Motley Fool Money - Time to Break Up GE?

Episode Date: October 20, 2017

Shares of General Electric lose power. Netflix delivers strong international growth. PayPal surges. Skechers soars higher. And Ruby Tuesday goes private. Plus, Pulitzer-prize winning columnist Steven Pearlstein talks about the next big financial bubble. Thanks to Harry’s for supporting The Motley Fool. Get your Free Trial Set – go to Harrys.com/Fool. Learn more about your ad choices. Visit megaphone.fm/adchoices

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five-blade cartridge and shave gel, go to harries.com slash fool. Everybody needs money. That's why they call it money. The best thing in life are free, but you can get them to the price. From Fool Global Headquarters, this is Motley Fool Money. It's the Monty Full Money Radio show. I'm Chris Hill, and joining me in studio this week from Million Dollar Portfolio, Jason Moser, and Matt Argusinger, and from Total Income, Ron Gross. Good to see you, as always, gentlemen.

Hey, hey, you do. We've got the latest headlines from Wall Street. Chilitzer Prize winner, Stephen Pearlstein is our guest. And as always, we'll give an inside look at the stocks on our radar. But we begin this week with General Electric. GE's third quarter profits came in 40% lower than Wall Street was expecting. New CEO, John Flannery, submitted his entry for understatement of the year when he called it, quote, a very challenging quarter. And, Ron, interesting to see the stock, because this is a stock that typically does not move all that much. And right at the open, it was down 8%, but it did recover. Friday morning. Because I think it's a bet on the future because the past is over. And Flannery's in there and he's being pretty serious about this. Everything is up for review. Everything is up for examination.

Every stone turned, he says, no sacred cows. I think that's important because it's been mismanaged for years. I think what you're going to see probably is to look to see what doesn't fit. And then you'll start to see some dispositions, some selling of things. And what's important to keep an on is the dividend. Is that in danger? Because if it is, and it probably is, a lot of people will be very upset. Wait a second. Before I go to Jason, how much danger is it in? Because for whatever GE stock has done over the past decade or two, the dividend was something that you could always count on.

You're seeing little kind of changes in attitude saying, you know, the dividend is sacred. And well, then maybe we should take a look. And then we're going to do what's going to do what's appropriate. And now, you know, it's on the table and it's under review. So I think slowly, slowly, slowly, they're leaning towards having to make a change because there's a lot of liabilities to this business. The pension liability, a lot of people don't think about, is humongous here. So to fund the pensions, the CAPEX, capital expenditures, and the dividend, based on current cash flow, you can't do that. The payout ratio does not support that dividend.

He's walking around with this sort of mantra that doesn't fit, like Ron said, get rid of it. I like that, though. I mean, I think that Flannery is GE's Alamalai. And I think that in the near term, it's easy to be critical, concerned, perhaps. But I think longer term, when you look at this company five, ten years down the road, he's shoring this company up. And I mean, it's not like they're going to cut the dividend completely, I don't think. I mean, if they have to cut the dividends somewhat, I think at least it's something you have to consider. Because we've seen companies before in times of trouble, they'll pull back on that dividend to make sure that they have the business, the balance sheet short up. And like Ron mentioned,

there, those pension liabilities, that is a real challenge that they will have to address. Not 10 years from now, they have to address that right now. But I really do feel like patient shareholders right now with GE will be rewarded if they can sort of see through this trying time. Because I think Flannery's intentions are good, and he seems to have a good plan. I think cut the dividend to zero. I mean, I think this is the moment. Whoa, zero? Wow. You throw in the kitchen sink. Send your email too. If you're the A new CEO, you're trying to dramatically change the culture, change the capital allocation strategy, change the future for GE, which has been kind of on a wrong track for nearly two decades now.

Isn't this the time to just throw it all out the window? We make a lot of enemies doing that. Probably will, but you know what? The stock price will go down for sure. But this sets the stage, I think, for a new GE, one that's cleaner that can invest in the right places, doesn't have these legacy costs or legacy obligations on their balance sheet. I think it's the right way to go. going to be able to cut billions of expenses, and they are going to shed 20 billion or so,

they say, of struggling businesses. So now we turn to, it's really been a capital allocation problem, really. It did a terrible job of buying businesses and selling businesses at the wrong time. As we said, the liabilities are too high. The dividend is too high. And if Flannery can bring capital allocation discipline to this company, you might have a good investment. Shares of Netflix down slightly this week after a third quarter report, Maddie, that is strong by any objective measure. They brought in 5.3 million new subscribers. Once again, that was higher than expected. Is it just because the stock is so insanely high right now? Well, it's had such a tremendous run this year. So the fact that it's given up a few

percentage points after what otherwise were great earnings, I'm not surprised. But you said it, the subscriber numbers are really this story. The international number, subscriber numbers, of 44% year over year, I mean, that just blows away anything investors, including me, were thinking they could do this year. And that's been really the story. I thought there was an interesting quote by CEO Reid Hastings on the conference call. We've talked about Netflix's market opportunity as well, how many broadband users are there in the world, how's that growing, and what kind of share of that can Netflix get. He on the conference school said, well, you know, I tend to think of it as people, all the people on the planet will get the benefit of the internet

over the next 20 years, and we hope that all of them will get to enjoy Netflix also. Is it addressable market as the entire planet? It might be the entire population of the business plan. It is. There you go. So, you know, maybe a new benchmark there for market opportunity. But I think that's important for a number of reasons, because I think if you buy Netflix right now at today's price, at an $85 billion market cap, at a valuation that a lot of investors would call insane, I think you have to believe that this is a company that can achieve within a reasonable amount

of time, something like on the order of 500 million subscribers. Because the content costs for this business are going the wrong way. They're going to spend between $7 and $8 billion on content next year, something $17 billion over the next few years. I think that number gets revised up. The content costs per subscriber is growing faster than the revenue per subscriber. That's unsustainable. So can they get to a point where that number plateaus, the subscriber number continues to grow?

That's where they need to get. Yeah, Jason, when you think about how Netflix recently announced that they were raising prices to a person, we all agreed, well, of course, they have that pricing power. But as Maddie indicated, if the costs are going up higher than their ability to raise prices, then maybe not in the next year or two, but starting in 2020 and beyond, this becomes a serious problem. Yeah, and I'm glad you brought that up because it's sort of what sticks on my mind in regard to Netflix, because what we track quarter in quarter out is the growth in that, I'm

that obligation, that content obligation, versus the growth in revenue. And revenue at some point or another, they're going to have sort of a saturated user base. And so the growth in revenue is going to have to come from price increases to some extent. And I just wonder how far they can go with that. I mean, I think it's fair to expect that they will raise prices every year to two years. Now, as long as they can keep, I think, a core, simple, low-cost option for all viewers out there, that'll probably behoove them, and then offer sorts of step plans from there for different sorts of definition or how many viewers or what have you. But yeah, it's the question that I keep on coming back to is, how far can they really take

that pricing? I think in the near term, it's a pretty easy, no-brainer that they can keep on escalating prices. But 10 years down the road, I'm not sure they're going to be beholden to those content costs, I think, in perpetuity, really. So call me a dumb value investor. But all those great things that we said could happen, content clubs, and you know, mitigating and growth going up and prices rising, that's got to be baked into the current stock price to support this kind of a market cap. So they would have to exceed all those

amazing things we just said for the stock to continue to be a good investment. Why would I put my money into a bet like that? Well, I think what's probably not priced in is that Netflix in 10 years is the dominant internet TV platform. In other words, it kind of reaches what Reed Hastings says, which is, Yeah, most people, most people in the world have a Netflix account. I think that's going to be hard to achieve. When Amazon's spending billions, Apple says they're going to spend over a billion this year. I think YouTube is ramping up their spending on content. I mean, Hulu, the list goes on. Can they maintain a brand that people recognize that people

want to subscribe to? That's a familiar app for most people in the world. That is a heck of a goal to shoot for. Shares of PayPal hitting a new all-time high on Friday after third quarter profit and revenue came in higher than expected. PayPal has a few payment methods in its portfolio, Jason, and Venmo really getting it done this last quarter. And the war on cash continues. Feeling really good about this. Listen, I'll go as far to say that I think that PayPal is a stock that virtually every investor

should have in their portfolio. I mean, it plays into what I think is, in my book, the most attractive long-term trend out there in the move towards electronic payments. And I think PayPal is a company that is really helping to guide you. the way. Clearly, a company that's winning in the space, and I think when you get to the size of their network and the dollars that are flowing through their model, it's a network that's going to keep on getting stronger, and I think it's going to continue to keep on winning. And when you look at some of these numbers, it's just amazing to think about. Topline was up

22%. Earnings per share up 31%. They have 218 million active customers now and had $114 billion in payment volume that flowed through over the past quarter. That was versus $87 billion a year ago. So, 35% of that's now coming from mobile devices. So remember, we talked about Facebook. When they first went in public, would they be able to make that shift to mobile? That was a question, I think, with PayPal, a very fair one, but clearly they're doing the right things there. It's not even that expensive of a stock when you look at it.

I mean, the trailing 12 months, $3 billion in free cash flow puts it around 26 times today. I think it's a high-quality business in a very attractive space there for the coming decade and beyond. So I own shares. We own shares a million-dollar portfolio. call it out as a best buy now. I think it's going to be a great holding here for years to come. And Ron, I don't know about your kid in college, but my kid in college, back when we

were in college and we needed money, we'd be like, hey, Mom-Dek, could you send a check? And my kid is like, can you just Venmo me some money? Venmo is a big thing. My only problem with Venmo is that two people can have a Venmo account that connects to the same bank account. So my wife and I have one bank account. We can't each have a Venmo. That's kind of annoying. I imagine they will remedy that in the future. It was two years ago that PayPal was spun out from eBay. eBay also reporting earnings this week. Third quarter results, not great, Maddie, and the guidance for Q4 wasn't particularly great either. Yeah, the ugly sister of that breakup.

Yes, I mean, with eBay, they actually had a somewhat decent quarter relative to the earlier expectations. But revenue, gross merchandise volume, only up around 9%, which is, they call that a good quarter. But if you think about it, the overall e-commerce market in the U.S. is growing 14 to 15% this year. So take that in context. It seems like eBay is probably losing share in e-commerce. I thought the stub hub revenue number of 5% was a little disappointing. When I think about eBay, I think of a very profitable, strong e-commerce business. A company that probably will grow in the single digits generates a free cash will yield of 30%. That's something Amazon could only dream of. But it's just not going to grow. I think Amazon's vertically

integrated approach to e-commerce with fulfillment, shipping, payments, all those things that combined really gave them the edge for the third-party sellers, which were vital to eBay. And it's reflected in the stock. If you look at eBay, even if you adjust for PayPal, eBay stock is up 75 percent over the last five years. Amazon is up over 300 percent. That's a pretty big disparity. If they could go back in time a couple of years, would they have been better off keeping PayPal in-house? No, I think the spin-off was ultimately good for both businesses. I think there was more

value created that way. I just think if they go back in time, eBay is going to make some bigger steps to follow more of the Amazon model than what they chose to do. Coming up, more earnings headlines and surprising news out of the restaurant industry. Stay right here. You're listening to Motley Full Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. On Friday, the biggest winner on the New York Stock Exchange was Skechers USA. Blowout profits in the third quarter sent shares of the footwear retailer up more than 35%. A lot of good stuff in the Skechers report, Ron. What was your headline?

Didn't see that coming. Yeah. Is that a good one? I guess maybe international wholesale business up 26%. Same store sales up 4.4%. Domestic wholesale operations turned positive for the first time earlier this year. Has it been positive in a while? So perhaps they're firing on all cylinders-ish. Expectations were pretty darn low. Stock wasn't even up before this week. So this represents the complete appreciation for the entire year. So low expectations, numbers came in good,

and you saw the stock soar. Well, and since you referred to yourself in the previous segment as a value guy, what do you do with a situation like this? Because this was a stock that was down, and there weren't huge expectations. They crushed them. Credit for that. What do you do with a stock that's up 35% in one day? All right. So first, understand that net income being up 42% is a little misleading because they had a huge tax benefit. So operating earnings were only up about 13 percent. First thing to recognize. Stock was relatively cheap at 15 times. Now after the move, we're at 18 and a

half. Still not too shabby. Pretty cheap still, as long as they can continue to execute. And based on their comments, it looks like they will for at least the next year. Proctor and Gamble's first quarter report was mixed. Profits higher than expected. Revenue lower than expected. The report was mixed, Jason. The reaction to the report was just flat-out Yeah, I really feel like this should be a better investment than it has been recently. It reminds me a lot of McCormick in that I defy you to find a household in this country that doesn't have at least a couple of Procter & Gables products in it. But the problem is that it's a really big business now, at $230 billion market cap. And so you need to see values start coming back in the form of dividends, share buybacks, and whatnot. They're not really nailing it on the repurchase side. It's down just about, counts just about 4.5% since 2013. I can see that. see why Nelson Peltz was trying to go activist here. I mean, I think there is probably an opportunity to unlock some value there. But if you look at this consumer space now, we're seeing more brands coming to market that are focusing on these messages of being more environmentally friendly

or more customer-centric. Look at Harry's Razors, for example. I mean, that's a sponsor of our show, and they're taking that razor business and really focusing on that customer-centric model. And I think Gillette has really let that pass-and-by. And I think one of Harry's competitors even was acquired by Unilever. So you don't want to wake up 10 years from now and look at this space and think, what in the hell just happened here. It's not going to happen overnight, but it will happen slowly a little bit surely. You can let these new brands pass you right by, and then Procter and Gamble could find themselves in a real pickle. So a big business with a lot of great

brands, I think they probably just need to do a better job of exploiting that and then figuring out new ways to return value to shareholders. So, as you said, Procter & Gamble, 230 billion, General Electric that we led the show with, just over 200 billion. Let's say, for the sake of argument, you don't want to go the radical Matt Argusinger route of cut the dividend to zero. Cut everything. Isn't the obvious move with these two huge, diverse businesses, to just start identifying major divisions to just sell off?

Because there was a point in time where a big part of Procter & Gamble's business, or certainly a significant part, was food. We saw them shed that pretty steadily over the past decade. It really seems like between GE and Procter & Gamble, there should be a lot of business units that are on sale right now. I think with Procter & Gamble, it's a very easy argument to make because they have so many brands in that portfolio. You go through an identified 10 to 15 laggers and just get rid of them and really focus on what you're doing well. As far as General Electric, I'll let

Ron speak to that. No, yeah. You've got to get rid of something. Interestingly, with GE, the healthcare business, which the new CEO ran, could be one to get rid of because it doesn't necessarily fit in the other industrial businesses. But it happens to be a business. a real strong one. So that could be one way to unlock some value. They're keeping the lights, though, right? They're keeping the lighting business. Don't worry. They bring good things to light. Let's be clear, though. I mean, Procter & Gamble's been a good investment for investors over the last five years. You've made money, but it has been outpaced by the market, and that's really

the measuring stick you need to consider. As we've talked about before, tough times in the restaurant industry of late, but a good week for shareholders of Ruby Tuesday, not an earnings report, but a lifeline from a private equity firm in Atlanta that is taking Ruby Tuesday private and shares of Ruby Tuesday up 20 percent this week on the buyout news. Was I the only one stunned by this that someone looked at Ruby Tuesday and found apparently enough value that they wanted to plunk down a 20 percent premium for this? It's probably largely a real estate play. They own about 270 of the sites where their locations sit. They own all of the buildings, but the real estate itself, only about 270 sites. So there is value there that

can probably be unlocked. I don't even, the business probably can be saved if you really shrink it down and only keep the performing units and then get rid of the real estate of the rest. Sounds too much like that Sears play to me. I think you just got to steer clear of those, oh, there's value in the real estate. Let's go to our man behind the glass, Steve Broido. Steve, we know you're a fan of Olive Garden. Ruby Tuesday, have you ever been? And if so, when was the last time? I have been. I can't remember when. It's one of those restaurants that you kind of, it's

like TGII Friday, Ruby Tuesdays, Beniggins. I don't know. Hulahans. It just doesn't, it doesn't register. I'm just not mindful of it. So to Ron's point about potentially they focus on the performing restaurants and sell off the others, do you think that opens the way for more olive gardens? I surely hope so. I surely hope so. All right. Don't call me Shirley. Ron Gross, Jason Moser, Matt Argusinger, guys. We'll see you later in the show. Up next, a conversation with Pulitzer Prize winner, Stephen Perlstein.

Stay right here. You're listening to Motley Full Money. Goodbye, Ruby Tuesday. All right, before we go on, I want to say thanks again to Harry's for supporting this week's episode of Motley Full Money. I've been using Harry's products for years. I love them. It's the smoothest shave I've ever had, period.

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That's harries.com slash fool. Welcome back to Motley Fool Money. I'm Chris Hill. Last week at the Motley Fool's annual Writers' Conference, I got the chance to interview Stephen Pearlstein in front of a live audience. A longtime editor and columnist at the Washington Post, Pearlstein was awarded the Pulitzer Prize in 2008 for his commentary on the Great Recession. He first came to the Washington Post to be the deputy business editor.

He was hired by the legendary Ben Bradley. Bradley actually hired Pearlstein over the objection of every other editor on staff at the Washington Post. After talking about his early days in journalism, I asked Stephen Pearlstein about his writing in the months that led up to the financial crisis. So let's fast forward to your column writing career because I spent a little time on the Pulitzer Prize website. One of the great things about the site is it doesn't just say, well, here are the people who won. They give you the body of work for which the person is honored. You actually went back and read all that? I didn't say I read all of it.

Oh, all right. How was it okay? It's good stuff. Oh, okay. They knew what they were doing. But let's talk a little bit about that period of time because the columns that you were writing in early 2000. 2007 sort of lay the groundwork for the lead up to the financial crisis. So for anyone who's you know is familiar with the crisis and or even if you've merely just you know read the big

short or something like that, I mean it's easy to just immediately go towards the fall of 2008 when Wall Street was in meltdown mode. But you were writing in January, February of 2007 and sort of seeing these pieces of the puzzle that slowly started to form. What were you seeing at the time that got you concerned? So I'm going to do a little digression, but it will help answer this question. In those days, people who worked on newspaper business sections, they were either financial reporters, meaning they covered finance. They covered the markets, basically.

Sometimes you added banks to that. but there were those people. There were people who covered companies. They were business reporters. They covered the airline industry or the steel industry or whatever. And then there were economic reporters who covered the economy, and they tended to cover economic policy as well, like budgets and taxes

and things like that. And when I was an editor, I was very frustrated with this sort of division of labor, because it always seemed to me that, that if you could somehow put all of those things together, you'd have a much better sense of what was going on. The business reporters didn't know anything about economics, and the economic reporters, I can assure you,

didn't know how to read an income statement. And so that was a problem. When you're writing about the economy, you say, well, if you do this, businesses will do that, and you know, I would say that will they ever talk to a business? No. Okay. So anyway, I set out to do something different, which was to be none of those and all of them at the same time. So the first thing I need to tell you is I'm not a market reporter. And I wasn't a market reporter in 2007 when, as happens in any bubble, all market reporters read each other and tend to think alike. You know, they operate like we all operate in a bubble. So I, here I was confronted with something that I'll tell you about in a minute that I didn't come, I hadn't read all the stuff.

about mortgages. I hadn't read all this stuff about CDS and CDOs and all that. I was vaguely familiar with it, but I really wasn't that familiar with it. If I had any specialty, it was in economics, not in finance. Anyway, there was this thing called New Century Mortgage or something like that, and it was going under in that time, January and February, I believe, of 2007. Two things about it. There was an investment bank here in Arlington in Roslin called Friedman Billings and Ramsey. Well, it was a big deal at the time. It was a small but very fast-growing, very hot shop. They took a lot of banks public, but they did also a lot of investment banking having to do with mortgages and mortgage companies.

In fact, they had taken New Century public. And I had done some, you know, in those days, Washington Post cover. local businesses and that was one of the things that I did I wrote about local businesses and I had written about Friedman Billings and Ramsey and frankly I'd always thought they were a little bit sleazy and then this thing happened with New Century and I started looking into New Century and I started looking into what they did and I don't know I was calling around to some people in New York who to try to explain to me what these things were you know these CDOs and CEDO squares and everything and basically when they were describing these things to me

you know I I'd say well let's slow down tell me how this works again and blah blah blah you know I didn't know much and and I kept having the reaction you mean they do that you mean they they don't really check on their on their income you know people borrow money you mean they let people do 100% mortgages you know I didn't I just couldn't believe they you know that they did that sort of stuff and so I was just sort of incredulous I was sort of naive because I hadn't seen the development of the shadow banking system and when I finally came face to face with it and started asking questions and by the way you know who invested a

new century well it turns out that Morgan Stanley was you know big you know had money in it and these other big Wall Street firms so I could start to see the connections that this wasn't just this was connected to the to the to the to the regular banking system and I just was thought it was nuts and I also began to make calls and figure out well it's not only nuts it's very big so I discovered the shadow banking system in 2007 I could see that it was unregulated I could see that in fact the shadow banking grew up as a way around regulation. It's a way of intermediating, you know, from savings to lending,

in a way that totally went around the regulatory system. There was no, not only was there no regulation, there was no capital requirements, there was nothing like deposit insurance to prevent a run on this banking system. And the banks couldn't go to the Fed. the banks in the shadow banking system, like New Century, can't go to the Fed and get money in terms of, if they have a liquidity problem.

So all the architecture that had been developed ever since the new deal to make the banking system safe, what the shadow banking system was, was a workaround, a regulatory workaround. That's why, and that's why all the money was going through those other channels. So because I wasn't just a finance report, and I wasn't just an economics reporter,

and I wasn't just a regulatory reporter. I sort of connected these dots in a way that allowed me to say, this is crazy and it's big, and when it comes crashing down, it's going to take us all with it. So where do you think we are now with, you know, given that we're in year eight of a bull market, and housing has more than rebounded? So, again, I'm not in the world of financial writing,

and I don't spend a lot of time reading that stuff. For a number of years, and if you go back, you'll see it's actually been like four. I've been a bear. The Federal Reserve and other central banks around the world have pumped trillions of dollars of freshly minted money into the finance system, into the banking and finance system. Most of it is still sitting in central banks, but it's there, and it's like Tinder waiting to be lit. They haven't absorbed it back. It's sitting there.

And its main effect in recent years, since the economy has, economies have rebounded, even in Europe, where is that money lent? Well, where it's lent at the margin is to buy assets. Real estate, stocks, bonds, artwork. And I happen to think that we have a bubble in assets created by this cheap money. And it's got to get sucked up. And if it isn't, and it's got to, you know, the central banks have got to try to do it. The Fed has announced its plan now for how to sell off all those bonds that it bought that are now sitting on its balance sheet, balance sheet which grew from $1 trillion to $5 trillion or $1.5 trillion to $5 trillion.

That's a lot. That's a lot of money. And the central banks in Europe and Japan made similar adjustments. The central bank of Japan got to the point where the, you know, The central bank of Japan, I think, owns a quarter or a third of the Japanese stock market. We didn't get to that point, but they have a smaller economy, and their central bank ran out of bonds to buy. They had to buy other stuff.

So I think this has a lot to do with propping up the market, and to some extent propping up the economy. Adjustment has to be made. I don't know when, I don't know how, I don't know what's going to trigger it. Obviously we don't have the same kind of abuses that we had back then, and we're One thing we know about financial crisis is it won't happen in the same way. It'll be something else that causes it, and it'll, it'll unwind in a different way. I don't necessarily think there is a crisis to be had, but I think there's going to be a significant correction.

And I know that, you know, again, just based on all these, it's a sort of a naive thing. It's sort of a simple thing, which is there's too much money out there in the financial system that has already caused people to do crazy things, values certain companies in a crazy way, new companies, and pay ridiculous amounts for houses in my neighborhood and things like that. My last question, since I will, there's no chance I will ever know what this moment is like. Can you just share what it was like to win the Pulitzer Prize? What was that moment? How did you find out?

I found out the Friday before. Really? Yeah. It got a leak to you? The dirty little secret is that among the major newspapers, the decision is made the Friday before, and let's just say it leaks out. to, it leaks out in a very limited way

to half a dozen people at major newspapers who tell you whether you want or not. So at 3 o'clock and on Monday, when they announce it and then they have the big celebration in the newsroom, you might ask yourself in newsrooms, well, how is it that they knew they were going to win that they ordered the champagne?

And how is it that Pearlstein's wife and children were in the newsroom at 3 o'clock? I mean, how, How is that possible? In fact, in the post newsroom, the post wins Pulitzer's fairly regularly, and when I was in the newsroom regularly, you sort of could tell who won because he or she wasn't there on Monday morning. Where's Steve? Well, Steve knows he's going to win. He doesn't want to be anywhere around.

So he stays at home and presses his suit, so he comes in at 3 o'clock with his wife and kids and has some pain. I'm not going to tell you how, because I don't want to get anybody in trouble, but the Washington Post and the New York Times, probably the Los Angeles Times, if someone of theirs won, they know. Tell me at least this.

Was it at least one of those managing editors who didn't want Ben Bradley to hire you? One of those people had to call you? That managing editor called me into his office on Friday afternoon and said, and by the way, that managing editor did not nominate me for Pulitzer Prize. I was not nominated by my paper. I was nominated by somebody else. That's delicious. The year that I won, we won seven Pulitzer's.

And six of them were nominated by the Washington Post, and there was me. Stephen Pearlstein is the embodiment of that great old adage. Living well is the best revenge. Coming up, we're going to dip into the Fool mailbag, 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 show 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. Welcome back to Motley Full Money, Chris Hill, here in studio once again with Jason Moser, Matt Argusinger, and Ron Gross. Our email address is Radio at Fool.com from Alan Bishop, who writes,

Earlier this month, I ran my second half marathon, and I opted to listen to Motley Fool Money. You delivered 40 minutes where I didn't have to think about questions like, why am I subjecting myself to this again? It must have worked because I set a personal record at one hour and 57 minutes. Thanks and keep up to great work. Congratulations. Congratulations. And thank you for giving us our new motto, Motley Full Money, slightly less terrible than running 13 miles.

Will you be listening to our show when you run your marathon this weekend? The Marine Corps Marathon? I will absolutely not be listening to this show. I'm doing the show. I don't need to list to do it. That's fair. Please email us Radio at Fool.com because next week on our MarketFoolery podcast all week, we're going to be doing in advance of Halloween, overrated and underrated candy,

and we'll kick it off just going around the table real quick. Overrated Halloween candy, Ron Gross, what do you got? Don't send me email here. The regular milk chocolate M&Ms and just the mini bag, they're just not that good. Wow. That's a bold call, though. Moser overrated? Yeah, whenever I got home and I had a baby Ruth in that bag, the thing had a one-way ticket to the trash can.

I just don't like the baby roof. I think it's the best. I don't like the baby roof. Wow. No. It's overrated. Smarties. Like, I think they're cheap.

They come in enormous bags. They're light. I think cheap homeowners will buy them. They can throw them out to, I don't like. Smarties are no way. Steve Broido, overrated candy. What do you got? Candy corn.

Kill it. Oh, really? Even though it only comes out. It's the limited edition one. I hate it. All right. You got one? Skittles.

Just, you know what? Just give it up, Skittles. And by the way, the tropical skittles, pack it in? They're not helping. Underrated candy, what do you got? I got the payday. You got your peanuts. You got your caramel. You got delicious. Jason? I love milk duds.

Rolos. You don't see them that much. And I'm not even a big Carabell fan, but Rollos are so good. They are. Steve? Lemonheads. Really? We got to break a tooth. You know why? I think you think they're underrated because they're so low.

rated. They're terrific. Take five. The Take five bar. But they're not underrated, though. They're delicious. They're delicious. And they need to produce more of them.

Chocolate, pretzels, peanut butter, caramel, peanuts. Take five. Whoever's producing Take Five needs to up that production. I'm on board. All right. Email us, Radio at Fool.com, with your stock questions, but really also your overrated and underrated candies. Let's get to the stocks on our radar this week.

Ron Gross, what are you looking at? I got McCormick, MKC, leading spice and and herb company. Controls about 20% of the global spice market. Recently acquired RB Foods, which has Frank's Red Hot Sauce, which is a personal favorite of myself. Me? Yours truly? Yes. They're going to cut $100 million in expenses. That should improve margins. Dividend yield of 1.9%. They've raised it every year for the past 31 years. Steve? Question about McCormick?

When do you know when you're supposed to replace your spices? I'm bad people that's of cinnamon in there that's been there since the 70s. No, I think that's right. I think McCormick would like you to replace that more often. I think three months is a good number. Oh, Jason Mozer, what are you looking at this week? Yeah, taking a look at Boston Beer, ticker S-A-M. Earnings come out on Thursday, October 27th.

And it's been on a slow move up since the middle of the year and actually green for the year to date. But I was reading some interesting chatter going on at the National Beer Wholesalers Association Convention here recently. I know that's a mouthful. You need a hobby, my friend. But they're talking about how beer is losing share to wine and spirits, especially with younger drinkers. And so I just think

that the companies that are first affected by this most are the real small producers, the microbears, where the economics are just not working in their favor. So I can't help but wonder if maybe we're not getting to that point where those multiple start coming down, maybe we see some consolidation in the space. And really, it shines the light on one of Boston beer's biggest strengths in the distribution and the production on a national level. Steve, question about Boston beer? How many Boston beers do you normally drink before recording this show? If I answer that, I mean, are my superior going to hear? Let's talk about this after the show.

Sounds good. Matt Argusinger, what are you looking at? I'm looking at JD.com, ticker JD. You know, Alibaba gets all the headlines. But I think if you really want to play the growth of e-commerce in China, I would go to the number two player, and that's jd.com. You know, Alibaba has taken much more of an eBay-like approach, light business model, let third-party sellers kind of handle fulfillment and shipping and things like that. JD.com instead has taken the Amazon model. They do all the fulfillment, which I think is hugely important for quality, reliability, and really big in China, fraud. So, JD.com is my bet.

$55 billion company. Revenue is growing 50% annually over the last three years. It's only about eighth the size of Alibaba. No one at Jack Daniels snapped up JD.com. Whatever reason.jadcom got JD. Steve, question about JD.com? Does the delivery model make sense in China being such a large country with a very diverse terrain. I hope so. That's actually a good question. It is. Steve, Boston Beer, McCormick, JD.com, three very different businesses. You've got one you want to add to your watch list? I'm feeling spicy. Right. Is there a particular spice in your cabinet that maybe needs to be replaced? Probably. I don't

use a lot of spices, but I just, I know that they sit there for a while and they seem to age. Montreal steak seasoning. Don't, you know, don't sell short that Montreal State. Really good stuff. You're pro on that? I am. All right. Ron Gross, Jason Moser, Matt Argusinger. Guys, thanks so much for being here. Thanks, Chris.

That's going to do it for this week's 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.