolutely. I'm curious though what you think about the price of gasoline. Do you look at it as this is something that needs to be solved. It can get to $2 a gallon. Or do you look at it and say, no, it's actually about what it should cost? Well, I think a famous oil man in about 1910 said the price of oil is what it will fetch in the market. And I think that what we're seeing, the price of oil, I think, is really telling us about some major changes in the world. It's telling us about

the shift to the emerging markets, the rise of China and India, how demand is growing there. and now use more energy in the United States. And it's also telling us about the rising costs of finding and producing oil, partly because, again, going back to those emerging markets, the cost of steel is going up and all these other costs are going up. So I don't see any near-term path that's going to take us back to $20 oil where we were, say, in 2004. I think the world has changed, and that's the story that the price of oil is telling us.

And, you know, if there are future disruptions, that will be reflected. in the price. But I think the price is kind of a floor for price is set by the costs of bringing on new supply and new supplies around, you know, the more expensive is around $60 or $70. And so that's kind of, I think, the floor for the time being, I think there's often the belief that politicians in Washington have more levers than in fact they do, because this is a big global market. But it's also interesting, when prices went up, boy, you saw the mistake some people made who kept thinking he was going to go keep going up and up is they thought price doesn't matter. But, you know, price matters. It matters economically and politically. If price goes up, then people buy different

kinds of cars. Politicians who are against higher fuel efficiency standards are suddenly in favor of them and a whole lot of things set in motion to kind of bring back some equilibrium into the market. And finally, final question. What's the next big thing in energy that you feel like really isn't getting enough attention that people really aren't talking about. Well, if you hadn't added that second clause, I had a very clear answer for you, but it is what's getting a lot of attention. And I think to, well, there are two things. The thing that's not getting a lot of attention is still efficiency. And yet it, you know, it's so big, but it's not something you can really get your arms around. It's really lots and lots and lots and lots of different things.

But the thing, the next, where the action is now, if five years ago it was all about biofuels, the new frontier today, it's all about the electric car and whether there's a race between China, Japan, and the United States, who's going to win it? And it's funny because I had two great photographs in the quest of showing a lady charging electric car in 1910 and the CEO of Renault, charging electric car in 2010, and it sort of looks like the same picture. So it's like this race that everybody thought ended at the beginning of the 20th century, has started again. We're still, though, I think, in the very early stages. And so I think over the next five years, we'll see, is the electric car really going to gain traction? And if it does, then we do start to move into

a different kind of energy world. Well, you may have just answered this, but my first buy-seller Hold question because last week here at the Motley Fool, we hosted Elon Musk, the CEO of Tesla Motors. I guess he was in, he thought the electric car. He's definitely a buy, but I'm curious. Would you buy seller hold to the future of the electric car? I guess if hold means that it's still early days, I would be in, I guess in the hold category, I think it would be about five years as I say to clarity, even in our most aggressive scenario, most optimistic scenario, we, we can see that about 3% of the automobile fleet by 2020 would be electric vehicles. But then costs come down, you know, the issues of charging and the issues of electricity

supply answered, then it could be a bigger part of the fleet. And once part of the fleet is no longer oil-based, then the balance, a lot of other things start to change as well. But I'd still say, having gone through other phases, a lot of momentum here, a lot of government support for it, but I think we've got to see some, we've got to start seeing a fair number on the road to really know whether literally, as well as symbolically or figuratively, they gain traction. All right. We'll check back with you in five years on that one.

Right. Let's put on the calendar. Buy seller hold, the future of ethanol. I think that we've kind of maxed out on ethanol, sort of corn-based ethanol in the United States. It's about volume base. It's about a million barrels a day, which is not insignificant. I think the question here again is what's going to come out of the research labs in terms of second generation biofuels where you're not using food crops. And I think there was a lot of optimism a few years ago.

I think people are finding it tougher. But I think we really haven't had biologists part of the energy world before. They are now. And so I would say, again, something part, that too is part of what I call on the quest, this great bubbling of technology and innovation. It's, you can almost see it like a stew, and there are a lot of different things going on in it. Buy seller hold lowering the speed limit back to 55 miles an hour. That was, of course, put in as a fuel-saving measure.

I think I detect no political support for that at all. So I guess what I call that, that would count as a sell. And finally, your first book, The Prize, was made into a PBS miniseries. So buy-seller hold a movie version of The Quest. Oh, I think, I think, why not, why not, a buy. It was really fun to do it and you reach a different kind of audience. But of course, the way video, you know, you communicate, is it TV, is it internet? Who knows?

But I think if you look at the pictures in the book, you can almost already see the video production. And who would you cast to play Daniel Juergen? Because here at the Motley Fool, we're thinking like a George Clooney. Yes, yeah. Okay, you could go with George Clooney. I mean, his pictures in the book. He's there climbing out of a Prius, so, you know, we could go with him. That works.

Yeah, I think that works. And he has a suitable gravitas and certain sense of irony and humor. So Ronald Reagan is a character in the book, but he's not available. I was just going to say, I don't think he's available. Yeah, so. But anyway, but this is the only book on energy. that talks about Ronald Reagan's worst moment in his career as an actor and ties it into the electrification of American society.

Well, there you go. If that's not going to get people to pick up this book, I don't know what is. The book is The Quest, Energy Security, and the remaking of the modern world. It is a New York Times bestseller. Daniel Juergen, thanks so much. Thank you, and I can't wait for the movie. Me too. Coming up, we're giving an inside look at the stocks on our radar.

This is Motley Full Month. 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 back in the studio with me, Seth Jason, James Early, and Ron Gross. Guys, time to talk about the stocks that are on our radar. And let's bring in our man, Steve Broider, from the other side of the glass, if only so he can grill you with an unexpected question. Ron, you're up first. Stock we bought for a million-dollar portfolio earlier in this week, coincidentally, is Apple.

AAPL is a ticker symbol. I know it's $370 a share. We think it's worth at least $500 a share. 100 billion in sales, 34% return on capital, $29 billion free cash flow, $7 billion, $76 billion in cash, no debt. We like it. Steve, a question for Ron? Sure. A question is iPads, iPhones, computers, what's next? What's the next big thing Apple's going to come out with that we don't know of? Actually, our model that we used to value it, we don't have anything in what we call innovation revenue. We really haven't accounted for anything.

thing because we don't know. We built in a little bit of dollars in there just as a guess, but we're mostly looking at just the things you mentioned and the continued growth that we can see in those products. So if they do come out with some grand new innovation. That's where it could be greater than $500 per share. If Android continues to gobble them in market share, and it could be less than $5.00 for share. That's the way this works. James Early, your stock this week. Here's, I'm going with the Evil Corporation McDonald's. This is an income investor pick. It just raised its dividend by 15% again, and it's raised this dividend every year since 1976. It's sort of a stealth dividend stock. People don't think of it as a dividend stock.

On the less time you ate out of it. Exactly. Oh, you eat the healthy stuff. You know, that was maybe, it's been since 1970. It may be five years ago. No, no, no, a couple years ago. Oh, you got to go. They've got, they've got coffee stock. No, I'm sorry, take that back. I had oatmeal there. I had oatmeal there. Yeah. Of course you did. Steve, question for James. So, James, why is McDonald's so evil? What's so evil about them? Steve, evil may be a bit strong of a word, but McDonald's has not been a very good company in a couple of respects. One of them is regarding animal rights, and the other one is public health and nutrition in fighting, labeling, fighting healthy foods. They resisted that for a long time.

Is it safe to say, James, that there is no company that, you know, regardless of what they do for their business, as long as they hike their dividend high enough, you're all in? McDonald's is pretty close to the edge. I would not recommend a tobacco company. and McDonald's just, I mean, it is not the nicest company, but they are trying to reform. So I like that. And sometimes when a big company moves a little bit, it has more of a social impact than a small company moving a lot. Seth, your stock this week? 2-6.

That's I-I-V-I. That's, you know, we're talking about Roman numerals here, and that's also the ticker. And it's kind of a complex company, and a lot of people know about it. It's in our service at Hidden Gems, and they produce high-tech products and materials. and materials. So like crystals and other mirrors and things for lasers and a whole bunch of really weird tech that you and I don't think about, but which enable modern life, modern weaponry and other things like that. And over the years, they've been very savvy, both innovators as well as acquirers, they tend to buy little companies that are doing closely related things, build those businesses, shed the ones that aren't as closely aligned anymore. The stock is pretty weak right now. And it's hard to see what's going on over the the next, you know, the near term, but they've just been so good over the long term that I think when it's, when the stock price is weak like it is now, it's always a good time to consider an ad. How big is this company? Oh, boy, I don't have the market cap in front of me right now,

but it's still a small cap. And can the crystals be used for new age purposes too? Like channeling the energy universe? But I don't think most new agers want to shell out with these kind of crystals. It's a good crystal. It's a good crystal. Yeah, I think they're probably smaller than this usually. Steve, question for Seth, about two six. Sure. I've actually owned this company in the past, and I have to admit that I don't think I really knew what it did. It's difficult to keep a handle on what. Even if you learn it, there's so many things they do. And then they, of course, shed one business, add another.

But just in general, they make a lot of little high-tech bits. Most of them are very large number of them, optical in nature. And these things go into all sorts of high-tech industries. The name isn't very descriptive either. No. You mentioned weaponry? Like, what percentage of the business is? I wouldn't say weaponry.

weaponry. I mean, it goes into, it goes into, what, it's cotton candy? Systems that can be used in defense technology, like darts. I mean, I'm not saying that this is on the end of a bomb, although there might be something that is. But a lot, you know, some of this stuff goes into, you know, high-end weird gadgetry. And high-end weird gadgetry, sometimes finds its way into weaponry. All right. In the time we have remaining, let's just go around the table real quick. Something you're working on next week in Hidden Gems, Seth? figuring out more specifically what 2-6 does. James Hurley, in income investor, what are you working on?

More videos, new videos. More videos? Yes, you haven't done someone a long time, but Steve has graciously expressed. Was that correct, Steve? Yes, I'd love to help. Great, great. All right, we'll do more. Steve, would you really love to help?

Absolutely. Love video. But James is going to be wearing a different shirt, though, right? I hope so. Ron, what are you working on in a million-dollar portfolio? Chris, we are getting ready to open up million-dollar portfolio to new members next month, And we do it once a year. We're really excited about it.

If listeners are interested, want to learn a little bit more, feel free to go to mdp.fool.com. All right. Are you excited about the reopen? I'm very excited. In fact, I just said I was very excited. But I mean, is there a part of it?

So how come the rest of us didn't pitch our service? And we actually came up in one to year, so you guys are open all the time. Okay. Should we advertise the Occupy Wall Street crowd? They might be interested. All right.

Ron Gross, James Early. Seth, Jason. Guys, thanks for being here. Thank you, Chris. Thanks to our special guest this week. Daniel Juergen, his new book, is The Quest, Energy, Security, and the remaking of the modern world. It is a New York Times bestseller, so check it out. You can also check out Market Foolery, our daily podcast on iTunes and online at Marketfulery.com.

That's it for this edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.