Motley Fool Money - SeaWorld's Sea Change

Episode Date: March 18, 2016

FedEx delivers. Oracle rides the cloud. Chipotle stumbles. And SeaWorld Entertainment makes a big, big decision. Our analysts discuss those stories and USA Today San Francisco bureau chief John Swartz talks South by Southwest. For a chance to win your own investing library, go to podcasts.fool.com.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Instagram teen accounts have automatic protections for what teens see and who can contact them, plus time management tools. And Instagram will continue adding built-in safety features to help create age-appropriate experiences. Learn more about teen accounts and Instagram's ongoing work to protect teens online at Instagram.com slash teen accounts. Everybody needs money. That's why they call it money. My best thing they'll From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio show.

I'm Chris Sillan, joining me in studio this week from a million-dollar portfolio, Jason Moser, and for a million-dollar portfolio and Supernova. Matt Argusinger and Simon Erickson. Good to see you, as always, gentlemen. Hey, hey, hey, hey, hey. We have got the latest headlines from Wall Street. We will head to Austin, Texas for a report from South by Southwest. And as always, we'll give you an inside look at the stocks on our radar.

But we begin this week in the healthcare industry. Shares of valiant pharmaceuticals down 60% after the company said it would miss a deadline to file its annual report. CEO Mike Pearson sent a memo to employees assuring them that the company was not on the verge of bankruptcy. I guess it just kind of looks that way, huh, man? Well, Chris, it was, gosh, three weeks ago, I think we were on the show, and we said, you know, where there's smoke, there's fire.

Well, it turns out there's actually napalm when it comes to the blind pharmaceutical, not to be dramatic, but this is a company with a lot of problems right now. So, delaying the 10K filing, companies do that a lot, but usually for the wrong reasons, it's usually there's an accounting irregularity, and it turns out they probably have several. And what that does, more worrisome is that that's going to trigger possibly from their bank lenders accelerated debt payments. Now, this is a company with $30 billion in debt. Three times the market cap right now, a shrunken market cap. And you have the CEO who's potentially least, and you have the CEO who's potentially leaving. You have a shifting back towards what they say is going to be organic growth versus

acquisitions, which is what they're known for. There's so many red flags, I don't even know where to start with this one. And if you're an investor who's looking at this company and thinking, hey, there's got, you know, Bill Ackman's buying this or he owns it and it's down 80% from its all-time high, it's got to be, well, be very, very aware. Sure. Yeah. I mean, I think that's something that we all, I think, have agreed on for a while here now, this is a business that is obviously in big time trouble. I find it interesting when you ask management, are you on the verge of bankruptcy? Well, we're not on the verge of bankruptcy, but we're kind of getting close to the verge. So we're going to try to back

away from the verge. I'm not saying these guys are on the verge of bankruptcy, but their strategy is going to have to make a massive shift here. Because when you have a business that grows via acquisition and typically issues equity to do so, and now that equity has has gotten hammered. No one wants those shares his currency, no one in the right mind. Again, Maddie said it, and I think we said it last week, there are more red flags than we can count here. There's no reason at all for a rational investor to jump in here unless you just really feel like flipping a coin or taking a bet. And to his point about Ackman, I'm not quite sure why he gets all that press. Maybe it's the hair or something, but he

He's got good hair. He has a number of poor investment decisions he's made, and it sounds like this is another one. We could, I mean, but that's a whole other topic we get into. We should get into at some point, because this Bill Hackman, just, his fund is down, not only just $3 billion roughly invalient, his fund has lost about 50% of its value since roughly mid-2014. And it's amazing to me the investors like Lemings who continue to flock to this guy in the

media or wherever else. We talk all the time about emotions for investors, and I at least understand the emotion. This is a stock that eight months ago was over $250 a share. Now it's in the high 20s. So from just the emotional standpoint, I can see that, well, gosh, it's not going to zero. It's got to bounce back up at least a little. Well, and I would say, I mean, I've had that question asked on Twitter a number of times of the past week.

That very well may happen, but before you make that leap, you better identify. identify that catalyst that's going to turn this around. Don't think it's just going to automatically turn around because it used to be there. I mean, there are good investors that really did a lot of work on this business over the past year. It felt like it was a good investment that have really gotten burned here. So there was something that was more or less under the radar there that they weren't able to find. So it's not to say that if you called Valiant as being a good investment and therefore it's not so you're a bad investor. That's not how that works. But you really do have to make sure that you understand it just doesn't automatically bounce back

because it was once there before. Yeah, and Jason, I think the thing that was under the radar that the rest of investors were missing was the underlying business itself. You know, the whole growth by acquisition, that's great. But we're in the era of personalized medicine, and there's a lot of other competitors out there developing core competencies that are actually investing very heavily on R&D. We haven't seen that from Valley, and I think they're behind the curve on this one. And let me just say, to be fair, we're not just picking on Bill Agman.

I think the bigger point here is to not look at any of these investors that get all of these headlines in the financial media and just make the assumption that, oh, that investor's doing it, therefore I should follow them their footsteps. Always make sure you do your own work and come to your own conclusions because nobody's batten 1,000 out there. Tiffany's fourth quarter profits were higher than expected, but their guidance for 2016 was a little grim, Jason. Well, sure, but I mean, there are a number of reasons for that. I think what differentiates Tiffany from other retail investments, and we've talked about this before, it's the power

the brand holds. I mean, if we look at their one greatest asset, it really is that brand. It's not affordable luxury, and I don't think they ever will be. If they do go that affordable luxury route, then I would be a bit concerned as an investor. But there are a number of factors that are working against Tiffany right now. The stronger dollar, not only hurting sales overseas, but it's also hurting the tourist sales within the United States. Typically, tourists will come into the United States, and Tiffany is one of those brands that they'll, they'll, they'll, they'll, flock to. We're not seeing that same kind of strength there. Also, another interesting note I read about here, the average Wall Street bonus fell 9% in 2015. And this is something that I think you

could also say would have an effect on a business like Tiffany because it is such a luxury brand. Again, though, I think this management team has done a very good job through the years of sticking to their guns, sticking to what they know. They're not going to be running these promotions to try to gin up sales. I mean, you've got to kind of take your lumps with this one. And anytime you see that stock in under 20 times earnings. I think you have to take a little bit of a closer look because it is a retail brand that has a bit more staying power than your typical sort of retail, fashion retail brands that we might find out there. FedEx on the rise after strong third quarter results. A bunch of divisions, I mean,

their ground division, really putting up some nice revenue growth. Well, Chris, it's important to see which of these divisions are really accelerating within FedEx. Well done. The one that really stuck out to me. It was actually the Express Division saw operating income up 51% in that group. Ground transport, meanwhile, was down 4%. So I think we're in a world now of two-day shipping. A lot of that's due to Amazon and the Amazon Prime subscriptions and stuff like that. And that's been really good for FedEx in the shorter term, and we've seen that in this quarterly report. But still for me, I'm a little bit hesitant on this because Amazon is also aggressively building out their own logistics infrastructure. We've

seen that with Prime now, which ships in some locations for $8 for one-hour delivery now. now, or free for two-hour. And it's going to be interesting to see, you know, how is that going to compare with something like FedEx, which is traditionally relied on ground shipping? Now they're getting more into express shipping, but are they going to be able to compete against a company like Amazon? If you thought Chipotle's monthly same-store sales report was going to be bad, you were right. February comp's down 26 percent, Maddie, and shares at Chipotle falling right along with them. Not 26 percent, only about 10 percent this week.

But, Chris, that was an improvement from the 36 percent lower. comps in January. No, it was a bad number. It missed expectations. You know, Chipoli's calling it an improvement, and the numbers got even better in March, but hey, we're still looking at, you know, bad year-over-year numbers. It's important to remember that the CDC just came out in February and said, kind of gave Chipotle and, you know, everyone the all clear about the E. coli scare. So we're still, it's going to take a while for Chipoli to work through that. They also hire James Mars than a food safety specialist. He's going to come in. and he's kind of an expert in E. coli of food pathogen elimination.

And the company is giving away a lot of those free burritos. I'm sure everyone at this table has gotten one of those in the mail, and I've gotten several. So they're going to try to build traffic back that way. It's going to be a tough climb, though, and the business is much more expensive. I think, us, a million-dollar portfolio, guys, we think Chipoli gets through this. We think by the second half of the year, and certainly in 2017, the numbers look a lot better. My longer-term worry, though, is that all the measures they take, food preparation, they're talking about, for example, cooking a lot of their beef now outside of the restaurants and

changing a lot of their fresh ingredients. Does that impact the brand? Does that impact the taste of the food? That could have longer-term implications for Chipotle. I don't think that's a major risk, but it's something I'm kind of thinking about when I'm looking at Chipole. You know, Chipotle's CFO just recently had an investor presentation that he said that he thought that up to 7 percent of his customers were not going to come back after this whole food scare. thing that they've been going through. And I think that's the bigger thing we're looking at. We know this is probably a short-term hook hookup. It's not going to be continual that you're having E. coli problems. But has the brand damage been done that consumer habits change permanently

from something like this? I think that's something we need to look at as investors. Do you think he was being conservative with the 7 percent? Do you think he was patting that? Or do you think he was being optimistic? Oh, I think it's conservative. I mean, seven percent, you know, and not coming back. We saw what was a 26 percent drop in the same store sales right now. Maybe that's, I still think It's conservative in the bigger picture. Am I the only one stuck on the fact that they brought in someone who is self-identified as an E- coli expert?

I mean, is this someone you want to hang out at a barbecue or something? Can you imagine introduce you? What do you do for a living? Well, let me tell you. You go to shake in every day. Maybe not. It sounds better, though, than the, I guess, in this past week with the NCAA tournament, there's the bracketologists.

There's actually people called Bracketologists who literally study the NCAA-term brackets for a living. I couldn't believe that. leave that. Everyone's got a profession these days. Coming up, your weekly reminder that apparel retail can be an ugly business. Stay right here. This is Motley Fool Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Full may have formal recommendations for or against so don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Full Money. I'm Chris Hill, joined in studio by Jason Moser, Matt Argusinger, and Simon Erickson. Shares of guests down 15% this week after week

fourth quarter results, but that pales in comparison to Aero Postal, which reported a loss for the 13th consecutive quarter, Jason. That and a ham sandwich will buy you, shares of Aero Pustle. I think I would rather just have a ham sandwich, actually, Chris. But I think with guests, the problem guests is facing is that basically the entire business is levered to that brand. And that brand just isn't resonating with consumers as it once did back in the early 90s or whatever guess was really bigger than it is now. I think the good news is that management has this plan to grow sales approximately $800 million over the coming three years. The bad news, I don't think it's going to happen. Again, I mean, we're looking at a business here. Margins are

getting killed. This has been a long slow decline. The writing has been on the wall for a very long time with this business, and I don't see anything just turning this ship around. Now, when we look at Aero Post-Dow, I think Aero Post-Dow is a great sort of indicator of where guests could be headed. In Aero Postal, I mean, what is there left to say? When a brand loses sway with its target market like it has, and it doesn't take the steps to try to get that target market back, I mean, that market just avoids it like the plague. I mean, you look at how outdated Aero Postal has become. I mean, you have expect to go in there and see them selling Microsoft Zunes. So I just don't know that you're

looking at any real sort of endgame here for Aero Postal. I'm not sure why those assets would be attractive for anyone. And if guests doesn't watch out, they could find themselves in the same position a few years from now. Oracle's third quarter profits came in slightly lower than a year ago, but revenue from the cloud business up pretty big, Simon. Yeah, and Chris, let's talk about Oracle and Salesforce being frenemies over the years. You know, Salesforce built their entire infrastructure on Oracle's database. But in exchange for that, Oracle learned a thing or two about them about CRM software and cloud-based stuff like this.

So, now Oracle is the one that's crushed, and they saw over 40% growth in their cloud-based revenue. Gross margins pop from 43% to 52% in one quarter, and now they've got a billion and a half dollars of recurring revenue from customers from the cloud. So I think that Oracle came out better from this and has learned a couple of things from Salesforce over the last 16, 17 years. Shares of SeaWorld Entertainment up 14% this week after the company announced it will phase out its ORCA breeding program. This seems like a very humane thing to do, but I don't know, guys, if SeaWorld does not have

the, for as long as I can remember, the whole brand identity of SeaWorld was the killer whale logo, the show, all that sort of thing. If they don't have that, what are they? Well, yeah, we talk before the show. Essentially, SeaWorld is now, it's an aquarium. It's an aquarium. And there's plenty of great aquariums on the East Coast or around the country to go to. Yeah, I agree. I mean, in a way, I think all of us kind of look at this and say, you know, this This is the right thing to do. This is a humane thing to do. But just putting on my cold-hearted business hat, this can't be good for SeaWorld long term. This was the major draw. And I don't

know what gets people back to the sea world. I think you just change it over. Now you have a clown fish and it's called Nemo World. I mean, that's a no-brainer. You probably bring in a whole new demographic while you're at it. I'm going with piranhas and deadly jellyfish. Wow. Preserving the fear that we had from the sharks. Mano War World.

Nice. Nice. You know, the first indication I had that Sea World. World was in trouble was from our man behind the glass, Steve Broido, who saw the documentary Black. It was called Blackfish. Wasn't it, Steve? It was. And not only did I see it, but I sent a very nasty letter to SeaWorld saying, I'm never going to Sea World. You guys are terrible, and this is a horrible, horrible business. Any advice for them on what they can do to rebrand? I think they can call it Coral World. Go for the color scheme. Go for the color scheme.

Nice. We recently discussed the food innovations that McDonald's is testing in Japan, and Now, Nestle is getting in on the act with new flavors of KitKat bars, including sake-flavored kitkats from Jay Melton, one of our listeners and Fool One members in Kumamoto, Japan, sent over a box with a note that said, I haven't tried them myself. I'll leave the taste testing to you and your team of experts. Let me know what you think. Maddie, you're munching in one. Munching away.

You know, I definitely get this sake. It's a nice. It tastes like, yeah, it's like half white chocolate. taste half sake. I'm liking it. I'm going by the look on Simon's face that he's taking the other side of this. I think you've got to be a sake fan. That's fantastic. I don't know that I even taste the sake. I feel like there's more just a white chocolate vibe and a little bit of banana. It is. I get to shocky. I get it. All right. Put down the wrappers. Let's get to the stocks on our radar. And our man,

Steve Brod, I'll hit you with a question. We just got three minutes left. Maddie, what are you looking at? I'm going back to Activision Blizzard. We just, Simon and I just got back from at Chris. as well, South by Southwest, and I'm convinced more than ever that e-sports is big, and it's going to get bigger. And you've got Activision who recently bought Major League Gaming. I happen to talk to one of the principals at ESL, which is the Electronic Sports League. I asked him about Activision's entrance into the market. He was visibly worried, because Activision, of course, has deep pockets. So, one of those really exciting options for the business.

And the ticker symbol? Oh, sorry, ATVI. Steve, question about Activision Blizzard? It seems like on multiple occasions they will release a product. and the stock will go straight down. I mean, and it's like hundreds of millions of dollars are sold in a single day, and the market is always disappointed in this company. Why is that?

Yeah, it's buy the room or sell the news a lot of times with these big releases that Activision has. A lot of people just don't think some of them are going to live up to the hype. Usually with Activision, they do. Jason Moser, what are you looking at? Sure. I had lunch with a friend this week. We were talking about a lot of ideas. One of them was Grubhub, ticker GRUB. And I think Grubhub is an interesting look here at sort of

a new aspect to the dining industry, really. So Grubhubhub owns Grubhub and the seamless sites. I think it's a great solution for restaurants to be able to leverage the fixed costs involved with keeping their operations open. Outstanding solution for consumers, as it gives us more choice. It's fully mobile. And hey, how can you not like a company that has a metric called Daily Average Grubbs? I mean, that right there alone has peaked my interest. The DAG. Steve, question about Grubhub. When does the name become a liability? That's just grub and hub. Either of those sound very appealing to me. Yeah, I have a feeling when the first grub siting comes from an actual delivery, we've got a problem.

Simon Erickson, what are you looking at? Chris, I'm going with NVIDIA. Ticker is NVDA. Matt and I both took a closer look at this in Supernova's Explorer mission this last month. We were looking a little bit deeper into virtual reality. And, Nvidia has got 80% market share in graphic processing units. There's a lot more improvements I think are needed in virtual reality. I came away from the headsets feeling a little sea-sick and motion-sick. And I think that's actually good for NVIDIA, who's going to make this a lot better.

Steve, question about NVIDIA? Does AMD have any shot? It seems like they've been fighting that war for so long, and NVIDIA seems to be winning all the time. They do have a shot. They're about 18 percent market share compared to maybe about 80 percent for NVIDIA. They're the distant number two, Steve. This is going to be a tide that rises all boats, though, and I think that will do all right, too.

I'm sorry. Invidia has 80 percent. 80 percent, 80 percent, 80. Dominance. Like the Alibaba. Steve Grubhub, Invidia, Activision, Blizzard, three interesting stocks. Any of those do you feel like adding to your watch list? Invidia, all the way. 80%. That's a good number. Right. Shares a SeaWorld up, and maybe if they take your coral world into effect, maybe you add SeaWorld as well?

Definitely not. All right, guys, thanks for being here. Up next, we are heading to Austin, Texas to check out the scene at this year's South by Southwest. Stay right here. You're listening to Motley Fool Money, Money. Money, Money. Cars at night are big and bright, deep in the heart of Texas. Welcome back to Motley Fool Money. I'm Chris Hill.

30 years ago, South by Southwest started as a small music festival in Austin, Texas. Over the years, it's added film and interactive components, and has grown to the point that hundreds of thousands of people now head to the lone star state to experience some part of South by Southwest. This year, I was one of those people. earlier in the week, I was joined on stage at the Austin Convention Center by John Swartz. John is the San Francisco Bureau Chief for USA Today. He's been covering Silicon Valley for the past 15 years.

And since this was my first time at South by Southwest, and he's a veteran, I had a lot of questions about the tech scene and the festival itself. You've been coming to South by Southwest for the past... Seven years. The better part of a decade. Yeah. How has it changed over the years? Well, you know, it's gotten bigger.

It's reached a point where I think this year, a quarter of a million people are going to be visiting during the stretch of the festival. Either they're traveling here or they're just coming into town to be part of the events in some capacity. So it's gotten larger. But the one thing I want to say is it's actually gotten more relevance. And we had been talking earlier about the, I guess, an excess of trade shows, especially tech shows and how much bigger they've become. I think this one in relation to a CES is much more manageable, and in terms of the topics and the products that are here, they see more relevance.

They're not, I mean, CES, they talk about the future. Here's something you're going to see in three years. Three years later, you come back. Here's something new you're going to see in three years, and you never seem to see the thing you want to see. Here, actually, with robotics and voice activation, those two areas especially, they are here and you actually see them in an intangible form.

You had written something earlier this week about, you know, forget robots, the Geminoids are here. What in God's name is in Gemini? Well, a colleague in mine, Rick Jervis wrote that story. So basically, I mean, what he's trying to say is we have forms of robots, like there's one, a couple of aisles away from here called Innovates. They basically can have a conversation with you. Now, I was a little bit skeptical when I first,

one over there, and I read my colleague's story about another robot that he had seen, and he was right. In the case, the robot was having a conversation with people about where they were from, and it was a deeper conversation than you could have ever imagined, which is a little spooky, but it also showed you, and it shows me, the progress that's being made in terms of robotics and in terms of the intelligence of those devices. It's funny, last year there was a bit of somewhat farcical but somewhat serious protest against robots in this whole man versus machine theme. And I think there's a little bit of traction to that argument because now you're seeing that the advances that are being made.

You see, I think there was an instance of a robotics, a game, a very incredibly complex game called Go, in which robotics and humans are participating with one another, against one another. And it's happening in leaps and bounds. I mean, it's real and it is here. There are so many keynote speakers. There are so many breakout sessions, so many topics being covered at South by Southwest Interactive. Is there a dominant theme to this year's festival? Certainly the Apple versus FBI story.

That's an undercurrent almost everywhere you go. It's almost like it looms over everything. And so even Obama, when he makes his keynote speech during the Q&A session, And someone asked him about that case. He says he can't specifically comment on it. Then he spends 10 minutes with a nuanced answer, in which he, in a sense, sides with the FBI, which creates a little bit of a blowback

or some anxiety among the people here. So he does it. Several Congress people are here and they are talking about it. I went to an online harassment summit on Saturday. And during the cyber bullying panel early in the morning, one of the speakers started talking about Apple FBI. Actually, one of the themes that I, so that that looms over everything. One of the themes that keeps cropping up is the whole idea, relevance of women in technology.

So Saturday was a day-long event, which is kind of a reaction, whole controversy about Gamergate the last couple of years. There were a series, it was a great, it was a great series of panels, Google, Facebook, ACLU, Anti-Defamation League, members of Congress. privacy experts were all at this event. My only quam or quibble was that it was off-site and it was almost kind of hidden. I think that's an incredibly important topic to discuss. It was discussed well, but it was off the beaten track, didn't get a lot of publicity. It wasn't very well attended.

And I think that's a bit of a shame because I think women in tech is like one of those diversity and gender topics. It's resonating. and that's not going to go away. It has been around for years and now it's finally being addressed. I think we need to do more coverage of that. And our paper has done quite a bit of that. And I think this shows, and I give the show credit for tackling it

or at least confronting it. Most trade shows ignore it altogether. We've seen over the years individual companies and or products get a lot of buzz coming out of South by Southwest. You go back to 2007 and it was Twitter. Right. Last year it was Mirkat, video streaming. Yeah.

And here we are a year later. Where is it? Yeah. And Mirkata has done out of that business. So our columnist Ed Begg did a story on that. It's funny. Last year I remember when that happened. I remember arriving here and people were filming one another.

And they said they were mirror catting. And I had no idea what they're talking about. It was a rage. So what, as someone who has worked in the Lodagh Valley and seen? Yeah. that whole scene developed over the last 15 years, what is it that makes the difference that enables an idea that catches on, in the case of Twitter,

that becomes a relevant, viable business versus a mere cat, which is an interesting idea that gets co-opted. Well, you know, it got co-opted by Twitter, right, with Periscope. There's so many factors. If I knew what was the formula or the secret sauce, I wouldn't be a reporter.

I would go into, I would go to a startup, or I'd be a VC. But it's funny, you're right. I mean, something will surface and it will resonate. Foursquare actually appeared here, and it actually had legs for a few years. Now it seems to be kind of in a sense of de-escalating. I mean, it's had some changes in management.

Its market valuation or value has dropped, according to investors. Mirkow was interesting because that had so much potential, and yet, you know, there was a time, and I can say it now, I guess, Mirkat was going to do a deal. deal with you two, the bands. And they were going to, from every conference, beam one song a night live over Mirkat. And I went to one of the first shows where they were experimenting with this, and it didn't work. It was too hard. The Wi-Fi and the number of people streaming there made it really extremely difficult. They tried a couple more times, and that deal kind of fizzled. And I think if that had happens, and if Mirkat through that deal, been able to do other similar deals, it didn't happen.

So it's always about serendipity. It's about luck. It's about things working just the right time and place. Even Periscope. I mean, I go to concerts and I try to Periscope bands, and through their security, we're told to not do that. And every time that happens, and I tweet about it, somebody from Twitter or affiliated with it will retweet it kind of as a push as a pushback.

So even there, in that case, I mean, sometimes there are forces beyond your control. I mean, the rights of the musicians and their management, so. We've seen in the stock market, so far in 2016, far fewer companies going public to this point in the year than we did a year ago. As someone who covers Silicon Valley up close, what's going on? Is that VC's getting a little more careful or is that private company saying,

you know what? It's a big ocean out there and we want to get our ship a little bit more tested and ready. Exactly. Everything you said is exactly true. And you're seeing it with fewer tech IPOs. You're seeing fidelity lowering its valuation on some of these companies. It happened with just happened with Dropbox. Dropbox is maybe one of the classic example. of a company that everyone expected to go public and it hasn't yet. And I'm wondering if the performance of Box, its rival, had a lot to do with the cooling of that. Zinga, it basically put its headquarters up for sale,

and its CEO moved out again for the second time, as Mark Pinkis. All these anecdotal examples of this happening of people scaling back. One thing I think it was Airbnb, had a huge number of people being hired last year. Well, they just, in a sense, reduce the number of recruiters they have and plan not to hire as many people this year. I think it's just a case of kind of scaling back.

One difference between this correctional phase, I'm not going to call it a bubble. One difference from this in the bubble is that a lot of these companies are making money. And they do have services that are being, used by millions of people that are real business models. I think what they want to do is they want to avoid the kind of catastrophic cutbacks and I don't know fall out with their investors that's happened before. They're looking around and they're seeing, you know, you're also, here's another thing. You see all these delivery food delivery services.

There must be 20 or 25 of them that I know of in the Bay Area. Only a few of those are going to surface, they're going to survive. They're going to burn through their cash eventually. I think there's an expanded burden rate. I think there's just people are overly cautious. They're also afraid about what's going up to stock markets. The stock market had that incredibly deep plunge the first few weeks of the year. I think that scared people. So it's kind of an overreaction, perhaps. But I really, one company I really want to keep watching and see what happens to is Dropbox and what they eventually do, because they're kind of in a purgatory. I mean, they can't go public, and yet they're still hiring, and it's something's

got to give in that situation. Let's go back to Apple for a second because certainly Alphabet and Facebook and others of that size have deep pockets. But number one on the list of companies with a lot of cash that could at any moment enter it's Apple. Any market they want to. They get more than $200 million or $200 billion, but the B in cash. I mean, they're sitting on a mountain of cash.

The funny thing is that Apple actually has acquired probably a couple dozen companies quietly over the last couple years. And these are companies that are usually smaller that they integrate within the company, within Apple. They don't announce the deals. They eventually get up, but they're things like artificial intelligence, voice. They're moving into areas that Google is well established in Internet of Things type of areas. So Apple does have a ton of cash, and I think they really need, I mean, having covered them for probably, too long. One of the things they need to do is they need to diversify beyond that cash cow. And I'm talking about the iPhone. That's 66% of their revenue. And eventually,

that can't continue at its pace. I mean, and what I'm saying is the growth of that product year over year has slowed to the point now where it's causing concern. I mean, they're going to come out with a new iPhone next week. That's the SE, which is like a four inch screen basically replaces the five. And from what I can gather, it's just a kind of incremental update. It's nothing that's going to blow your socks off. It's not like when the six came out,

or maybe when the seven comes out. So that one cash cow is kind of propping up the company. It's propping them up well. But you have to start looking at long-term how long that's going to continue. Plus you have the iPad sales and free fall. The Mac sales are doing okay, but they can't compensate for the other areas. And there's the impatience about what they're going to do with a car or the auto technology.

There's a little bit, there's more mounting pressure for them to come up with something. The watch hasn't exactly knocked anybody's socks, blown anybody away. Yeah, it seems odd to say. They're like almost in cruise control, even though they're doing extremely well, but how long can you cruise at that speed? Eventually, when you're in cruise control, you start slowing down eventually. It seems odd to say about the biggest public company in the world, but it sounds like what you're saying is, gosh, they really need a different hit.

They need another hit. They haven't had one in a few years. It's been, I think 2007 was iPhone, 2010 was iPad, which was, you know, was a hit for about a year or two or three. Watch, they thought that would be it. It wasn't. It doesn't have that app that people really, it doesn't have the killer apps. It doesn't do anything beyond what your phone does. Yeah, there's got to be something else.

And that is unfair to them because as successful as that company is doing. It's happened to them before, though. I mean, I remember recovering them in the mid-90s when they had a glut of a product line and they had 80 different variations of the Macintosh. And eventually they had to bring jobs. They had to buy next and bring him back basically to reinvent the company. next, John Swartz talks about a story that's not getting as much attention as it should. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. I'm Chris Hill. Let's head

back to Austin, Texas now for more of my conversation with John Swartz from USA Today. Apple, Alphabet, Facebook, Microsoft, these are huge companies that dominate, and I would argue rightly so, the tech media coverage. But as someone who works in. They do. They do. What's a story that you and your team at USA today are watching that you think, boy, this isn't getting a lot of coverage right now, but this might have legs. Well, one company I also would add to that mix is Amazon, which I think is the one company competes with everybody and everyone's wary of them. I also think they have the smartest CEO of any tech company now. But the thing we were looking at had been reporting on for a couple of years,

and we're going to continue, even though the tech industry doesn't want us to, is diversity and the lack of it in the valley. And the idea that these companies that want to expand overseas and want to reflect their customer base are not hiring people that mirror that. I think it's a big deal. I think it's not just in tech, it's in multiple industries. I think it's gotten a lot of traction. That's something.

I also want to look at the income disparity. So, for instance, Bernie Sanders and Donald Trump, run on this kind of anger, anger platforms about income disparity between the haves and the have-nots and various ways, different approaches. But in Silicon Valley is the same thing. You have a very, very small group of people making an inordinate amount of money while a vast majority of people in that area are being priced out of the, priced out of the area. I mean, the house costs are astronomical. It's more and more expensive. There are actually reports now surfacing that people are leaving Silicon Valley because it's too expensive, it's too crowded. I mean, I think in a sense

they're driving them away. There's almost like a dwindling middle class in that area. You see it there's a lot of, the homeless problem is a huge problem in San Francisco. It was 10 years ago, and it's improved slightly, but you see all this construction surrounding you in the city. You see multi, billionaires. I mean, you see Jack Dorsey, you see people who are billionaires walking down the street to work. And yet, you look across the street. And you, it's, you look across the And you see more homeless people than before. And homeless encampments that are being displaced by construction sites.

That's an important story that tech has an impact on. And actually, one of the things that I was here about is this idea that tech can solve a lot of problems. So why can't it solve problems like that or address problems like that? Wouldn't it be interesting for tech to take on a really big idea, like something in education or involving the home

or involving diversity and attack it. Last question, then I'll let you go. 2016 is obviously an even-numbered year. The last three even-numbered years, your San Francisco Giants and won the World Series. How are you feeling about the team this year? I went to spring training last couple days ago. How's the team looking?

Well, they have a lot of minor nagging injuries, so they were not, they were being slowly played, they're being slowly played into the line-up. They called slow play. That's a Giants phrase they're using now. So I actually feel good. Their pitching staff is as good as it's been in several years. Gee, you think for the money they're being paid, they could play at regular speed?

No, they're older, too. They're 30. They're so old. All right, John Swartz from USA Today. Thanks for being here. Thank you for having me. Before we wrap up this week's show, I want to tell you about something we just shared on our daily podcast, Market Foolery. Our mission here at the Motley Fool is to help the world invest better.

April is financial literacy month, and once in a while we've recommended books to our listeners, but now for the first time we're giving away an investing library to 10 of our listeners. We taped a special episode of Market Foolery with Motley Fool co-founder David Gardner, columnist Morgan Housel, and a few other folks, in which each one of us shared our favorite book about business and investing and the lessons that we learned. You can listen to that episode by going to podcasts, fool.com. And you can enter your email address to win your own investing library. We're picking

10 winners, and by the way, that's all we're going to use your email address for. We're not going to spam you. We just want to help you invest better, and we know from personal experience that these books will help. So go to podcast.com to see the full lists of books that we are giving away and enter your email address to win your own investing library. That's podcast.fool.com. That's going to do it for this week's edition of Motley Full Money. Our engineer is Steve Broido. Our producer is Mac Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.