Motley Fool Money - Mr. Market’s Rough Week

Episode Date: January 8, 2016

Wall Street had its worst starting week ever. Our analysts discuss how should investors react to China’s volatility and which blue-chip stocks are on their watch lists. Plus, we analyze the latest from the auto industry, specialty retail, financial services and more. Bill George shares lessons from his latest best-seller, Discover Your True North: Becoming An Authentic Leader. To check out our new podcast center go to www.fool.com/podcasts  Learn more about your ad choices. Visit megaphone.fm/adchoices

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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. From Fool Global Headquarters, this is Motley Fool Money Radio Show. I'm Chris Hill and joining me in studio this week. For a million-dollar portfolio, Jason Moser, from Motley Fool Pro and Options, Jeff Fisher, and from Motley Fool Deep Value, Ron Gross. Good to see you as always, gentlemen. Hey, hey, Chris.

We have got the latest from the auto industry, specialty, retail, financial services, and more. We will dip into the full mailbag, and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with the big macro. The monthly jobs report was the lone bright spot in what was otherwise the worst week to start the year in Wall Street's history. The continued slowdown in China, along with a crazy week for China's stock markets, scared a lot of investors.

There's a lot to get here, Ron Gross. Well, let's start. Happy New Year, Chris. Happy, yeah. Happy New Year for all the investors. Let's start with a jobs report. Really strong, 290,000 jobs added and the previous two months revised up. Things looking pretty strong for the U.S. economy.

Yep, things look good. I like unemployment staying steady at 5%. I'm fine with that number. I think economists think of that pretty close to full employment. The fuller look at unemployment, the U6 measure, flat at 9.9%. I'd like to see that lower, but still pretty good historically. Again, this is a common theme. The only kind of dark side to the employment report was wages, which are growing at about

a 2.5 percent. You will clip right now, not so bad, but that was actually down just a bit. And we want to see that number going in the right direction. Jason, we saw in the employment report spread out over a bunch of industries. No one single industry sort of leading the way here, as we've seen in the past. This was increases in health care, in construction. A really pretty robust report. Yeah, I think you have to feel good about it.

We've come from a pretty dark place here with unemployment over the past few years. And so to see any improvement really there is obviously encouraging. We want to see wages, like Ron was saying, continue to sort of tick up there, because we're in a position now with energy prices so low, the cost of production so low, we're not seeing any real inflation concerns. In theory, this should lead to a more powerful consumer. But we've obviously seen a very tumultuous sort of beginning to the year here in the market. markets. And it seems like, you know, China is like this big headline that keeps on making

its way out. And I get that to a degree. It's obviously a more global economy now than ever than ever before. But, I mean, I think it also lends itself to this greater notion that as investors, you know, we have really control over one thing, and that's our emotions, right? I mean, we're the ones that can control whether we hold the stocks we have, sell them, or buy them. And so everything else out there, you've got to kind of let that play out. And I think that's really one of the biggest marks for investing foolishly is because we can look at it with that longer time horizon and be able to keep our emotions in check. But, Jeff, I mean, if it were just that China's economy were slowing, that would be

one thing. And that's not insignificant. But we also saw this crazy activity with the market in China where they basically halted trading after 20 minutes one day just because the market dropped 7%. I mean, it's... Hey, that's like a day off. You can go home. Hey, I'm done with my work. I don't think anybody really treated it that way. Go to the park, take a nice walk. Yeah, Chris, what gets lost in all this noise in a lot of cases is that the market in China did so well most of last year.

You know, it about doubled, and then it began to decline toward the second half of 2015. And that just accelerated again now. You see manufacturing in China dip a little bit, but it's been doing that several months in a row for a long time. If I have any concerns about China, it's sort of a contagion of fear concern, which is that China has pumped so much money into the economy. A lot of people say artificially, which is hard to argue with that, to build infrastructure that they may not need really for years and years. But that said, China itself accounts for less than 1% of U.S. gross domestic product.

It accounts for only about 7% of U.S. exports. And the American companies that we invest in, multinational companies here in America, they derive on average only about 2% of their net income from China. So even if the Chinese economy fell 10%, those companies would see their earnings fall 0.2%. So put it into perspective here in the States. I completely agree with Jeff. The main thing I focus on when I see China's economy, not at stock market, its economy having trouble is what that could do to commodity prices and how that reverberates around the globe and here domestically. So that's the one thing I focus on. And I think it's also important, as you kind of teed up, to separate the stock

market from the economy. Because while I'm no expert on the Chinese stock market, the mechanism itself, my understanding is it's relatively a mess. And that it's governed by retail investors versus the U.S., which is institutionally based. The retail investors appear to be panicking. They're not sophisticated. They're selling stocks willy-nilly. and it doesn't appear appropriate. And then the government, the central government, doesn't really know what to do. You mentioned the circuit breakers on, they're off, they're on, they're off. They're not great at what to do in terms of intervention from a central bank perspective.

They're trying to feel their way through this. And I think that's creating more havoc than perhaps is necessary. When we see big drops in the market, let's face it, the stock prices of good companies sometimes get dragged down. And so let's just go around the table, and Jason, I'll start with you. What's a company out there that's on your watch list that you think, hey, if nervous investors are going to sell this company off, another 10, 20 percent, I might be jumping in. Well, I'm glad you went to me first, Chris, because I have a feeling that Ron might agree with me here.

He may have this idea on this list as well. But it's actually Walt Disney. Disney's one we have on the watch list in MDP. It's when we continue to talk a lot about. We've done a lot of work valuation-wise looking at it to really get an idea of where we would feel like the no-brae or click the buy button prices. And it's coming, it's getting there. But I mean, it's a global powerhouse. They make their money so many different ways. When they have shortcomings in one segment, you know, other segments are able to pick up the slack. And this is a business that

it's going to remain relevant for just decades, decades to come, I feel. So this is one that I'm gladly pick up on the cheap. Jeff? I've been watching Under Armour ticker as UA, a popular full stock in many full services. Of course, the athletic and sports clothing and shoe retailer, fast grower. But the stock has really hit a speed bump. It's gone from 105 per share to a current 76 per share. So what?

That's 25-ish percent. It's lost. If it fell another 10, 20 percent, I might have to finally buy what has always looked like an expensive stock. Ron? There's nothing I like more than a blue chip or a real solid company that is selling on the cheap. And it's very hard to find that.

Every now and then you get a shock to the system. 2008, 2009 was a time where you could pick up amazing companies at prices that were rarely seen before. So if that were to happen again, Blue Chips is right where I would go. I might look at ones that really don't even have that much exposure to China. When I think of a perfectly run company, I think of like a Costco. A favorite around here would be a Markell. Stocks that are off 4 to 5 percent this year for no real reason. Let's move to the week in Automotive News. Detroit made it official. was in fact the best year ever with just under 17.5 million cars and trucks sold.

And great for Ford and GM and Fiat Chrysler, Jeff. But all those sales are not translating into stock performance for those three companies. Yeah. The stocks have really gone nowhere actually down in the past year, year and a half. And I think a lot of the problem is where do you go from here when sales are this strong? Right. If the stocks aren't doing anything when they're having their best year ever, why should I be jumping in now?

Because everything is in their favor, right? Employment is getting stronger. Income is ticking up. Those are two of the most important things when it comes to buying a car. That said, those trends are expected to continue, and most are predicting another record year in 2016 with even higher sales. So I think the carmakers, GM and Ford in particular, look inexpensive. Ford is at less than seven times forward earnings.

earnings estimates. It yields more than 3%. And is doing really well in China. It just announced today, or Friday, that China sales were up strongly. They sold more than 1.1 million vehicles recently as sales grew 3% year over year in China, which is a huge potential market for them, of course. Let's move on to retail. The container store reported a loss for the third quarter. Revenue came in lower than expected, and the stock got whacked down as much as a market. is 40 percent on Friday alone, Jason. Yeah, really, really tough day for these guys.

I mean, I was, I really, I didn't think it was getting this bad, honestly. It seemed like the aftermarket numbers, you know, were bad enough, but really the day into Friday was just brutal. I think this really all goes back to what we've questioned before with the container store. It's the market opportunity that actually exists. And to my mind, I think it's much smaller than maybe someone would have believed when the company went public.

And I'm not also necessarily convinced that they really went public. of their own accord. I mean, there were investors in there that I think sort of pushed them along there. But I think the big question the market has today, it's a very fair one. It's that while management has always been very consistent in saying that this is an investment year, the question is, is this investment actually going to pay off? I mean, the hope would be that this late in the fiscal year, you would see some signs of that. And unfortunately, what we're seeing is the opposite, with revenue being guided down again, and with earnings per share guidance being slashed from a range of 30 cents to 38 cents per share

to a range of 10 to 13 cents per share. So, significant downward guidance there. And I don't know that they have, I don't know that they can fix these problems here in the next couple of quarters. I think this is an underlying bigger question as to the market opportunity, really. And so it's not one that I would be looking to bounce back anytime. Well, and as you indicated, it wasn't just a bad quarter. They're lowering guidance because they're being transparent saying, hey, look, we're going to be spending more money. to try and boost sales. And it's a good business. They do well by their employees.

I mean, you have to acknowledge those types of things. But, I mean, from an investment perspective, you know, it can be a good company, but not the greatest investment. And I think that might be the case here. It offers such a good lesson to would-be IPO investors as well. Now, I love buying IPOs. Google MasterCard, come to mind, Facebook, as ones I've bought in the last 10 years in their very early beginnings. But Container Store came public in November 2013. It's a well-known retail brand in this country anyway. It had a pretty good story. It's down 88 percent

since then. So, and you could see by mid-2014 that it was declining sharply by then. So if you just waited six months to see a couple quarters and see how the business was doing, that might have saved you a giant loss. So, you know, be cautious as you move into IPOs. The third quarter was mixed for Bed Bath and Beyond. Profits were about what Wall Street was expecting, Ron, but same store sales fell and profit margins falling. Again, maybe not surprisingly, but all those holiday sales promotions.

Yeah, the company continues to struggle, as do many, in the wake of Amazon. It's really tough to compete. They're brick and mortar stores. Same store sales fell in the low single digits. Now, the online digital sales did grow 25%, which is exciting. but it's still a very small percent of sales, less than 10 percent of sales. And it's very expensive to ramp that up, especially when you offer things like free shipping, which by the way isn't free. Someone's got to pay.

And if it's not the consumer, it's the company. So that eats into margins. So we're seeing consistently lower margins as the company desperately tries to compete with Amazon. Company really is just not doing well. Stocks down 40 percent over the last year. Only nine times earnings right now. So that stock may look cheap to some, but I'm not.

I would be careful. I don't care if the company's paying for shipping. You say that like I should have a . If you own the stock, you are. If I'm not paying, guess what? It's free. Coming up, we've got video games and we've got alcohol. What more could you possibly need?

Stay right here. This is Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Jeff Fisher, and Ron Gross. Shares of American Express hitting their lowest point in nearly three years this week. After Fidelity announced it was dropping M&M. after a 12-year partnership. Jeff, last year it was Costco, this year Fidelity. Yeah, Costco, JetBlue, and now Fidelity.

Fidelity's portfolio of 24 million customers represents less than 1% of Amex's total billing. So it's tiny to the business, and yet the fear is legitimate, which is that Amex keeps losing partners. Now, what's happening? Customers don't care as much about premium offerings from credit cards, or MasterCard and Visa are matching those types of offers. at a lower cost. So, Amex is under a lot of competitive pressure and doesn't look like it'll get much prettier anytime soon. That said, I think the stock is quite inexpensive. They still generate a mountain of free cash flow and huge operating income, more than MasterCard or Visa. I own shares. I believe in it for the long term, even though it's going through

a really rough patch. I think the brand will ultimately come through and deliver some value again. Ken Chen Chenow is in his mid-60s. He's been the CEO for about 15 years. He's been at the company since 1981. I bet he wishes he left a year or two ago. As a shareholder, do you look at him and say, Ken, let's start talking about a succession plan? I hope they have been. I hope they are. They need to kind of revitalize their vision and just do better. Not every company having a bad week. Shares of Constellation brands hitting a new all-time high

after third quarter profits came in higher than expected. They also raised guidance for the full fiscal year. They're in the business of alcohol, Ron. And they're doing better. Business is booming. Business is booming. Beer and wine are strong. Beer, 8% increase in beer sales, 16% increase in beer shipments. That translated to a nice 20% increase in beer operating income on the strength of Corona and Modelo brands. You'll remember they completed the Ballast Point acquisition In 2015, lots of folks said they paid up for it, but it's really bringing in really strong numbers. Wine and spirits were up 3 percent, which led to a 12 percent increase in wine operating income. Good enough for a 22 percent increase in overall third quarter profit. They raised

guidance. They're going to invest $1.5 billion in a new second brewery in Mexico to support the Corona Brands. Company is firing on all cylinders. There we go. First one of the year. First one of 2016. It didn't take long. I don't know anything about the management of this company, but I have to believe they're doing a good job because when you just look at how many – I mean, we talk all the time about acquisitions are tough to pull off. Well, it's tough to integrate new businesses into, you know, under an umbrella.

They've got more than 50 different wine brands, as you were talking about the – I mean, they must be doing such a good job of executing. Their newest wine acquisition, I want to say, is Maomi, if I'm pronouncing that correct. which I think is a Pinot Noir, grape acquisition. And I think that is actually doing quite well also. So they're not afraid to pay for these acquisitions, but I think they do it well and they integrate them nicely. Activision Blizzard is best known for video games like Call of Duty, Guitar Hero, and Warcraft. Now Activision Blizzard is getting into electronic sports with the purchase of Major League

gaming for $46 million. Jason, this is a video streaming platform? Do I have that right? So I can watch people playing video games? Would we say this is a Pino noir of an acquisition? That makes sense right? Pino Gricho. Yeah. So, I mean, to your point there, this is a company that basically live streams people playing video games. I mean, I know it sounds maybe a bit odd. It does to me, too. It's a big market, though. As a matter of fact, and it's market value today at about seven $150 million. So it is very relevant. And if you just go a little bit back, I thought we were

going to be able to make it through this radio show without even having to say Amazon. But since Ron went ahead and nobody was a case, let's go ahead and jump in here. Amazon bought Twitch not too terribly long ago for about a billion dollars. And that is the same type of business that Activision Blizzard has just bought as well. Based on a tweet that I just saw from Maddie Argers singer who's at there at the CES show in Las Vegas this week, one in five, a Americans participated or watched e-sports last year. That's what this is. In China, it's more than 40 percent of their population total, which is more than our population total. So it is obviously a very significant market. I think Activision Blizzard was wise to dip

a toe in the water. We got about 40 seconds left. Favorite video game? You're on a desert island. You get one game, Ron Gross. What are you going with? Donkey Kong? That's fine. I'm not going to judge, Jason. I would give Donkey Kong a good runner up there. I think I'd probably go with Gallagher. We're so old. I was going to say old school.

It's time to shut this show down because I'm like, that of space invaders? Atari? Pong. Notice how there's no angry birds. You know what? I'm at least going to go with a tablet game. I'm going plants versus zombie. Oh, that's a cool game.

Yeah, good one. All right, guys, we'll see you later in the show. Up next, leadership expert, Bill George shares tips for investors and shares why he is such a big fan. such a big fan of Millennials. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. I'm Chris Hill. As investors, we want effective leaders running the businesses we invest in. But that's even more important these days when there's just a little bit more uncertainty in the stock market. Our guest this week knows a thing or two about effective leadership. Bill George was the CEO of Medtronic for over a decade, and then

moved on to teach management at Harvard Business School. He's authored four best-selling books. His latest is Discover Your True North, becoming an authentic leader. Mottie Fool host Mark Reith recently sat down with Bill George to talk about what traits investors should look for in his CEO, his own experiences running a global medical device company, and why he's so optimistic about what millennials will bring to the next generation of leaders. But Mark began the conversation by asking Bill George about his first days as the CEO of Medtronic. Well, the first thing I did is I didn't know anything about medicine. I went there.

I know a lot about high tech. I'd been in 25 years. So I went out and I saw a scound up and saw 700 procedures. So I actually put on the greens, went into a doctor's all over the world in Greece and Turkey and India and China and Alabama and, you know, wherever you're in the world. And so how they implanting, what's heart surgery look like? You know, how they're doing brain surgery, how they do spine surgery, a lot of other things. People die in the operating table. It's tough stuff.

But I learned how they thought, I learned the business of the eyes of the doctors. And I insisted all of our people, instead of looking inward, going to meetings, doing management 101, like they learned at some business school, get out there and talk to the customers. The great retailers walk two dozen stores a week like Brian Cornell at Target. They're out there all the time with their customers. But we want employees to be engaged. And we also brought patients into Medtronic to tell their story. And all the employees that gather around. I remember Warren Benis, who was my mentor.

mentor came in, he had a Medtrient Diffibrillator. He died about a year ago. He had a mid-triac defibrillator. And he sat there in front of these people, a lot of tears. He said, thank you. You save my life. Four times. I've had Sudden Gary Accruist. I would have been dead four times. And he went and visit the production line talk. That's very motivated to people. You see, I'm doing work, saving someone's life. I'm not just making buck for you, the CEO. That's what it all comes. All right. Well, getting back to those leaders that you interviewed, of all those almost 200 leaders that you've spoken to, who did you learn the most from? You just mentioned Warren Benis, your mentor. Was there anyone else that you interviewed that you really took a lot away from?

Paul Pullman, a Unilever, fantastic leader. You know why? Because he is trying to transform society. He's taken Unilever and made its True North, if he only calls it its True North, sustainability. And they've gone over the globe, and he's also transformed the company into a global company so that they give opportunities, good opportunity, somebody from Vietnam or Chile or Poland to get to the top of Unilever as the person from the headquarters in London. And he's transforming it to build it. He's going to have 70% of his sales come from emerging markets. There's no company that has that that does business in the Western world. But he's got this commitment to transform all their products. And he does it with all his suppliers. He's all of his customers. And people

really resonate. So he's way ahead of his time. He started about six, eight years ago. And And he's put some six, seven hundred people through a program of helping them become authentic leaders. So he's really committed to this, authentic global leaders. And I've had a chance to work with him a lot. Very admirable guy. And he also had the courage to go to the London stock market where stocks traded and say, you know, folks, just so you know, I'm not here to serve the shareholders. I'm here to serve customers and consumers. And that got a lot of people upset.

But you know what? He's done extremely well. If you check out, he's done, he's done very well. His shareholders because he's serving consumers, because he's inspiring his people. That's who you tried to do at Metronic, the exact same thing. Fair enough. Now, let's talk a bit about Warren Buffett, who is a leader very near and dear to the hearts of a lot of our subscribers, our members. You actually talk a bit about him in your book when you talk about the sweet spot.

First of all, what do you mean by Sweet Spot? And what is Warren Buffett's Sweet Spot? Your sweet spots when your motivations, mostly your entrenched, Motivation, not just money, fame, and power, but making a difference, what you love to do, what you're really good at, come together with what you're really good at. And you bring together your strengths and their intrinsic motivations. Like for me, it would be seeing people restored to full life and health. For Warren, it would be making money for people because he loves to do and he's good at it.

But, you know, he started out on the wrong track. He went to work for a brokerage firm. And he actually hated the brokerage business because he was under pressure every day as a 25-year-old to continue to churn his customers' accounts. Whether they made any money or not, Warren, you get the commissions. He said, that's not what I want to do. In fact, he says, you know, he went back and formed his own firm, took his own capital, went back to Omaha where he was from,

and using Ben Graham's ideas, formed this firm. But basically, he says the best holding period is forever. You know, he invested his own money and he invested your money, and he's built a great enterprise, but he's a very long-term investor. He's not these guys who are trying to make commissions off you. I often say to some of these people, Are you trying to make money for me or off me? And he was very clearly trying to build something with law.

And he gave his manager's freedom to operate. So he was really a very modern manager. You know, he's in his 80s now. I've had dinner with him. He's the most modest guy in the world just sitting and chatting with him. You know, he's very down to earth, very real, straightforward, very clear, you know? I have yet to have a dinner invite from Warren. I'll be waiting for that.

I wasn't alone. It was with five other people at the table. Sure, sure. But I'll take it. Just a casual dinner with Warren Buffett. But a lot of leadership books, including yours, talk about successful leaders. Not a lot of books talk about leaders who have failed. We always hear the story about the guy who falls and gets back up and has even more success than he originally had.

You talk about those, but you also talk about the folks who don't get up, who can't get up. Some of them just come to mind, Richard Grasso, Mike Baker in your book. You talked about them. What are some lessons some people can take away from the leaders who fail and just can't get it? back up. And I'm not going to write about leaders who fail to have it met, so I know these people, even including Lance Armstrong. I biked with him once. So you get a sense of who's the human being inside. I don't say these people are not evil people. They weren't born evil. They lost side of their true north. They got pulled off course. And it's sad when you see that happen. A guy like Rajat

Gupta, sadly, sat next to me in the Goldman Tax Board. Just a terrific leader, fantastic guy. But he got caught up with money, maybe going back to being impoverished as a youth, but he got caught up with, you know, he's worth $120 million, so he's not exactly poor. He's crossed over the line. Another one of the superstars who wanted to make CEO of Medtronic someday, now my successor, but maybe one time removed, guy named Mike Baker. Very sad case, and he got caught up with the fame of being successful. He got caught up with that, and when the numbers went away, he didn't acknowledge it,

and he was put in jail for fraud. Very sad. So you see that happen. And retrogasso, we lost a great guy. You know, he didn't even spend all the money he got. But, you know, we lost a great leader that happens. That's what makes me sad. So I'm talking about why do these are losing their way?

Why do they get off their way? And do they have a team of truth tellers to pull them back? Bill, you're losing it, man. You need to get back to your true north. Or get your moral compass work and don't get pulled off over here. Don't start chasing that title or that fame. Hmm. Now, obviously, our members focus.

on heavily, or excuse me, heavily focused on publicly traded companies. Right. When you're investing, one of the first things you look at is the leadership team. Who's in charge? I'm glad you do. Not everyone does. That's true and sad. But it is one of the things we like to talk about here at the Fool.

What's the track record for the leadership team? How long have they been around? What are their goals? But for the man on the street, for the average investor, it might be difficult for them to tell if a CEO of a publicly traded company is being their authentic self. what advice would you give to an average investor when he's looking at a publicly traded company? Well, he's looking at that CEO. What are some of the traits, some of the characteristics he should be looking for before he makes his investment?

Is he transparent? Or she? Do they tell the truth? They tell you the whole story? Do you feel like he can trust him? Look, if it doesn't resonate well, and believe this story you're getting, do you feel like this a huckster selling you a bill of goods? And if you think that, no matter how good the story is, be skeptical. Can a person just sit down and explain what they're trying to do in simple terms in about two minutes, three minutes?

If they can't do that, so-called elevator speech, if they can't do that, I wouldn't invest there. I would look for people that I think I could really trust and are good and go with them because they understand their business, they know what they're doing, and I think they're true to their work. Because I'm a long-term investor. If you're in short-term investor, I can play the game. it doesn't matter. He might as well invest in wheat or corn, you know, or currencies. But if you're a long-term investor, you need to have trust in the leadership. This person I'll put my money, because you're voting with your feet. I'm going to put my money behind this person. And by the way,

bad things happen sometimes to good companies. That happens to. You need to watch out for that. And they go through, all companies go through difficult periods. And so I just want to say that, that you'll see companies go through a bump. They'll come back. The good ones will. The bad ones will go away. And you just will find them going away like General Motors did. Now coming back under Mary Barra, but rough patch. Sure enough. You were the CEO of a publicly traded company. What was the best and worst part about being the CEO of a publicly traded company with all those eyes on you, shareholders, board members, everyone in management, the best and worst parts of that world? The best part for me, even today I've been out of their 12 years, is hearing

from patients whose lives are restored. We're hearing for family members. You gave my father another 10 years or my son is your diabetes, but it's transformed his life. That was the best for me. No doubt about it. And watching people come together in the company, all kinds of employees doing all kinds of jobs, even IT department finance, it didn't have to be people on the firing line.

Great. And that was the best part for me. I remember once, 48 quarters, we missed our numbers once. Wow. And, yeah, but I remember that, I missed it. It was I was out skiing in Colorado, and it was President's weekend. And I said, Bill, you've got to come back on a Monday.

That was President's Day. And you've got to explain to people. 375 people. Really angry, you missed our numbers by 2 cents. I think our earnings are up 12% instead of 14. And they were really angry. And they said, you lied to us. I said, whoa, wait a minute.

I'm not clairvoyant. We are just acquiring a company. What happened in between that and the time we closed? No. But, you know, I think you have to stay the course. That's part of it. I don't miss that. Wow.

That must have been fun for you. Well, but you got to stay the course. I said, look, okay, we missed the quarter. Back to you, we missed your expectations, not ours. These are your numbers. But we did. So guess what? It's a great company.

We'll come back. We have great strategies. We went out and acquired some companies and made some significant moves. Two years later, the stock had doubled. So, hey, EU last, last, last, past. Well said. Hang in there, man. All right, so we've got some great advice for leaders, some great advice for investors.

You're actually a professor at the Harvard Business School. Is that correct? Yes. What about the young folks, the people who are graduating, these next few years. Any advice for them as they head into the business world? As I told you earlier, this is a fantastic group of people coming up. And this is going to sound corny to you, particularly with a group of investors, follow your heart. Do what you're passionate about.

If you really care about the media, go into it. You don't have to go into working for a hedge fund or a private equity firm. If you love it, go do that. But follow your heart, do what you wanted. Remember I had one student, Seth Moulton, who's now the second youngest member of Congress. He was going to go to work for Goldman Sachs. I said, do you like finance? No, did you like environment last summer? No. I said, why are you going there? And he said, well, yeah, and he rethought it and came back and ran for Congress, and God bless him. He's going to help the veterans. He's a five-time Iraqi war, tours of duty in Iraq under General Petraeus, the last one. So, you know, people got to do what they want to do. You'll be best. That's that sweet spot.

You'll be best when you're doing what you really want to do. During Bill George's tenure as CEO, shares of Medtronic rose over 1,200 percent. His latest book is Discover Your True North, becoming an authentic leader. Coming up next, we will dip into the Fool mail bag, and we'll give you an inside look at the stocks on our radar. Stay right here. You're listening to Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and

the Motley Fool may have formal recommendations for or against. So don't buy yourself stocks based solely on what you hear. Welcome back to Motley Fool Money. I'm Chris Hill, and joining me in studio once again, Jason Moser, Jeff Fisher, and Ron Gross. It's a new year, guys. We have a brand new radio station to join the Fool Family of Affiliates, WB-B-A-E-A-M-1490 in Maine. We love lobsters. Just saying.

We accept tribute. Absolutely. And speaking of which, also brand new this year, a new podcast center on our Fool.com website, you can go to Fool.com slash podcast. Check out previous episodes of Motley Full Money, as well as all of our various podcasts here at the That's fool.com slash podcast. Radio at fool.com is our email address. Radio at fool.com. Question from Brian Harold in Denver's Massachusetts. I've been listening to your many Foolish podcast for about a year now, and I can't get enough. As I start to analyze stocks and

develop my own analysis model for companies, I've been looking for indicators that matter most to me, and I think that the price-to-earnings ratio will be one. I've noticed that the Boston Beer Company is now around $183 a share. share, but the PE is around 24, which seems low to me based on what I'm reading about PE ratios. I know you can't offer specific advice for listeners. However, how would you recommend I interpret a seemingly low PE ratio relative to the current stock price? Jason? That's a wonderful question. And as a Boston beer consumer and as a Boston beer shareholder, I'm happy to lob up an answer here. You know, PE ratios, I think, can be very helpful. And

it is very helpful to look at them as comparative sort of ratios. In other words, if you're going to look at a PE ratio of one beer company, maybe compare it to another beer company. You don't want to compare the PE ratio of a beer company with a bank, for example. So you want to keep it sort of apples to apples. And if you look at that, I think over time here, Boston beers multiple has certainly come down, and you're looking 24, 25, 26 times. If we look at something like Budweiser, Anheuser-Busch and Bev, interestingly enough, their P.E. A ratio stands at about 23 right now. Now, if you look at Kraft Rural Alliance, which is a bit more of these sort of Boston Beer style, smaller craft brew company. That's a multiple that's 80 and higher,

which indicates maybe that there are some expectations for some serious growth there. I think that the Boston Beer multiple has come down a little bit here because maybe there are some questions as they grow how quickly we can expect that growth to come in the near future. But typically as a company gets bigger, you'll see that multiple come down as the growth becomes a little bit slower. All right, let's get to one more from Christopher Johnson. Generally, I regard a company cutting the The dividend is a warning sign, possibly a candidate to sell. However, given the trouble in the energy sector, U.S. Silica recently cut its dividend in half.

Is U.S. Silica just one of those holding weight stocks? As the previous emailer mentioned, we can't give specific advice. But generally, Jeff Fisher, how do you feel about companies cutting their dividends? In this case, in half? Generally, especially when they're in a competitive industry where they don't have much pricing power or sustainable advantages that I know of, I would look at it as a good inflection point to possibly just sell it, to get out of it. And I don't know much about U.S. Silica.

Well, I won't say anything anyway. But energy and commodities are very, obviously very tough industry, tough business. If the dividends being cut, losses are expected at the company for the years going forward, you can do better. It might be a warning sign, but it also may be very prudent capital management by the company that has been made necessary by outside factors. All right, let's get to the stocks on our radar. Our man, Steve Roydo, is on assignment this week with our producer, Mac Greer at the Consumer

Electronic Show in Las Vegas. But fortunately, we've got Dan Boyd behind the glass. He'll hit you with a question. Ron Gross, what are you looking at this week? Back to my theme I mentioned earlier about buying blue chips on the cheap. I'm going with Apple, AAPL. Stock's down 7% this year, 20% over the last six months. Yes, there are some concerns about slowing growth.

At this price, the stock is very undervalued. It doesn't need to put up significant growth to be a big winner in the future. Dan Boyd, question about Apple? Does the next version of the Apple Watch need to be a hit, Ron? I don't think it's absolutely necessary for the future of this company or the future of the stock, but it would be nice. Jason Moser, what are you looking at? Yeah, the question gave me a good idea there. So I'm going with Boston Beer as my stock on my radar. The ticker is S-A-M, Sam. And I think we may be finally getting the pullback

that we've been waiting for. We've got it on the watch list in MDP, and we were really looking at under $200 is one where it really started peaking our interest. And it's down over 40% from its 52-week highs, and for good reason. They are witnessing competitive pressures in the craft business today, and that's not going to abate. Now, I think there is a solution for them. It's the Alchemy and Science subsidiary that they own, and that's where they bring more craft brewers on board with their model, and they help with the distribution and production. So it's a good situation there. I think that the Little Craft Burrs will find it a better choice than maybe joining up with something like an Anheuser-Busch and Bev down the line. So I think that,

you know, Founder Jim Cook has something special here. I believe he's going to lead this company to better days, and it's one I've got definitely on my radar. Dan? Does the way Founder Jim Cook spells his last name annoy you like it does me? No, it doesn't. Jeff Fisher, we got about a minute left. Another blue chip. This one more boring than Apple is Wells Fargo, WFC. The shares are down more than 12 percent recently, as financials have taken a hit across the board,

largely, I think, because there are now concerns that interest rates will not increase that quickly in the coming year or a couple of years, which would then, of course, lower their interest income. But Wells Fargo is the trillion-dollar giant in America, the mortgage leader, well-run business. If you want to be bored and own something for a long time and earn a good return, I think, 10% annualized, check it out. Dan, question about Wells Fargo? Yeah, whatever happened to the Wells Fargo wagon, Jeff? It's still out there, I think.

I think I saw a Christmas commercial with it. Really? Yeah, it was like the first time I'd ever seen it. It's an endearing icon. Three very different businesses, Dan. You got one you want to put on your watch list? Yeah, I think I'm going to go with Jeff and Wells Fargo this week. Thank you, Dan.

I'll buy you a coffee. I was going to buy you a beer, Dan, but forget it. All right, guys. Thanks for being here. Dan Boyd and Rick Engdahl teaming up to make sure this show. gets put together this week. I'm Chris Hill. Thanks everyone for listening, and we'll see you next week.