Everybody needs money. That's why they call it money. Oh, this ain't been a life I've been. But you can get up to the present.
From cool global headquarters, this is Motley Cool Money. It's the Motley Cool Money Radio Show. I'm Chris Hill, and joining me in studio this week for Million Dollar Portfolio, Jason Moser, and Matt Arguessinger and from Motley Cool Deep Value, Mr. Ron Gross.
Good to see you as always, gentlemen. Hey, you've got the latest earnings from Wall Street. We will go around the world of investing with Portfolio Manager Bill and man, and as always, we'll give you an inside look at the stocks on our radar. But we begin this week with Google, or should I say Alphabet?
Google announced a new corporate structure and revealed that the company will be two divisions. Mattie, basically one is Google stuff, Google search, maps, YouTube, et cetera, and the other division is going to be the moonshots, the driverless cars, basically the things that don't make money yet. We were talking about this earlier. I really did think when I first saw this story, I thought it was a joke, and I'm still wrapping my head around why they would remake their structure.
Right. All of us, I think, had a pretty visceral reaction to this name. Now, it's been in fact Larry Page in the letter where he described the restructuring. He said, you know, don't worry, we're still getting used to the name, too.
The restructuring makes sense on a few levels. I mean, I think there's this idea that Google is trying to build a forest instead of one tall tree. A lot of people have used that to describe Berkshire Hathaway. Another conglomerate I think even Buffett himself might have described Berkshire at some point like that.
And a lot of people have applied that metaphor to Google. I don't think it's fair because I think this isn't necessarily from Glamrs. This is a company I think that's refocusing itself. It realizes that it's got a very powerful business in Google, this business of search, the business of online advertising, and now mobile advertising.
But it's got all these other things. And it's got all these ventures that people have no idea how much cash is put into over the years, but no idea what kind of revenue is being generated or any cash flows. And so this is a chance for, I think, the company strategically to say, we've got this incredible business in Google. We're going to put a lot of effort behind that.
It's going to stand alone. And we've got all these other businesses that are going to be under this one umbrella company. It makes a lot of sense. My concern is that it almost gives them the license here to go spend more and more cash than they even would have, because they can break it out and say, no, no, no, Google's good.
We're got it here. But over here is where we're spending all this ridiculous cash. But so don't worry. That's what I said precisely earlier in the weekend that I think this is one of those things that will ultimately give Page and Bryn that opportunity to spend more with less scrutiny from Wall Street or from investors.
I think the first thing that I think is really interesting is that we're going to have a lot of money to pay out. But I mean, to Maddie's point there, I mean, you have this umbrella where it's going to be, okay, well, we have Google, and then we have this, you know, the reporting I could just see now. So this is other cool stuff. It just doesn't make money yet.
And who knows how that's really going to pan out? I mean, I don't think it's necessarily a bad move. But I also think the comparison to Berkshire Hathaway, well, I've named my feelings very clear on that. So I think earlier in the week, I called it something along the lines of dumb or a cop out.
I stand by that because, I mean, let's be very clear here. Maddie made the point that Berkshire Hathaway is acquiring and rolling up all these great businesses under their umbrella. It's basically a big venture capital fund. It's a big venture capital fund that has made two extremely great investments so far, Google, and I'd say YouTube.
Everything else are just bets right now. And they're bets that may or may not pay off. And so I think if you're an investor looking at Google now and looking at Alphabet, that's the way to think about it. It's a way if I can get this massive venture capital type fund in my portfolio, maybe that's the way to look at it.
What if they spin off the venture business? Then we just have a Google standalone. Oh boy. Now I'm back to be started, right?
Well, they clearly wanted to get this out the door this week because they did not secure the URL, Alphabet.com, and congratulations to Chris and Rick Kannich of Cleveland, Ohio, who is a dad, husband, and self-proclaimed geek, because back in 2007 when he went on Twitter, he secured the at Alphabet Twitter handle. So congrats to him because I'm pretty sure a check is coming his way. Oh, BMW and the Alphabet.com, right? Maybe they would have been more clever in doing Alphabet ALF.
Who knows? Remember, I do. I was going to say this name Alphabet, it just makes me think of Fraggle Rock for whatever reason. I don't know why.
Well, there's one thing I do like about the name, and Larry Page finishes letter by saying this, is that if you break it apart, Alphabet, it's a bet that it's supposed to beat some kind of benchmark. I like it from this perspective, is that in the sense that hopefully we're making bets, they're going to beat some kind of benchmark. Maybe that's the S&P 500, maybe it's something else, but at least it's about beating something. Maybe there's a way to measure them.
That's why Buffett never changed the name Berkshire Hathaway to something a little bit more sexy. Speaking of which, earlier in the week Warren Buffett finally used his elephant gun, Berkshire Hathaway buying precision cast parts, the aviation and energy industry parts maker for more than $37 billion in cash. Biggest deal ever for Berkshire Hathaway, Ron, do you like it? I like it, and my first sense that I jotted down here, it's a time to reload the elephant guns.
I do like it. He paid up a little bit, but that's because there's a portion of this business that's related to the energy industry, and things have been weak there, so the multiple looks a little bit high. Stock has actually come down over the course of this year, so I think he swooped in and did get a fine price. He'll spend $23 billion of his cash, he'll be left with still $40 billion, but as he says, that's really not enough.
He wants more. The big elephant gun deals are off the table for the next 12 months as they replenish their cash award, which won't be too hard for them to do, and then maybe down the road a year or two from now we'll see another big one. They may continue to make some little tucking acquisitions along the way, but this is the kind of business that he likes, an industrial business, well-run, CEO Mark Donnegan will continue to run the business, it'll stay in Oregon, and I think this is a nice deal. You think back a few years to when they bought Burlington Northern Railroad for somewhere in the neighborhood of $26 billion, that was seen as a huge acquisition at the time.
That has certainly paid off well five years from now. Do you think we're going to be looking back at precision cast parts and thinking it paid off just as well as the Burlington Northern deal did? Well, obviously Mr. Buffett thinks so, and it's certainly a bet on the aerospace industry, the airline industry, which as we know has been consolidating, and there are a lot of orders out there.
The customers like Airbus and Boeing and GE are placing lots of orders for aerospace parts, so I think this will turn out well. A little foolish inside story here, I think this is interesting, and this is a shout out to our stock advisor, Team Red, and the company called Titanium Metals, and they recommended them the same day. A few years later, precision cast parts bought Titanium Metals, and then of course now, Burt's your halfway, which is also a stock advisor recommendation is buying precision cast parts. Kind of cool.
Wayfare, the online seller of home furnishings and decor lost money in the second quarter, but overall sales were up more than 65% compared to a year ago, and the stock got more than 40% this week, Jason. Is it that good or our expectations that low? Well, I think number one, if there was any question as to whether Wayfarer actually came to play here in a series of business, those questions have been answered because by every metric that really matters, this company is performing very well. They continue to grow sales, they continue to grow repeat customers, they really just, as this run might say, they're firing on all cylinders.
I mean, gross margin is expanding, and I think part of this is short covering. I mean, they have a low float on the market as it stands, and there was about a 34% short interest going into this release. So I think with this earnings release, there are some shorts covering which will explain that huge pop is what it's over the week. But by the same token, again, that's not taking away from what this business is doing.
It's very quality business, founder led, and I think that, again, I refer back to the repeat purchases, and I think that's crucial for this business, because ultimately, I think people look at Wayfarer and they see e-commerce. And honestly, what this is, truthfully, it's a logistics slash customer service company, right? They don't maintain any inventory really under balance sheet, so to speak, maybe 20 million inventory at the most. And what they do, more or less, is they connect those suppliers all around the country with customers, and they basically arrange to have those goods delivered to the customers.
And so it's a great value for the suppliers because all of a sudden, open, sort of this mom and pop shop up to virtually the entire country. And then obviously, it's helpful for Wayfarer because they get to grow their presence around the entire country. And that's what they continue to do. And then the key part really is growing that repeat customer base.
Now, they have 56, better than 56% repeat customers' score, and that's important because that means they don't have to go out and acquire those customers. And ultimately, the long-term strategy is to be able to ratchet back those acquisition costs, ratchet back those SG&A costs, the marketing, the advertising, which will really help expose the true profitability of this model. And I like where they're headed. I think the real question is, can I trademark that firing in all cylinders then?
I think you probably have the money on the table last week. You know, twice, I wasn't here. You weren't here. I think we'll have to pay a little something on the side.
Radioitful.com is our email address question from Brian in Nebraska. Do you see Wayfarer getting bought out by Amazon, or are they just a smaller company enjoying their carved out niche in the market? I saw Wayfarer getting bought out by Amazon before they went public. That was honestly what I thought was going to happen.
I remember putting an article out on Fool.com saying as much because they had about a year before the IPO. I think that time has passed, though. I don't believe that Amazon would jump in there and acquire them at this point because I don't think Wayfarer wants to be acquired. I think that because they are founder-led, they are calling all the shots in the business, and I think they really want to grow this thing for the long term.
Ali Baba's second quarter revenue, up 28% of that was lower than expected. And Mattie, we're coming up on the one-year anniversary of the Chinese e-commerce giant going public, and this week the stock hit a new low. Amazingly, it's just let me above. It's IPO price.
Of course, we know it skyrocketed after IPO. It's down 30% this year. By the way, I want to point out that with Ali Baba's fall, they are now trading a lower market cap than Amazon. That was not the case last November.
That was the good Amazon. In terms of world-killer aspect to this company, when an IPO last year, I just feel like, well, good luck with that now. I think Amazon is certainly rightfully the king of e-commerce. But there's a lot of issues going on with the Chinese economy, a lot of macro concerns.
I feel like this is a business that's not very focused right now. They had a US business that they pulled back on trying to increase their international transactions. It doesn't seem like that's working out so well. Still, they account for 80% of e-commerce in China.
You cannot ignore this company. They also announced a $4 billion buyback, which is pretty big. But I do see a company that's trading at 15 times sales. If I'm looking at a growth rate now of 30% or less, that's in declining.
By the way, that growth rate, a year ago, an IPO, their growth rate was 60%. That's quite a deceleration. If I'm going to pay 15 times sales for Ali Baba, I'd rather pay 2.5 times sales for Amazon than I'm going to grow over 20%. Up next, retail, restaurants, and a surprising stock offering.
Stay right here. This is Motley Fool Money. Welcome back to Motley Fool Money for a sale here in the studio with Jason Moser, Matt, Arguessinger, and Ron Gross. Time for a tale of two retailers.
Second quarter profits from Nordstrom came in higher than expected. JCPenney lost nearly $140 million in the second quarter, but that was still better than endless. We're expecting wrong at both stocks up on front. Yeah, tale of two stocks.
Don't let the two companies, don't let the fact that both stocks are up fully. Nordstrom doing a great job. We saw 20% growth in Nordstrom.com, and Commsales are up 4.9%. Their recent anniversary sale did really well, thanks to my wife, I'm sure.
Thank you, honey. The business continues to do really well, focusing on what they do best, which is great customer service, opening plenty of new stores, moving at the Canada. We hope they fare better than our friends' target did. But there's plenty of expansion there.
JCPenney, on the other hand, making progress. I'll give it to them. Smaller loss, but still losing money. Commsales were up 4.1%, but the Commsales last year were not so impressive.
That's not such a hard thing to do. Sephora Division was their one piece of strength. Let's see if they keep on the right track, but guess what? They've got to start making money.
Just smaller losses isn't going to cut it. I feel like Mike Ullman did a very smart thing by sort of he came in after the Ron Johnson debacle. Mike Ullman, you could argue, turns JCPenney's business around basically by reversing almost everything Johnson did. He dropped the mic.
He handed the CEO office over to Marvin Ellison. They said, hey, look, man, the stock's up more than 30% here today. Good luck with this. Yeah, and they are raising expectations.
As I said, they're not profitable yet. So they mostly had an EBITDA measure, a measure of a cash flow metric, and they're raising expectations for that. Gross margins were up a bit. So, okay, let's see how this goes.
On last week's conference, Paul Tesla Motors CEO, Elon Musk, said the company has no need to raise capital. So it was a little bit of a surprise this week when the company announced an additional offering of stock to the tune of more than a $500 million. Man, I thought they didn't need the money. I know.
It's no surprise. I expected this at some point. I just didn't expect this. Oh, we got that.
Of course, which was a big surprise to me. I can defend this by a lot because it really amounts about 2% of Tesla's outstanding shares. Elon Musk has come out and said he's going to buy $20 million in the offering, which is nice. More importantly, when your stock is trading, where Tesla is, it can often make sense to issue stock, and I think it makes sense.
And sometimes you don't always need the cash, but it can be strategically a good time to raise cash. So I think they said, you know what, we've got a lot going on the next six months, gigafactories being produced. Model X is coming out. We've had a lot of production issues there.
Let's resolve some long-term risk by issuing cash right now with our stock pretty high. I think it's a smart move. Shake Shack's second quarter profit was higher than expected, revenue up 75% and they raised guidance. All of that sounds good, Jason, on the surface, but Wall Street seems unimpressed because Holy cow, the stock took a dive this week down more than 20%.
Well, in secondary offerings that aren't working out so well, I think that maybe Shake Shack is one. You know, I mean, it was a good quarter. I mean, same-store sales were up almost 13% for the quarter, and that was versus 4.5% growth this quarter last year. They are growing the top line at a very respectable level.
So the business is performing well. I think that what many of us have questioned here is generally speaking just the overall market opportunity, after all, just a burger place, right? And so, you know, there are plenty of those around the country. And if you go all the way out to the West Coast and you have your in and out burger there, you know, I would argue probably the same as, you know, how well does that translate over here?
I'm not sure how well Shake Shack translates further west. Well, I guess we'll find out soon enough because they are opening some stores out there to get a feel for it. But then I think some of the news that really, I'm not convinced maybe that Market Foolery didn't leak early that day because we were talking about this. It was just up.
It was doing well. And then right after we got done taping, man, that's when the bottom fell out. Well, this is, I mean, and we've seen this type of thing happen over and over this very experienced. It's really sort of weird the way the initial reaction to a stock because initially when Shake Shack reported, the stock popped and it was going that in that direction for a few hours.
Seven-and-a-half. And then it seems like over time, more questions get asked and whether Shake Shack or some other company, we're really seeing, I don't know. I've seen it several times this quarter where, as you said, either after hours or before the market opens, stock is strong. But then when the conference call comes usually at 910, sometimes even at 11 a.m.
and we hear a little bit more, we hear about expectations going forward. And let's get to ask questions. We see the stock reverse one way or the other. I'm just going to keep in mind, Shake Shack has a very narrow float right now.
They're going to be issuing shares, but that's mostly for, so, inside of some cash out. I just, as we were talking about it the past week, this is a company with a, the market valuation on this company, if you look at this per store valuation of over $35 million. And you normally, that would be reserved for companies that are growing very, very fast. And the same store sale growth is nice, but this is a company that's going to open maybe 12 restaurants over the next 12 months.
It is not growing at very high rates. I don't see how they can hold on to this. I put that in the context of Chipotle. Chipotle is going to open 170, 180, 180 stores in a year versus Shake Shack's 12 to 14.
And to the point about a secondary offering, this is a secondary offering precisely. It's for insiders who cash out. The company is getting none of this money. And so, I mean, that could be sort of a sign there that insiders are feeling like, hey, this is a pretty decent valuation.
We want to go ahead and cash out. And because of that low float, your average retail investor is probably thinking, hey, what in the world? This is really, you know, always correct. I would never want to participate in an IPO or a secondary following offering where the insiders, where the prime motivation was for insurance.
They own 50,000. Why would I be left holding their bag? No, thank you. That's just a good response.
And they're all company owned, right? Should they seriously? They're not all company owned. Actually, a lot of them, obviously the international locations, which they have a number of, are licensed.
And so they aren't all company owned. And I think that's one thing we've seen before with Jerry Morel. For example, five guys, he was very much, if he could buy all those licensed or vacuum wood because they are cash machines. But it's just a way for companies to grow quickly to license those stores, especially if they're going to expand internationally, that they're just not going to be able to really own those stores.
All right, guys. We'll see you later in the show. Coming up after the break, a conversation with Bill Mann about what's been happening in China and what it means for US investors. Stay right here.
This is Motley Fool Money. Welcome back to Motley Fool Money. I'm Chris Hill. Bill Mann is the portfolio manager at Motley Fool Funds, and he joins me in the studio now.
Thanks for being here. Hey, Chris. How are you? I'm doing well.
I'm doing well. There's a lot going on in the world of investing, the global world of investing. So let's start with China because the last time you were on the show, that's where we started. We'll start there again because earlier this week, the good people at the Central Bank in China devalued its currency.
And I think it's fair to say that's a little bit of a shockwave through their markets. But it also sort of sent this signal that, hey, guess what? Things aren't so great. Yeah.
I mean, am I wrong? That was the first thing. Do you remember a few years ago when people were trying to set up Chinese renminbi bank accounts here? And now you have the Central Bank essentially sending the signal.
We think this economy is sputtering. Yeah. Yeah. Well, I mean, if you look at any country that sells, you know, that is commodity driven, they could have told you that a long time ago.
In fact, they did tell you that a long time ago. So I just literally think that China makes up its own statistics and they're just making up these moves as they go. They are, if they're not panicking, they are making a very good show of panicking between the moves that they've made with their stock market, where they literally on the five o'clock news. I don't know if it's actually on it five, but the state run media for the last year and a half has been hyping the stock market.
So people have been pushing their way in. It doubled, almost tripled, and then fell 35%, which if you look is still pretty good, right? And it's somehow a crisis. And they've panicked.
They've said, okay, if you own more than 5% of a company, you can't sell it. We're going after these vicious short sellers who are also known as people who are just trying to sell. The next thing that they could just do is like just make up closing prices. Okay, we want this to be seven.
So it's seven, right? It is amazing what is happening there. It's not a market. Well, and the last time you were on one of the things we talked about was if you're a US investor, rather than look to just sort of jump into the Chinese market with both feet, maybe look at US companies that do a lot of business in China.
But now you look at company and let me just list a few across a range of industries, Qualcomm, Yumbrands, Texas Instruments, Wind Resorts. These are all companies, US-based companies who are making more than 40% of their revenue from China. And looking at what happened this week, I mean, how much trouble are these businesses in right now? I mean, it kind of depends.
In a lot of ways, those companies, all their contracts are dollar-denominated. So in some ways, it might be good for them if they've got labor there because their labor costs in Chinese currency in yen is dropped. But if you're Apple and you're thinking about how many more iPhones you can sell in China, the fact that the economy is slowing down. I don't think it's good for anybody.
I really don't. It just goes to show that sometimes rampant bull markets, and define that as you will, but a long-running bull market hides a great deal of rot. And so when it pulls back just a little bit, that rot is exposed. I think that the Chinese government, and I don't know that they did this on purpose, where they literally managed to incite a riot and get everyone to put money into stocks.
But I think they did themselves no favors by really fomenting for the market to go up that fast because nobody could adjust. So you have a market that's essentially doubled in the past year, and it's a disaster. And people are selling their prized llamas in the streets to try and raise money. And that's actually true.
There's a story about a guy trying to sell his prized llama. Maybe for another show. No, no, no, no. Let's take the prize llama.
Why is he selling his prized llama? Because he needs money. It's his llama or his house. I mean, he's put he poured money into the stock market into these garbage quality companies because they were going up.
I mean, it's not a sophisticated market. Well, and there are garbage companies, and then there are also massive, on the surface of it, stable companies like PetroChina, which is a huge energy company. And when you think about big energy companies, one of the things you think about in terms of the stock is its stability, or should be its stability. It is now one of the most volatile large company stocks in the world.
Yeah, it's as volatile as some of the pink sheet stocks here in the US. I mean, it is really remarkable what's happening there. And people are panicking. And they probably should.
But it is the downside of a market that's gone up that fast. And yeah, I mean, companies like PetroChina, I mean, obviously it's in the oil sector. So it's got, it has, it's been hit by some commodity prices and things of that nature. But a $300 billion market cap company should not move.
I mean, it's having swings of $100 billion in market cap over short periods of time, which is unreal when you think about it. You're listening to Motley Fool Money, talking with Bill Mann, the portfolio manager at Motley Fool Funds, which as of the latest public filing had more than $730 million under management. Let's bring it back to the United States earlier this week, Berkshire Hathaway, very much in the headlines with a more than $37 billion acquisition of Precision Cast Parts. Yeah, they spent some money.
They spent some money. And I know you are a fan of Warren Buffett, but I get the sense that you are not a fan of this deal. Oh, no, no, no. I actually, I think that the deal is good.
And Precision Cast Parts is a fine company. I just find, I think it's probably from having, you know, from having been brought up as an investor looking at message boards, you know, at the Fool and elsewhere. And the Berkshire fanatics have a very, very strange way of loving every deal that Buffett has ever done instantly. And I think, and you and I were talking about this off air before we were taping.
There actually are some people who are, who are not that happy about the deal, who would prefer the deal cash, you think that he paid too much. But it's just always amazing to me because people, and Buffett, I think deserves the benefit of the doubt more than perhaps any investor alive, but immediately when he does something, it's automatically in their eyes brilliant. And I just think that it's, it's a commentary on, you know, on, on, you know, people's willingness to trust the master, if you will. I think that the deal, I think it's a great deal for, for, for Berkshire.
I saw commentary the other day that this deal signaled the end of Berkshire Hathaway as a mutual fund proxy. And I've never really liked it when people have called Berkshire a mutual fund because it, you know, it, it, it fundamentally isn't. But I think that that's, you know, I think that that's an apt description of what's happening with this deal. I was kind of heartened by the reaction because, and I'm not a Berkshire shareholder, but just like last week where we saw Planet Fitness going public and the market just sort of collectively yawned.
And I thought, well, that's the only thing that's nice that we're not just going to automatically throw a parade for every company that goes public. I liked that this deal was scrutinized in a way that said, you know what, we're going to give you a standing ovation for the Heinz deal maybe, but we're not so sure about this. Yeah, but people, yeah, there were people who were talking about how much they paid for the Heinz deal, which in hindsight, I mean, it was, it was, it was genius. But I just think it's funny.
I mean, the old Buffett could come out and you know, announce that, you know, that they've bought, you know, any type of, you know, any type of company here and people would cheer. Radio at full.com is our email address, a couple of internationally flavored emails first from TC Hogan in North End of her, Massachusetts. That's part of this country, by the way. I know that's not international.
TC's question is not about it, but you're, you're well familiar with North End of her, Massachusetts 48 hours ago at, at a place called Harrison's Rose Beef, which, when I was in high school, when I was, yeah, so TC right now is nodding because Harrison's Rose Beef is awesome. We used to call it the Promised Land when we were in high school. Is it still the Promised Land? Oh, God.
So TC's email at the subject line is, what's the deal with Chile? And I won't read the entire thing, but he basically gets at his interest in the Santiago stock market and sort of looking at the data there and trying to make sense of how, here's an international market, which depending on which source you're looking at, whether it's the Wall Street Journal or Yahoo Finance or something, you're getting different sets of data. So first and foremost, I know you look at a lot of different markets when you look at Chile. What's the, what's the thesis for investing in Chile?
So Chile is one of the cheaper markets in the world right now simply because it is a market that is dominated by natural resources, primarily copper, which is more of an industrial metal and copper prices have fallen through the floor. So for a country like Chile, a lot of times people are going to look at these commodity prices and they're going to extrapolate onto every other company in the market. They're going to say, well, we need to get out of Chile because we don't think the price of copper is going to go up anytime soon. But there are great companies in Chile.
I mean, there's the Conchitoro, which is one of the world's largest winemakers there, just fabulous company. How do you square the data? Because I think it's great that he's looking at a market outside the U.S. and I think for anyone who's looking outside, we talk about trying to trust the data from China, but let's set aside for a moment.
I mean, when you're looking at any international market, how do you figure out a way to sort of square two sets of data from two seemingly reputable sources? Yes. Well, so I think if you look, and one of the places that is readily and freely online, available online that I look at is Bloomberg and they've got market data. And if you click down on the countries, you'll notice something, which is, and you can think about this intuitively in the United States and it makes sense, we tend to think of Japan as being the Nikkei or we think of Germany as being the DAX, but every country has a number of indices.
Now, you know, I looked this morning and there are three or four listed for Chile alone, and there's the select, there's the general, which is a broader set of indices. But then there's also ones that are dividend and not dividend adjusted. So the data actually squares and sometimes they're wildly different, but I think that the aggregator sources in Yahoo would be one of them. And I think that was one that he mentioned sometimes are a little bit fast and loose about the description of what they're displaying.
Is it dividend, is it impacted by dividends or they reinvested? Is it the general? So I would look at Bloomberg. I mean, I would say in a lot of ways, we don't spend too much time looking at the indices in that close of a fashion.
Question from Richard Anderson, a listener in Sweden who asks, what should international investors consider before investing in the US stock market? I like this. It's the exact opposite of the question that we get. Yeah.
Yeah. Do you trust the United States market? I would think. So I would say that the United States market has in some ways the, you know, when you go to the bowling alley and you've got the, you know, there's the, you know, there's the, you know, they're the kids, allys where they put the buffers up to the bowling ball.
Can't go into the gutter. I love that. That's the only way I pull. Right.
Exactly. Exactly. Crushed it. No gutter balls for me.
The US market has those, you know, because it is such a diverse market and it has such a strong regulatory oversight. It's kind of like that market in the world. I mean, China's the exact opposite. It's all gutter, you know, like you've got a dental flaw going down the middle.
If you can hit that, you might hit a pin. The US is a very, very safe market. It is the most diverse economy in the world. There's the broadest range of types of companies and industries.
The thing that I would say about the United States, and this will seem a little bit odd, but you've seen the thing where the SEC is now coming out and showing what the, you know, what the salary of the, you know, the CEO is versus the average worker. These types of corporate governance issues, I think, are deeply inferior in the US than they are in Europe. And you should really be careful about the management that you invest in. I would say that in Europe, you know, in, let's take Sweden since that's where that's where he's from.
You're going to find managers who are much closer to the middle. In the United States, you will find all types. So I would be, I would be careful about corporate governance issues and buy stocks with management teams who seem to be aligned with their shareholders. You can sign up for declarations.
It is the free monthly newsletter from Motley Full Funds. Just go to fullfunds.com and you can sign up for declarations. Portfolio manager at Motley Full Funds. Bill Mann, thank you for being here, my friend.
Good to see you, Chris. Coming up next, we'll give you an inside look at the stocks on our radar. This is Motley Full Money. The best thing to life, Bob B.
As always, people on the program here at The Interest in the stocks they talk about on the Motley Full, and they have formal recommendations for you again. It's about by our stocks based solely on what you hear. Welcome back to Motley Full Money. I'm Chris Hilling.
Joining me in studio once again, Jason Moser, Matt Argersinger and Ron Gross. Can I just before you get to the stocks on our radar. One more earnings story of note on Friday shares of El Pollo Loco got roasted. The second quarter revenue came in lower than expected.
Same store sales up, just 1.3% Jason and the stock taking a dive down more than 20% on Friday. Right, and we talk about concerns of the market opportunity with something like Shake Shack, and I think that same dynamic as in Play Here Without Play Loco, because they have such a Western presence. We're not really sure how well that translates to the East. In their S1 they stated they see a market opportunity around 2300 stores versus about 415 that they have today.
It's interesting to note that you mentioned that same store sales number, that system Y. If you look at the company owns same store sales, those are actually down half a percent. And that's a red flag. Whenever we see those company owned stores do worse than the franchise stores, that's got to raise a big question mark right there.
And so I think between the actual growth numbers, this company is lobbing up along with the fact that I just think the question of the market opportunity to re-valid one, I think the sell off in the stock was very warranted. And I'm not really sure this is one that we even look attractive today. All right, let's get to the stocks on our radar. We'll bring our man Steve Brodo from the other side of the glass to hit you with a question.
Matt, I'm looking at a stock you value company today. I'm looking at American Express. Finally, I'm their father. I'm their ticker, AXP from American Express.
And it's a company that's on our million dollar portfolio. Watchlist. We haven't bought it for the portfolio yet, but it's something that's certainly, I'm paying attention to. I mean, it's come down a lot over the past 12 months, related to the Costco deal.
They've lost that exclusivity there. But you're paying only 14 times earnings for American Express today. That's half the multiple of Visa, MasterCard. And I just, for that kind of business quality, the business of American Express is the brand.
I just think it's a great price right now. And the ticker? AXP. Steve, question about American Express?
You've had a current shareholder and I have an Amex card, which I'm about to cancel, I think. Because of the Costco deal. And because I'm getting so much better deal through Amazon.com, they've got a great thing. Convince me not to cancel this card.
I mean, I can't. I mean, it sounds like if you love Costco or if you prefer Amazon, American Express might not be the place anymore. I hope it is for millions more of other people that are watching. Jason, what are you looking at?
Well, I'm going to dip into another blue chipper here. Going with Walt Disney ticker, DIS. These shares have been shellac this week down almost 12% since the earnings came out. There are concerns of subscriber head wins in regard to the ESPN property and their cable networks in general.
I think those are a bit short sighted. I think, you know, there's sort of the question of the brand and whether there's a weakness there. I don't think it's a question of the brand. I think it's a question on the distribution side, which is still a bit of an unknown.
And I think that management has recognized this and that's something that they'll be, you know, attacking here in the next five to 10 years. I actually think this is an opportunity for them to get ESPN from even more eyeballs thanks to the proliferation of mobile devices all over the world. In fact, it sports translates everywhere. So I actually encourage there.
And then when you look at the shorter term catables on the horizon and Star Wars and Disney Shanghai, I just think there's too much to look forward to with this business. And if you're looking for one to buy and hang on to for years to come, this is a great one. Steve, question about Walt Disney? My question is the new Star Wars.
Are you as excited as I am? I'm excited. I'm very excited. I hope there's no Jar Jar Binks.
I would say I'm doubly excited, Steve. Why do you see question? I mean, look what I got. Oh my goodness.
All right, Ralph. What are you looking at? I got Graham Corporation, GHM, a new deep value watch list stock for me, not a recommendation to make vacuum and heat transfer equipment for energy, defense and chemical industries. US Navy is a large customer, only $180 million market cap here.
Profitable, great balance sheet. Because of the weakness in the energy sector, stock has come down quite a bit. Trading near, it's 52 week low. We've got less than two times tangible book, four and a half times e-but-da.
As I said, tons of cash, almost no debt. Stock is probably worth 10 to 15% more based on normalized earning, not counting any future growth going forward. I need to dive in a little bit to the competition here, but it looks really interesting to me. Steve, question about Graham Holdings?
How did you find this company, Ron? Well, I run a series of screens on some software we have here where I put in some criteria that I'm looking for. It spits back a couple dozen and I spend my days sifting through them. Is one of the tabs you click on sexy?
Because you describe that business. Blurring is good, my friend. All right, Steve. Graham Holdings, Walt Disney, American Express.
Anything of interest to you there? I don't know. Graham Holdings sounds pretty interesting. I like companies like that.
I just want to know where Ron's finding him. All right, Ron Gross, Jason Moser, Matt, Argy Singer, guys. Thanks for being here. Thanks for being here.
That was going to do it for this week's edition of Motley Fool Money. Our engineer, Steve Broido. Our producer is Matt Greer. I'm Chris L.
Thanks for listening. We'll see you next week when I guess we'll be test Viglin, the former host from Marketplace Money.