Money Tips for the New Year

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I'll best stay there and life I breathe, but you can get up to the present. From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Hill, joining me in studio this week, from Motley Fool One, Jason Moser, from Motley Fool Income Investor, James Early, and for Million Dollar Portfolio, and the MDP value Ron Gross.

Good to see you gentlemen. Hey, hey. We have got the latest from general retail, fashion retail, and non-retail as well, just in case you were worried that this was an all-retail show. We've got money tips from personal finance expert Deanna Yocum.

We will dip into the Fool mail bag and give you a few stock ideas for your watch list. But we begin this week with Big Macro. December jobs report came out Friday morning. 252,000 jobs added in the month of December.

Ron, the unemployment rate falls to 5.6%. What's not to love? I think it looks really good. In November, it was revised upwards as well, created 353,000 jobs.

In November, and that U6 number we sometimes talk about, which is that all-encompassing unemployment number also did well, 11.4 down now to 11.2%. So looking pretty good, the one sticking point, and this isn't new, is wages, which are not really climbing as we would like to see them. In fact, they were down for the month, which brought the annual gain down to a positive 1.7%, rather in NIMIC. Not only do we need to get people back to work, but we need to see people continually increasing their wages, because we need those folks to spend to drive the economy.

The offset to that will be the low gas prices. But for now, we can get away with that, I think, because the low gas prices will put more money in people's pockets and should have them continue to spend. But longer term, we need to see some increase in wages. Now, the offset to that is the lack of- That's quite a few.

I've got just seven more points. He's pivoting. The lack of wage inflation gives the Fed the time it needs to not raise interest rates if they don't want to, although I think we will see the hike sometime during the year, but they're not in a rush because we're not seeing inflation. Just offset that.

I thought I was done. I thought I was done. I have three more points. But it wasn't the other reason, besides just the wages going down, helping the unplant rate that fewer people are looking for work, in other words, people left the workforce.

So if you factor that out, maybe it's just kind of a wash. The labor participation rate, which you speak of, is at a 37-year-old, you're low, 62.7% right now. It's partly a demographic shift as people get older and leave the workforce. But certainly we've talked about that kind of math that does impact the unemployment rate and that is true.

Go ahead. I'd say the wages point is the right one I think to focus on. It's nice to see the unemployment rate continuing to improve. But if people are not making money, it's fine now.

Gas prices are low. Inflation isn't checked. There's really no concerns on that front. But we know that that won't last forever.

And when you look at, really, what I would consider an abysmal national personal savings rate, I mean, it's someone that's able to fully have percent a day, that just means that when the time comes, when people need to be prepared for whatever shoe drops, they're not necessarily going to be prepared. And there isn't going to be a whole heck of a lot of equity out there in homes to tap. And there isn't going to be a lot of credit being extended. So I think that while it's nice to see the unemployment rate continue to improve, wages are going to have to get better.

Let's step back to feel good about ourselves and look at the rest of the world. China is softening. Europe is just kind of in the doldrums. The missing story here is that we're doing so well at a time when not many other people are.

And I'll overuse this analogy to the party use simply because I think it's just so good. But we are the least drunk driver on the road. And that's still saying something. I mean, whether it's from this debt filled, a mania or not, we're still doing the best.

All right, let's get to some retail earnings. Third quarter results for BedDath and Beyond and the Container Store both came in lower than expected. Both stocks were down on Friday as a result. Jason, how bad was it?

Not good. Not good bad. Not good. I mean, you know, we talked about this on Monday on Market Foolery.

I actually mentioned the Container Store as being one of the companies and management teams that really needed to score big this year because they have just had an awful experience of publicly traded company. And this quarter didn't do anything to really help that cause. I mean, you look at top line sales growth numbers and comps or growth numbers both just really parable. I mean, comps are down.

Sales growth is flat. And when you look at something like the Container Store, I mean, this is already a small sort of niche play to begin with. I think it's very fair to question the market opportunity this company has. And when you have a big box retailer that is not able to focus on that online presence, like something like a BedDath and Beyond can, at least, that's where I would become very, very concerned with the Container Store, particularly considering the debt they have on the balance sheet.

And then back to Beyond, I will extend them a little bit of credit here because I went through the call here and the word online was used 14 times this quarter. They're growing their mobile sales. They are. Last year, the same quarter that word online was used only once.

And that's something I've been very critical on them for quite some time. How many times have you used the word online? Well, their online strategy were lack thereof. So at least this gives us some clues that they're actually thinking about this now.

And the thing about BedDath and Beyond is they're already married to that discounting strategy. I mean, you can't go to your mailbox or check your email without having some type of a coupon from BedDath and Beyond. The Container Store is a little bit more focused on pricing power type of an idea with a more sort of premium product. And I'm not sure they actually have that pricing power that we initially have liked to believe.

Isn't the golden era of the big box or just any kind of store retail just over? I mean, the golden era for sure. No doubt about that. You know, companies that are not focusing more and more on online and mobile in particular are certainly missing the boat.

And there are some companies out there that just their businesses aren't geared towards that online experience. And unfortunately, I think the Container Store is probably one of those where it's a bit more of an in-store experience. And that probably is going to hurt them in the long run. It wasn't all bad news in the retail space this week.

Costco's same store sales for December came in higher than expected. And shares of, wait for it, JCPenney, up more than 25 percent. It's alive. After same stores sales for the holiday came in higher than much higher than expected.

How much should we read into these results, Ron? Well, for Costco, it's just, I think it's more of the same. And then this one indication where big box or warehouse is thriving, the discount space. They continue to put up great numbers.

If you exclude the effect of gas and foreign currency, which is a little bit wonky right now, you have Comp Store sales up 8 percent for Costco, really impressive numbers. Stock continues to reflect that goodness, however, stock is not as cheap as it used to be. Where are we? We're on 140, 445 now.

I really think 150s, mid-150s is probably the upper limit. And then you're probably factoring all of the coming growth for the future. So certainly it's not as cheap as it used to be, but they're doing a great job. In terms of JCPenney, are they out of the woods or are they just out of the coffin?

Well, we've given them a really hard time. And I think we have to acknowledge that. And the fact that the stock jumped is good for them. And then they show some light from a very dark time.

But I still kind of stick to my guns and say it's a very competitive business, retail and general and department stores specifically. They don't really have a differentiating strategy. Pulling back from the Ron Johnson era, which I think they had to, and they're back to promotions and couponing and sales. But that's a very crowded space.

And I don't see how they differentiate themselves. And just because they put up some positive same-source sales numbers, I don't think necessarily you can extrapolate that out to the future. Regardless of the retailer, how much importance should investors put on the same-source sales number? Because Costco came out with this number for December.

Costco doesn't report quarterly earnings for another two months. And I think there are some people out there who look at same-source sales for the holiday coming in better than expected and want to extrapolate out and think, well, gosh, they're going to crush their earnings. But that's not for another two months? So you listen to what management has to say.

In the case of JCPenney, we can listen directly to what they had to say, where they gave us guidance. And they said they expect quarterly growth to be in the upper range of their two to four percent comp store guidance. So there you have the company telling you directly. In the absence of that, you can't necessarily hang your head on it, but still, you can take some trends and say, you know, companies executing well or they're not.

Shares of Verizon rose earlier this week on reports that the telecom giant is talking with AOL about a possible joint venture. And James, I got to admit, this was kind of a head scratcher for me when I saw this. What does Verizon want with AOL? Well, Verizon wants nothing more than to hose us with massive data charges.

We all know, right? Take through the nose. How does that make them different from other companies? Well, if we're watching more videos, then we're going to end up paying a lot more.

So they think that AOL can just give them more videos. It's not totally clear to me why they just can't do this themselves. But the idea is that AOL get in videos and also a better programmatic ad buying platform. But I don't see why they have to buy it.

AOL has traditionally been sort of a kiss of death for companies that try to acquire it or at least once. So big acquisitions don't work out. I don't see this working out very well. I think they should partner and not buy.

Although how worried should you be if you're a Verizon shareholder? I mean, Verizon's market cap is about $1933 billion and AOL is less than $4 billion. So if they were to make either an acquisition or joint venture, it would not be a ton of money for them. That's sort of the best kind of point.

Coming up, one-fashioned retailer does a little shoe shopping. Stay right here. You're listening to Motleyful Money. Welcome back to Motleyful Money.

Chris Hill here in studio with Ron Gross, James, early, and Jason Moser. Guys, this week, fashion retailer Coach, but Stuart Weitzman, a privately held luxury shoe company for $574 million. What do you think Ron? Is this going to help coach in its battle against the likes of Michael Coors and Kate Spade?

It might help, but it's not really the answer. Coach has been struggling over the last couple of years, really. As you said, as competition has moved in, especially in the North American market, whether it's Michael Coors or Kate Spade or Tory Burch, and really kind of take a market share away from them and kind of eat in their lunch a bit. So they really need to focus on turning that handbag, the primary business, and they have a new management team and a new design chief, and they possibly might be on the right track there.

The addition of Stuart Weitzman might be interesting, but I think it can possibly take their eye off the ball a bit from what they really must do to turn this business. Stuart Weitzman is a good business. I don't think the price, it's $1.5 billion or something to sneeze at, but I don't think it's ridiculous. It's a $300 million business probably, and it gives the company, it gives the coach more access into those luxury retailers, whether it's an even market or sex, in order to a certain extent.

So it's pretty good. They have a retail business as well as Coach does. In fact, the mall near me, the coach is on one side of the aisle and Stuart Weitzman is right across on the other, and they're a highly respected brand. So it's a nice acquisition, but Coach has more work to do here.

This is right in line with their strategy though. They've been trying to figure out a way to pivot away from just being a handbag company for a while now. We've been kicking around that lifestyle brand name that they continue to use. So this is why that acquisition is taking place, because whether it's Shoes Coates, they're trying to become more of your closet.

I'm just wondering what's the most you would pay for pair of Shoes, Ron? See, I find it fascinating how expensive ends Shoes are. You go in, you're dropping $150 easily, right? For a pair of men's shoes?

No, no. If not significantly more. So what is your answer? I mean, I'm not a big fashion guy, too.

I can't imagine over $175. It does seem like this move by Coach is just on some level, just a tiny admission that they made a mistake years ago in going down market. And maybe I'm reading too much into that, Ron, but it does seem like it's their move back to the luxury space when the cats out of the bag for them. They need to be in a lot of different spaces though to recapture that North American business.

And most importantly, it's they have to produce the designs that people want. And I think that the short viewers may have that secret sauce. These new designs are getting good reviews and there has been some light at the end of the tunnel, but it's too early to really coach out. It was a huge part of their business.

And that's kind of the problem, too. Radio at Fool.com is our email address. Got a question from Carl Eric Strumster in New York. He writes, let's pretend there's a company, eBay, that is planning a big spinoff in the not too distant future.

Let's also pretend you own shares in the company, but aren't necessarily sure that you want to keep owning shares of that company or the company to be spun off in the long run. Is it worth waiting to sell your shares until the spinoff has been completed? Or can you assume that any additional value from the spinoff has already been baked into the company's share price? James, obviously he's hinting towards eBay, but I think there's a question regardless of any company that you own that is planning a spinoff.

Academic research Chris has shown that spinoffs do unlock value, statistically speaking. So if that's true, if you believe that, you would want to hold the share through the spinoff to get that value. That makes sense. Well, I mean, if it's academic research, how can you argue that?

How can we not trust that? I like how he throws a little if you believe that. I do. I mean, companies tend to overbuy, companies tend to do things they shouldn't do.

So all else equal, pairing down usually adds more value or just unlocks value that was hidden. Kind of academics are we talking about? I was just reminded of the fact that longtime listeners know this, James, from time to time, you will reference particular academic research here or there. Do you not trust this research?

This is not like the Ned Davis study that you've forgotten. Academic research can be highly, but that is one of my favorite studies. I know that's why I'm not. I feel like I have a favorite study.

This is positive rush of energy. When I think of Ned Davis, 1972 to 2006, dividend payers in the S&P outperformed non-pairs by six percentage points annually, Chris. Who couldn't like that kind of stat if you're a dividend advisor like myself? Anyway, yeah, there can't be significant biases in academic research.

It's a lot more political than people think, but overall, it's a lot better than industry research. Shares of WD-40 down this week after first quarter results came in lower than expected, and the results themselves were not nearly as noteworthy as how WD-40 describes itself in its official statement. Let me read guys. This is straight from their earnings statement.

This is the first sentence. WD-40 company, a global marketing organization dedicated to creating positive lasting memories by developing and selling products that solve problems in workshops, factories, and homes around the world. Today reported financial results for its first fiscal quarter. Wow.

Just to be clear, this is the very handy spray that you use on hinges that are squeaking. It's awesome. It's the last thing that memories is a big shock. But PR guy can convince anybody of anything.

Isn't that just a little self-aggrandizing to refer to your, again, handy spray that solves the same thing? Not just the spray, though. I mean, I'm sure James can probably testify to this. I know you used to work in the automotive repair business.

You had to probably have a bottle of that lava soap in there to clean your hands off. That's pretty impressive soap there. I mean, all my life. I mean, I can think of many problems with WD-40.

It's good stuff, but lasting memories is a bit much. I mean, you know, it's kind of sit back here and think, oh, yeah, I remember that time those hinges were squeaking in WD-40. Let's bring in our man Steve Roto from the other side of the glass. Happy New Year, Steve, by the way.

Happy New Year as well. First, before I get to how handy you may or may not be around the home. Why Mary? Were you like me sort of surprised at how WD-40 thinks of itself as a company?

I just bought some WD-40 the other day. So that's, I mean, I ran out of some and I bought some. How long did it take you to run out of the sum? Not very long because I was trying to remove a very greasy residue.

It's very good at picking up like tars, like substances, I went through OK. I'd have the same bottle like what, 25 years ago? So online, you can find different lists of unusual uses for surprising uses for WD-40. The one that I saw that I'm absolutely going to try because we've got a little bit of a squirrel problem near my home is basically using it to keep squirrels off of bird feeders and that sort of thing.

I don't know what that actually does to the bird seed and therefore the birds. But we'll see. I don't like to shoot the squirrels with a WD-40. No, I think you're supposed to spray it on the bird feeder.

But what sort of in the most unusual way you've used a WD-40? No unusual ways, although I have used it to remove tar. I mean, it's terrific. You guys know what WD stands for?

I always assumed it was the initials of the inventor or the founder. It stands for water displacement and that was their 40th formulation. Wow. So they took 39 cracks and couldn't make it work?

I think so. Alright. Thanks for being here guys. We'll see you a little bit later in the show.

Up next, money tips from personal finance expert, Deanna Yockem. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Fool Money.

I'm Chris Hill. Start of a brand new year. It's the time to make New Year's resolutions. It's getting better shape, better health, get your fiscal house in order.

I guess this week actually says no. Do not make New Year's resolutions about your money. Deanna Yockem is the Motley Fool's personal finance expert and author and she joins me in studio now. Thanks for being here.

Oh, hey, Chris. No resolutions? Why? Everybody makes resolutions.

Resolutions. It's like a setup. They're made to be broken. You are going to fail if you have resolutions.

So we recommend just make a to-do list. Just make a to-do list and jump right in there. Alright. So I'm putting together my personal finance to-do list.

What should I put on the list? Number one, stop buying stupid stuff. Make a list of big things that you're excited about buying, purchasing whether it's travel or a new car. Keep that front and center.

And you will be surprised at how many things you just don't buy when it's put into that context. Well, particularly if you have sort of that larger goal and your mindset is comparing sort of the nickel and dime purchases that you make on a daily or weekly basis compared to that trip later in the year you're really excited about what else am I putting on? Well, also I want to clarify that I'm not one of these skip the latte people because I've seen you when you haven't had your life. Oh, yeah.

I know. I never consider that. Money I spend on coffee is money very well spent. So for you, you should not skip the latte.

You do get joy out of that. But find something else that you're spending money on that doesn't bring you that much satisfaction. Alright. What else am I putting on my list?

So you hear everybody say increase your contribution to your retirement plan. Make sure you're maxing out your 401k. Well, well and good. Here I say, if you have not contributed, if you're eligible to contribute to an IRA for 2014 and you have not yet done that, you're waiting.

You've got until April 15th or 16th. Do that now. Don't wait. Don't wait because January historically has been one of the best months for the stock market.

So as soon as you get your money in there and working for you, the better off you'll be. So this is a just do it now. Do it as soon as possible. Alright.

One of the other things that I've heard you talk about and I'm assuming this is also on the list is take a day to just check your own financial health. Yeah. We call it financial health day. Maybe this is the Motley Fool.

We take one day of the week where it's no emails, no work for me. Oh, dear. Sorry. I do it weekly.

I don't know about you. One day of the year, you take off and pick three or five things that you want to concentrate on that have little niggling details in your financial life that you want to get done. Things that'll help you spend better, save more, protect your family or invest better. For instance, look at the fees that you're paying for your mutual funds.

That's something that is going to pay off. You see, oh, wow, I'm overpaying for underperformance here. I need to make some changes. I have this day.

My calendar is clear today. You can get that done. So it's a really satisfying thing to check off your to-do list. Well, and particularly if you take an entire day, some of the things that you may be doing to improve your financial health involve activities with institutions, actually going to the bank or spending time on the phone with your brokerage account, that sort of thing.

The sort of thing that in the context of a regular day when you're working or you're dealing with your kids after school or something like that, you feel like you just don't have the time. But if you're taking the entire day, then all of a sudden that seems a lot more manageable. Yeah. And tackling something that you're insuring is only there nine to five, Monday through Friday.

You've got the day off. You can do it. Opening safety deposit box, for instance. You have to go do that during banking hours if you want to access it.

So take out your calendar now, pick a day, clear it, and make your to-do list then. All right. Before we get to some of the recent surveys that have been in the news about how we collectively as a country are or are not doing well in terms of saving, et cetera, give me one more thing for my to-do list. Prepare to die.

You went dark. I did. Not that I see anything in your picture. Any ominous clouds over you.

But this is an important thing. We're all going to go at some point. We are all going to go. And emergencies tend to not happen when you want them to.

They are not schedule a bowl of events. So you want to be prepared for them. And here it's really simple. Having a few important pieces of paperwork filled out.

Your durable power of attorney, your advanced medical directive. So the durable power of attorney for finances and the advanced medical directive both do the same thing. It basically names someone to take care of these things to make decisions on your behalf. Should you be unable to do so?

When families don't have these important documents in place, then a whole lot of confusion, more stress on top of a very stressful time already can take place. So if you have those in place already, they're easy to get. You can get them from your local hospital or even online. So does that happen then?

And depending on what state you live in, you should not necessarily assume that the laws of the state that you're living in are going to sync up perfectly with your family members and the money automatically. Because it's easy to think in the abstract, oh well, if I die suddenly, then of course my spouse and my children will get. But no, not depending on the state. That's not necessarily the case.

That's absolutely right. So at least having these forms in place will help things move along as you intend or as you would like them to. We were talking earlier. And one of the things I mentioned to you was I feel like we as a nation are doing better managing our money, keeping ourselves out of debt, that sort of thing.

That's just how I feel. Then I saw a brand new survey out this week from Bankrate.com, which finds just 62% of Americans have enough spare cash to pay for unexpected bills like a car repair or a trip to the ER. That was surprising to me. Was it surprising to you?

I'm not blown over by that. Unfortunately, it's pretty common for people to spend over and above what they take in. And so having savings aside from that is a very difficult thing. It takes a little bit of discipline.

And we don't like to think about the what is. Right. I mean, this is where many people when you hear about those in credit card debt, those but going down that black hole, it's because of things like this. Car repairs are big expenses that weren't expected or planned for in medical expenses in particular.

There was a story a few weeks ago, another survey where nearly 20% of Americans surveyed said that they believe they will never be completely free of debt. But what stood out to me was that only 6% of millennials think that they will die with any sort of debt. Are millennials delusional? Or are they actually better at managing money than the old geysers like me would necessarily assume?

Like it's the other people. I was just really surprised by that. No, it is surprising. You see, I've seen other studies that show that this is interesting, millennials act financially more like the boomers than, and in fact, the generation before that than they do say Gen X.

And what that means is it's like these kids grew up in depression era or America where they know, oh, wow, things happen. The market goes down. They've been through a couple crashes. They probably vividly remember 2008, 2009 and fact of that industry.

So good for them in understanding that debt is bad. That is the thing that those are the cement galashes that will prevent them from getting ahead. But on the other hand, they're also not as good about investing. They don't trust the stock market.

And that's a very bad thing because you can steer clear of debt and shove money in your mattress all you want. But if you are not getting decent returns, if you're not even keeping up with inflation with your savings, then the future doesn't look as bright either. So this is a generation that really needs to learn that investing in the stock market is not as scary as recent years might have led them to believe. Well, in particular, since they have the benefit that older people do not have, which is they have more time on their side.

They have a greater ability to put that compound interest to work for them. Those youngsters don't waste your most precious asset. You're listening to Motley Fool Money talking with personal finance expert Deana Yocum. She's also the author of the book, Couples and Cash, How to Handle Money with Your Honey.

And now we can add podcasting to your resume because you are part of the brand new podcast, Motley Fool Answers. First and foremost, when can I get this new podcast? Every Tuesday comes out on iTunes. And this is you and Robert Broke, our colleague who's a retirement expert, Allison Southwick, sort of keeping you two in check covering a lot of the things that frankly we don't cover because on this show we focus so much on stocks, but you guys are covering 401Ks, retirement planning, estate planning, all of that.

Yeah, debt, bad debt, mortgages, all sorts of things that frankly in my mind are investments because they involve your finances. They're just not investments in the stock market. So we're going to get you in shape, Chris Hill. Thank God, some of it is.

Hey, if you've got questions, email them to answers at fool.com. That's answers at fool.com. Send them your questions about retirement planning, estate planning, 401Ks, all of that day-to-day money stuff, the New Motley Fool Answers podcast. As she said, it goes up every Tuesday, so check it out.

Dan, welcome. Thanks so much for being here. Thank you, Chris Hill. Coming up, we'll give you an inside look at the stocks on our radar.

Stay right here. You're listening to Motley Fool Motley. As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear.

Welcome back to Motley Fool Money, Chris Hill here in studio. Join once again by Jason Moser, James Early and Ron Gross. Guys, before we get to the stocks that are on our radar this week, let's dip back into the fool mailbag. RadioatFool.com is our email address.

Drop us a line sometime. Got a question from Levente Zebo, whose name I'm almost certainly just pronouncing. I apologize for that. From Guelph, Ontario.

You used it at the home of Jim. That is the home of one Jim Billy. Will you call this an international show? Absolutely call this an international show.

He begins by saying, I cheered up when I heard Ron Gross say he's getting interested in solar. I know that not Argusinger is enthusiastic about solar city, but my question for Ron is, is there a single company other than solar city that caught his attention or is it just the industry in general that is starting to look attractive to him? What do you think, Ron? Well, it is the industry in general.

I mentioned that at our year end show. I want to just look at it for 2015. I think solar is going to pick up as it becomes more price competitive. Now, the drop in oil prices has put a little bit of a kink in that for the time being.

We've seen solar stocks come down quite a bit because they're less attractive in terms of being a competitive alternative, something alternative to traditional fuels. But I think if you look at the industry as a whole, there's a lot of interesting companies. You can look at installers. You can look at manufacturers.

A lot of them are blurring the lines and becoming both and becoming more virally integrated. Solar city is clearly a favorite here at the Fool, but there's a number of good ones. Sunpower, first solar, Vivint solar, really interesting stocks. I think one way you may want to play this though is to look at a basket of these types of stocks because it is difficult to say if one specifically will be the winner over another.

So you want to pick three or four of them. Another interesting way to play, and this is not a recommendation, but it's to look at an ETF. The Guggenheim, sector ETF, ticker symbol tan, TAN, TAN. Could be an interesting way to go.

That mimics the MAC Global Solar Energy Index, and that could be the easiest way to play this. Got a question from Jake Miller in Pennsylvania. He writes, Warren Buffett has said one of the best ways to invest is to buy great companies at a fair price. My question is, what is the best way to determine a company's valuation?

I often hear about PE ratios and price to book values, but is there a better way to determine valuation? For example, Under Armour has come up a few times on your show. Yet its PE ratio is in the 80s. At first, this seems unattractive, but the performance of the stock over the past year would say otherwise.

Well, he's right about that, Jason. I mean, just under Armour, up nearly 60% over the past year. But it is not just if you're looking at the PE ratio. It is not a cheap stock.

No, it's not. And there is no one answer in regard to valuation. Evaluation is, I think, just as much art as it's mathematics, right? I mean, everybody has their own perspective on it there.

But I think a lot of it also comes down to understanding the actual business and how the business model works. And I think the PE ratio is, I mean, Amazon.com looks like it's pretty out there as well. But you have to look at the fundamentals of that business, how they make their money and account for it on their income statement and so forth. And so when I look at a lot of these sort of volatile sort of higher growth names in Under Armour, we'll just use as an example, I'm less focused on the PE ratio.

And I'm more focused on a couple of things. I'm looking at really what's the market opportunity for the company, looking at their sales growth. And then in looking at that sales growth, how are their margins shaking out there? If you can see their gross margin continues to improve over time, and that's showing you they're maintaining some pricing on their products there.

And that's a good sign of a very powerful brand that people like. And so I think the best way to mitigate that risk of valuation and really volatility in stocks, particularly with these growth names is to buy them in stages, buy them in thirds or fourths even. I mean, take the total amount of money that you want to invest in a given company, say you want to invest $3,000 in Under Armour. Well, don't buy all $3,000 worth of shares at once.

I mean, buy it by $1,000, follow it, and then add to that position opportunistically over time. Sometimes you may add on the downside, sometimes you may only add on the upside, but that's okay too. Adding to your winners is one of the most valuable lessons I think I learned from David Gardner since I've been here at The Molly Fool. So it's one way to look at it.

James? James? Yeah, just an untactical point. It's not the only way to...

Let's see over the bleak first. Yes, it's done to tickle. There's something in humanity that we love the illusion of certainty. If numbers feel precise, they give us the illusion of control and valuation gives us that.

That's the bleak point. Nobody really knows what to do. But it does come down to cash. If you're buying based on PE, you're buying the last year's earnings.

And who cares about the last year's earnings? If you're buying a stock, you should care about the future. So it does ultimately come down to the future cash flows of a company. PE is kind of a quick and lazy way to approximate that.

Not saying everybody's lazy to use it, but sometimes. But it is ultimately is a cash flow based evaluation. It's just sometimes very hard to estimate the future cash flows of a very new and growing business. Now quickly jump in and say a lot of valuation boils down to how much are you willing to pay for future growth, which is by definition unknowable.

A traditional value investor would probably say I'd rather not pay that much for future growth. A rule breaker investor or a growth investor like David Gardner would say I'm fine playing for growth for companies that are innovative and changing the world. Alright, let's get to the stocks that are on our radar this week. We'll bring in our man Steve Brodo from the other side of the glass to hit you with a question.

Ron, gross, you're up first. I'm going to recommend Activision, ATVI. A company we've talked about over the years quite a bit. I think the company's doing really better than it's ever done.

2014 was a great year and 2015 looks to be quite good as well. The stock is off 15% over the last six months, really 20% from its recent high. I think that creates an opportunity to get in now at a good price where when it was trading around 24, now 19, 24, not as attractive, 19 looks pretty good to me. Steve, question about Activision Blizzard?

My question is what is a video game that you would actually play from Activision? I'm not a video gamer. My nature, Destiny, looks pretty good. Call of Duty.

I sit and I watch my son play. I can't imagine being any good at it myself. Some of the world of Warcraft could be interesting, but I'm not really a gamer. You're just going to name other games.

No, there's many, many, many. That's one thing that makes it so attractive. James, what's in the radar. I'm with Omnicom.

This is an income investor recommendation for a couple of months back. It owns a bunch of advertising agencies. Three of the biggest, VBDO, DBB, and TBWA. I guess you have to be an actor.

Yeah. But VBDO is the inspiration for a TV show called Mad Men. I've never seen it on. I don't want to be.

I don't want to be. They made the VCs everywhere you want to be. Campaign. A whole bunch of famous ads.

2.8% yield is not huge, but this is a very lucrative business. They have a 31% return on equity and a 16% return on capital. No matter what we're doing, whether we're using a mobile device, websites or billboards, advertising is always going to be with us. It's actually becoming more complicated.

Things are going across many different platforms now, which actually increases the value of an ad agency. Steve? 2.8%. What yield do I want to be looking at if I'm really interested in dividends?

It's kind of the number you set for yourself, Steve. More than 2.8%. Yeah. If you like 3.5%, what's the threshold for your income?

Because 2.8 is about the lowest alcohol. 3% or above is usually what I like. Jason? Well, that's a shout out to Buck Rogers.

It was. Congratulations. Well done. That was great.

Good for him. That was good. Good for him. Good for him.

I called this one out a little bit earlier this week. Zillow to me ticker Z. It's the online real estate marketplace that everybody knows and loves. And I had always been a little bit scared of the valuation, to be honest with you.

But I do believe that the truly acquisition will work out well for them. They still maintain just a very small amount of the market share of revenue that agents are spending on that advertising. So there is a lot of optionality there for this business. One of those options that they're pursuing is the rental market as well, which I think will continue to be very strong with, there's a 50 cent word for you, Steve.

The parapatetic nature of our workforce today. Steve? Is that too weird? Steve?

Is that mean anything worthwhile? You know, not very long ago. I made a lot of fun of it, but I tell you, as time goes on their data is getting better. So it is improving.

All right, guys. Thanks for being here. Thanks everyone for listening. We'll see you next week.