Motley Fool Research on Parade

It's the weekend, so pull up your chair a minute and relax! We have some goodies for you.

First, we recently met Fool writer, John Del Vecchio, who analyzes software and computer hardware companies for readers of Motley Fool Research. In one report covering Oracle (Nasdaq: ORCL), John writes that he believes Oracle could be on a business track to soon become a more valuable software company than Microsoft (Nasdaq: MSFT). How so? John analyzes the young, fast-growing software markets that Oracle is winning.

Next up, Siebel Systems (Nasdaq: SEBL) appears to be a young software Rule Maker in the making (could that mean it's now a Rule Breaker?). These reports are sold in Motley Fool Research and for a limited time the new Siebel Systems report is free. Grab yourself a copy!

Today we meet Bob Fredeen, a Fool analyst who covers branded retailers for Fool Research readers, including Starbucks (Nasdaq: SBUX), Gap (NYSE: GPS), and Nike (NYSE: NKE). Having other interests as well, Bob will soon offer you Fool Research's first report on Qualcomm (Nasdaq: QCOM). Let's jump in and get to know Bob better to see what he offers to Foolish investors. Bob, some history of yourself?

TMF Bobdog: I grew up in California, but when it came time to go to college, I applied to three schools on the East Coast. I choose the westernmost school, which was Washington, DC's George Washington University. After earning a degree in International Affairs, I figured the current economic environment was not all that favorable for me and I hadn't done enough crazy things in my life. So, I packed my bags and flew to Taiwan.

In Taiwan, I was able to find work as a mediocre English teacher. Fortunately, that market was pretty forgiving and I was able to learn on the job. Towards the end of my four-year teaching career, I was stunned to find that some of my students' English had actually improved. Of course, my primary contribution was a never-ending stream of games to keep the children entertained.

You're probably waiting for the finance aspect. My entry into the world of finance was very Chinese. A student's friend's family business wanted to found an investment bank. So, through connections, I was able to get a job as an English editor/analyst for this small bank. After much stopping and starting, the company finally built a "foreign investor" team and I started analyzing companies almost full time, as well as editing my colleague's reports.

This job is what brought me to read The Motley Fool, as I convinced my boss that a modem was critical for my job and began surfing the Internet to learn as much as I could about finance. This same quest later led me to enroll in the Chartered Financial Analyst (CFA) program with the Association for Investment Management and Research.

Even though I was a card-carrying member of the Wise, Taiwan style, I followed the Fool. As I was looking for a new job, I heard about the new Motley Fool Research stock reports and I wanted to be involved. The one facet of my previous job that I truly enjoyed was researching companies and industries. I like to look at the industries and where companies fit into an industry, and I like to figure out how different factors influence the industries and then the companies themselves.

Rule Breaker: Do you believe any of the companies that you analyze are Rule Breakers?

TMF Bobdog: I cover Gap Inc., Starbucks Coffee Co., and Nike Inc., and we will announce my coverage of a new company soon [sorry, we trumped ya there, Bob -- Qualcomm]. Because I like to cover companies with well-established, strong brands, I tend to gravitate toward Rule Makers more than Breakers. Starbucks has been in the BreakerPort since 1998, and perhaps it was a Rule Breaker when it was purchased. However, I don't believe it is now. Now Starbucks sets the rules in its industry. In fact, it seems that in regions where local competitors are successful, the local brands "out Starbucked" Starbucks. To me, that shows that Starbucks is actually a Rule Maker. In fact, I'm going to tell Tom Gardner that you have one of his companies in your portfolio. Boy are you gonna get it.

Rule Breaker: What do Fool Research writers hope to accomplish for investors and the Fool's customers?

TMF Bobdog: I think the most important thing that we try to accomplish is to explain the business model and the industries of the companies we cover in a clear, entertaining manner. We hope to provide, in a single product, a summary of what a company does, the competitive landscape it faces, and what the critical factors in its future truly are. We strive to ask and answer all of the right questions about a company.

I assume that most of our customers are either investors or folks who want to invest, and I think that the value of the Fool Research reports is essentially the same for both: the reports help build their understanding of companies so they can make better-informed investment decisions. With that understanding, our customers can also use our reports as a basis for further research or as a tool to help them choose to ignore a particular investment.

I hope they would also go out and find more information that either supports the conclusions in the reports, or even debunks them. So, ultimately, our research reports are a convenient and understandable way to learn about potential investments and keep current with your existing investments.

Rule Breaker: How well should an investor know and understand a company before buying shares? Can you define this need somehow?

TMF Bobdog: You should really know a company before you invest in it. At the very least, you should know what is in the financial statements and what all those numbers mean. After that, I think investors should have a good idea of what the company does and what its industry is like.

I personally learned this the hard way, making a few bad investments in the past. The actual numbers or facts to look at vary for different industries, but I am a big fan of companies that have strong Foolish Flow Ratios and cash conversion cycles. Basically, I like to see companies that do not have too much inventory, and that have low receivables and high payables.

In my opinion, some of the best companies to invest in are companies that are big enough to get their customers to pay early (low receivables) and get their suppliers to accept long credit terms (high payables). Looking at the cash conversion cycle, I tend to focus on the inventory numbers first, to make sure that the company is selling its inventory quickly. This is especially important with the branded retailers that I cover, because by analyzing these numbers you can often get some visibility regarding future performance.

Rule Breaker: Finally, to grant us a mirror into your soul -- snicker, laugh -- what movie have you seen more times than any other?

TMF Bobdog: I'm not totally sure, but the answer is either Top Gun or Backdraft. Of course, Top Gun probably wins since I've been watching it since I was about 12, and I'm pretty sure I hit triple digits at some point. But, I shouldn't underestimate the power of "HBO Asia" and its redundant scheduling. When we first got cable in Taipei, Backdraft was THE movie they showed all the time. Any time of day, any day of the week, Backdraft was sure to be on. When the movie first came out, I was a volunteer EMT in a local rescue squad, so my first experiences watching the movie were with co-rescue workers who told me every single mistake made in the film. So, not only did I see the movie tens of times, but every single detail of every fire scene was carefully critiqued.

Rule Breaker: After five years on foreign soil, Bob, welcome back to the United States of America for your first Fourth of July here since 1994! Have a great holiday! (Oh, and by the way, Bob, we don't shoot real fireworks here anymore. It's all virtual now. Cities simply raise giant screens into the sky and a computer generates a show. Really! You'll see. You can't even tell the difference.)

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