This episode of Motley Fool Money covers a range of economic and company-specific news, starting with the U.S. jobs report and concluding with investment opportunities in international markets and individual stocks.
**U.S. Jobs Report and Macro Economy:**
The show began by dissecting the August jobs report, which showed the U.S. economy adding 142,000 jobs, with the unemployment rate falling to 6.1%. Analyst Ron Gross noted that while the unemployment rate tick-down was positive, the job creation number was "not great," breaking a six-month streak of over 200,000 jobs created. He emphasized that it's "just a month" and didn't warrant panic, though some traders hoped it would lead to prolonged Fed easing. However, Gross believed the Fed wouldn't be swayed by a single data point.
**Company News:**
* **Apple's iCloud Security Scandal:** Apple's planned buzz for the iPhone 6 and iWatch unveiling was overshadowed by a celebrity photo scandal. CEO Tim Cook acknowledged iCloud accounts were compromised but insisted Apple's servers were not breached, suggesting users might have been victims of phishing. The panel discussed the balancing act for Cook, needing to reassure users while denying lax security. Matt Argusinger and Jason Moser debated whether this would impact sales (unlikely for average users) and the implications for new features like iWatch payment options, which could put more personal data on devices. They noted Apple often prioritizes usability over security, and for consumers, liability often rests with the credit card company, not them. The iWatch is seen as a high-stakes product, with the potential to define the wearable tech market.
* **CVS Health Rebranding & Tobacco Ban:** CVS Caremark announced it would stop selling tobacco products a month earlier than planned (October 1st) and rebranded as CVS Health. Shares hit an all-time high. Jason Moser highlighted that tobacco sales represent only 1.5% of CVS's total, making it a symbolic move aligning with their health-focused mission. However, he cautioned that ancillary purchases made by tobacco customers (drinks, gum) account for 14.5% of total sales, and a "bleed over" effect could be a concern.
* **Yum Brands' China Woes:** Yum Brands (KFC, Taco Bell, Pizza Hut) saw shares fall after reporting a 13% decline in same-store sales in China due to a "bad chicken" health scare. Matt Argusinger called this a "recurring non-recurring problem," noting a similar issue less than two years prior. He criticized Yum's management for failing to resolve supplier issues, pointing out that total revenue hasn't budged in three years. China is crucial for Yum, accounting for over half its sales, and these recurring problems are creating a significant brand and marketing challenge.
* **Twitter's NFL Partnership:** Twitter launched "NFL Timelines," a new feature aimed at making it easier to follow football teams. Jason Moser explained this is a play for the highly profitable domestic market, where ad revenue per thousand impressions (RPM) is significantly higher ($3.47) compared to international ($0.61). The goal is to grow the domestic active user base and engagement, similar to their successful World Cup strategy.
**Fool Mailbag:**
The panel addressed listener questions:
* **Online Research:** For accurate research, Ron Gross recommended reputable financial sites like Fool.com, Yahoo Finance, and Morningstar. Crucially, he advised going to "source documents" on SEC.gov (10-K, 10-Q filings) for direct company information backed by legal enforcement. He cautioned against blindly trusting online commentary due to potential conflicts of interest.
* **Real Estate Investment Trusts (REITs):** Matt Argusinger discussed REITs as a way for individuals to invest in real estate. Pros include mandatory dividend payouts (90% of income) leading to tax benefits. Cons involve monitoring for over-leverage and avoiding REITs that constantly dilute shareholders by issuing new stock. He cited Retail Opportunity Investment Corp (ROIC) and Alexandria Real Estate Properties (ARE) as examples. A key caveat: rising interest rates typically negatively impact REITs. He also warned that very high dividend yields (7-10%) often indicate riskier leveraged securities.
* **Diesel Car Investments:** For those interested in the growing "clean diesel" market, Jason Moser suggested looking at Cummins (CMI), a stable company building diesel engines. He also mentioned Westport Innovations (WPRT) for natural gas vehicles and Clean Energy Fuels (CLNE) for natural gas fueling infrastructure. He briefly noted Tesla's (TSLA) recent announcement of its Gigafactory in Nevada, highlighting its potential to become a major battery company.
**Interview with Bill Mann (Motley Fool Funds):**
Bill Mann discussed global investment opportunities amidst geopolitical tensions.
* **Russia:** Mann, a value investor, likened current opportunities to John Templeton's post-WWII European investments, buying during panic. Despite moral implications, his team is more interested in Russian companies now, focusing on those with better corporate governance (i.e., "not stealing from shareholders"). He noted that while global markets haven't significantly reacted to geopolitical hotspots like Ukraine, directly involved markets like Russia have, creating buying opportunities for those willing to invest during crises.
* **Japan:** Having recently visited, Mann observed Japan's market, the second or third largest globally, is still down 60% from its peak 20 years ago due to a prolonged "slumber." Corporate governance is a key issue, with boards often lacking outside directors. However, Mann believes Japan is "turning it around," with the government actively trying to combat deflation and stimulate economic growth, even by directing pension funds into the stock market. For investors, he suggested mutual funds or well-constructed ETFs, particularly those focused on Japanese small-cap companies, to gain exposure.
* **2014 Outlook:** Mann expressed pleasant surprise at the market's performance, noting that much of the gains have come from "multiple expansion" (anticipating future earnings growth) rather than just current earnings. He sees opportunity in "hated" sectors, specifically smaller banks within financials, which are less exposed to the large fines impacting major institutions.
**Radar Stocks:**
* **Ron Gross:** Crocs (CROX), a "deep value opportunity." He highlighted a $200 million investment from Blackstone Group, ongoing reorganization (store closures, workforce cuts), and a belief in 33% upside as the company focuses on its core clog business.
* **Matt Argusinger:** Tile Shop (TTS), a home improvement retailer. Despite its stock being cut in half due to short reports and housing market trends, executives have bought $3-4 million in stock recently, catching his attention. He praised their extensive product variety and showroom experience.
* **Jason Moser:** Club Corp Holdings (MYCC), a recent IPO that owns golf clubs. He sees potential in their business model, where scale is crucial for profitability and lowering member costs.
The show also briefly mentioned the FTC fining Google $19 million for children making in-app purchases without parental permission, similar to a previous Apple settlement, highlighting ongoing issues with app store purchase policies.