In this MarketFoolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker examine the latest developments on Wall Street.
First, they discuss Facebook (NASDAQ:FB) CEO Mark Zuckerberg's hearings in Congress and how he will be perceived. There's also big buyout news for Verifone Systems (NYSE:PAY), as well as encouraging developments for McDonald's (NYSE:MCD) international expansion efforts. On the other hand, Mattel (NASDAQ:MAT) is closing its New York office -- another negative development in a consequential year for the struggling toymaker.
A full transcript follows the video.
This video was recorded on April 10, 2018.
Bill Barker is an employee of Motley Fool Asset Management, a separate, sister company of The Motley Fool, LLC. The views of Bill Barker and Motley Fool Asset Management are not the views of The Motley Fool, LLC and should not be taken as such.
Chris Hill: It's Tuesday, April 10th. Welcome to MarketFoolery! I'm Chris Hill. Joining me in studio today, from Motley Fool Asset Management, Bill Barker. Happy Tuesday!
Bill Barker: Thank you!
Hill: We've got a lot going on today.
Barker: Do we?
Hill: Considering it's not even earning season, we've got a bunch of actual news we're going to get to. And that's not even taking into consideration what's happening across the Potomac River as we speak right now, which is that Mark Zuckerberg is getting ready for the first of two fun-filled days with members of Congress, answering their questions.
Barker: Yeah. It would be early to review that.
Hill: It would be very early to review that, because technically it hasn't started yet. But I will say this. I'll say two things. The first day is, on Motley Fool Money this week, we're going to have David Kirkpatrick as our guest. He's the author of the best-selling book, The Facebook Effect. He knows this company quite well. I'll be talking to him, I think I'm taping that Thursday afternoon, to get his take on, certainly all of the first day of hearings, and a good chunk of the second day of hearings. So, that's the first thing I'll say.
The second is, if you're a Facebook shareholder and you are someone who does not necessarily care a whole lot about what happens on Capitol Hill, and maybe you're thinking to yourself, "This is a great opportunity for Mark Zuckerberg," let me just go ahead and lower your expectations right now. As someone who worked on Capitol Hill for six years and has been in the room when these types of hearings are going on, there's really not a ton of upside. And this isn't about Facebook, and this isn't about Mark Zuckerberg, this is just about the situation that he finds himself in. Historically, there's just not a lot of upside for whoever is facing congressional committees. So, if you're going into this thinking, "Gosh, if he has a great performance over the next couple of days, he can put a lot of this behind him." No. No, he really can't. He can kind of stop the bleeding. But again, there's not a really tall ceiling on how great this is going to be.
Barker: Not a lot of friendly faces in that room, you're predicting.
Hill: Definitely not a lot of friendly faces. And it's often the case where one party or the other is more sympathetic to whoever the witness is in these types of settings, and I think people might be underestimating just how much both parties are not pleased with Mark Zuckerberg and Facebook. So, yeah, I think it's going to be a not great couple of days.
Barker: On the other hand, as we sometimes talk about, in a sense, he personally has an easy act to follow, and that is his public persona and clips of him talking. It would not be that hard for him to come off better than the mental image of him in most people's minds.
Hill: That's possible. Yeah, that's one potential outcome. Here's another potential outcome: he just spends the next two days literally sweating under the lights and looks every bit, if not more, awkward than people imagine him to be.
Hill: We'll see.
Barker: By this weekend, you'll be able to actually comment with some intelligent analysis about that.
Hill: I won't. David Kirkpatrick will. That's why we're talking to him. We have news from the toy industry, restaurants. We have to start with the stock of the day, and that is VeriFone Systems, not exactly a household name. VeriFone shares are up more than 50% this morning. This is a payment technology company that is being taken private for just under $2.6 billion in cash. In sympathy, I suppose, PayPal and Square are up a little bit. Nowhere near the 50%, but, it appears to be a good day for payment technology companies.
Barker: Yeah, for the hardware makers VeriFone and Ingenico. As you say, it's not a household name, but you have come into contact with its products hundreds and hundreds of times without realizing it, probably. And not just in some part of the system that you never see. It is the point-of-sale hardware for your credit card that they are best known for, which also has been part of the problem for this company and this stock over the last couple of years. After peaking a couple of years ago, it's been rough times as other forms of payment, mobile and Square and various other things, are replacing the centrality of that hardware point-of-contact device that you're familiar with. VeriFone and Ingenico basically are the two companies that have almost all of those devices. VeriFone also -- and this is probably the reason that it's attracting a premium of 52% today over what it was trading for yesterday -- is developing software applications, which are probably more important for the future than the hardware.
Hill: Is the war on cash as close to a slam dunk a trend as you see in the world of investing? It's just hard for me to look at cash as having a particularly bright future.
Barker: Yeah. Many weeks, I make it through the week without using cash at all. And then, when I travel internationally now, I usually don't use cash at all, never exchange money, never touch cash. So, yes. And I think there are parts of the economy that are more cash-dependent, certainly the illegal ones, which you know more about than I do, I'm sure.
Hill: [laughs] A little bit, yeah.
Barker: So, you can better comment on the future of that.
Hill: Some of the more illegal activities out there, they're getting pretty sophisticated. They're going the non-cash route, too.
Barker: They've got the Bitcoin for the really seriously illegal parts of the economy. They're using Bitcoin.
Hill: They are.
Barker: From what I hear.
Hill: Again, I don't have direct knowledge of this that I can comment on at this time, Senator.
Barker: Alright, so, VeriFone's up 52%. That's pretty good. As I said, if you pull back a little bit and look at the chart over a longer period of time, this is really just getting it to prices that it saw not that long ago. It has been a tough last couple of years for the company. But, it is an indication that the private equity market is still healthy and buying things up, because it's going to go private.
Hill: Let's move on to the news from Toyland. We'll start with Mattel, which is closing its office in New York. This is part of an overall plan intended to save about $650 million for Mattel. It's affecting about 100 employees. They're trying to move them to different places, so not necessarily layoffs, per say.
But, this seems like a supremely consequential year for the Mattel Corporation. They almost need to move even faster than they're moving right now, and if they don't significantly turn around their fortunes or have some sort of bright spot -- and that can come in the form of a quarterly report or something else altogether -- but, it's hard for me to see Mattel remaining a stand-alone public company for a whole lot longer unless they reverse their fortunes.
Barker: In a sense, they have the safety net of Hasbro's (NASDAQ:HAS) interest out there, which I would assume is going to continue because of how much sense it makes for a combination, or really a takeover at this point, of Mattel by Hasbro. So, maybe they have a little bit longer, just in the sense that that's out there and it's something they can kind of rely on, to a degree, if the market conditions hold. We're still in a bull market. They wouldn't want to sell at a time where they had to sell.
New management there, they still think that they can turn this around, start cutting costs, and that may help them turn what has been losses. They lost $3 a share last year. Some of that was one-time costs, but also, their EBITDA was negative for the year, so, that's not a great sign. I think that, given what's going on with Toys R Us, it's made it that much harder, and I don't know what the bright spot is for them right now.
Hill: You mentioned Hasbro. Hasbro, for all of the success Hasbro has had, particularly with its tie-in with Disney, has hit a little bit of a stumble recently in the form of Black Panther, which is a movie that I think surprised some people in Hollywood with just how successful it was and how much money it made. Apparently, it also surprised the buyers at Hasbro, which had the rights to the toys. Apparently, there are no more Black Panther toys to be found. They sold out within just a few weeks of the film's release in mid-February, and Hasbro is kind of scrambling at this point.
Barker: Yeah, it's a good news, bad news thing.
Hill: It is the proverbial good problem to have. It's still a problem.
Barker: It's still a problem. And as you say, the degree to which this film has been successful has surprised people. It was a very good film. I saw it. You saw it, I assume.
Barker: I think over the long-term, this is going to be a very good-selling toy for Marvel and Disney and Hasbro, they all have a share in that. So, longer-term, good news. This is reminiscent, I guess, of the scene in Toy Story 2 where they took a jab at the toy sellers, within the movie, for not stocking up enough on Buzz Lightyear, which sold out after Toy Story originally came out.
Hill: Yeah, I believe it was Tour Guide Barbie.
Barker: Tour Guide Barbie.
Hill: Taking a shot at toy sellers and toy makers. Which, good for her, she was right on.
Barker: Also, we have time to recover for Christmas. It would have been a bigger problem, I guess, if Black Panther had come up in, say, October or November and had the success that it had, and you had as many people buying all their Christmas toys and there were no Black Panthers available. I think we have plenty of time.
Hill: It's one more reason to love Pixar, when the writers and directors of the movie throw in little nuggets like that, playing to the back of the room. "Here's a little joke that'll go over the kids' heads, but any parent who tried to buy a Buzz Lightyear after the success of the initial Toy Story and was not able to, here's a little something for them."
McDonald's is expanding its footprint in the Nordic part of the world. McDonald's announced plans to open 200 restaurants in Sweden, Norway, Finland and Denmark. This is going to be over the next decade. I guess the thing that caught my attention was, wow, McDonald's, still expanding. There's still places in the world where they can do that. And by the way, you can look at this story and say, "Well, even collectively, this isn't the biggest market in the world." But on a percentage basis, it's increasing by about a third the number of restaurants that currently exist in those four countries. So, you're welcome, Sweden. More McDonald's coming your way.
Barker: [laughs] You're playing to Sweden. You still feel like you need to apologize for all the times you've botched the Swedish language.
Hill: It was just the one time that I botched the Swedish language. I think Swedish people are keenly aware of how challenging their own language is. They probably are. It's not the easiest language.
Barker: Do you think that's been one of the impediments for McDonald's, getting in there and nailing the language issues? That this is why the delay?
Hill: Maybe. Quentin Tarantino, when he's writing Pulp Fiction, it's a lot easier to write the Royale with Cheese scene because it's French. I don't know what quarter pounder with cheese translates to in Sweden.
Barker: I'm sure you'll be hearing, because there's an avid Swedish audience to which we are playing right now.
Hill: I would say that one of the dozens is in Sweden, yeah.
Barker: You've had multiple Swedish emails, haven't you?
Hill: Well, yeah. I mean, a dozen is more than one, so, sure.
Barker: Oh, one dozen of the dozens.
Barker: Got it. Yeah, I don't have a lot to say here, because as you say, in absolute terms, it's over a decade, it's 200 restaurants, over four countries. Not that big of a needle mover. But, it's nice that McDonald's still has some places to grow. They've kind of stalled out in some of the bigger markets. On the whole, look, it's a big world. Some places are going to be going well, some places are not going to be. They're having trouble and struggling in India right now, in terms of their franchiser there. And that has taken a break that Domino's is the biggest fast food provider in India now, they supplanted McDonald's. I'm sure over time, they'll improve that situation. But in the meantime, they have the Nordic countries to work with.
Hill: Two things before we dip into the Fool mailbag. The first is, once again, shout out to Steve Easterbrook, the CEO at McDonald's, because he's been CEO for a little over three years, and that stock is up about 75% since he took over. And when I think back on how he entered that job, specifically how he became CEO in early February of 2015, and right out of the gate it was clear that he was going to take his time, that he was going to start talking to franchisees, and he laid it out, saying, "Listen, the first few months of my tenure as CEO, this is what I'm going to be doing. I'm going to be asking a lot of questions, doing a lot of listening, and I'm going to come out with my plan for the future of this restaurant." I think it was May, maybe it was late April, early May, something like that, that's when he came out with the plan that included, "Yeah, of course we're going to do all day breakfast," and that sort of thing.
But just, the confidence that he had when he took over the job to say, "I'm going to take a little bit of time." And, knowing that long-term shareholders, or, I would say, investors who have a long-term mindset, were going to give him that time. He didn't feel the need to rush. He said, "No, I'm going to talk to a lot of people. This is a big company, I'm going to try to get this right." It's really been incredible, what he's done in terms of rewarding shareholders while he's been CEO.
The second thing, and this is a minor thing, but you mentioned it this morning when we were chatting, the word restaurant as associated with McDonald's, you are saying that it still makes you do a little bit of a double take.
Barker: Yeah, it's a little jarring, "McDonald's restaurants," because I guess the image I have, in my head at least, of a restaurant is a little bit more of a sit-down experience than the counter experience. This is not a shot at McDonald's, although we could go in that direction if you have a good line or something, but I feel the same way about Starbucks (NASDAQ:SBUX) also included in the restaurant category.
Hill: For me, I was thinking, the thing that makes me do a double-take is the use of the word store with respect to Starbucks. I see that more often, and that's the thing that gives me pause. It's like, "Starbucks stores." I just think of it as a coffee shop. Yes, there are other things going on. Maybe it's too arduous, and maybe part of this is just, certainly in the business media, they're grouping things by category, so yes, it may not be with wait staff, but McDonald's is a restaurant because you can sit down and eat there. So, I totally understand why, but for me, it's Starbucks, it's the "Starbucks stores" that makes me go, "No, they're not really stores, they're coffee shops."
Barker: Yes. And, would you call McDonald's restaurants?
Hill: I guess my point is, that one doesn't bother me as much as the use of the word store with Starbucks. So, yeah, I would stick with restaurants.
Barker: Dunkin' Donuts (NASDAQ:DNKN)?
Hill: Same thing, coffeeshop.
Barker: They're really a donut shop.
Hill: Well, no. They're actually moving away from that. I think it was last week, this is in New Hampshire, somewhere in Southern New Hampshire, I believe, the first Dunkin' Donuts shop opened that has been rebranded, simply, Dunkin'. Speaking of global restaurants that are taking their time, Dunkin' Brands is making a methodical push to deemphasize the donuts and really play up the beverages. So, this is their first move in that direction. And I think, certainly in New England, it's going to be a really easy move, because most people in New England, because Dunkin' Donuts shops are so ubiquitous, most people just say, "Let's go to Dunkin'," "Let's go to DD," "Let's go to Dunks."
Barker: Really? Dunks?
Hill: Almost no one says, "Let's go to Dunkin' Donuts."
Barker: So, you can weigh in on this, because it's a point of some concern for my daughter, who's about to leave for college in the fall in New England. She has been told, maybe it was by me, I can't remember, that she's going to need to start drinking from Dunkin' Donuts -- or these other names that you allege are used in New England -- and that if she tries to go to Starbucks, she's going to be mocked by the other people around her.
Hill: I don't think she's going to be mocked, but there are going to be so many more opportunities to go to Dunkin' Donuts than there will be any other coffee place.
Barker: You mean, you're going to have to walk 30 yards instead of 20 to get to the Starbucks, because there's only one every 30 to 50 yards around the campus, whereas Dunkin' Donuts, they are like food trucks everywhere serving Dunkin' Donuts.
Hill: So, for a lot of the dozens who are listening who don't have a Dunkin' Donuts anywhere in their life, either near their home or near their place of work, this may seem odd. In the state of New Hampshire, there's a Dunkin' Donuts for every 6,000 people in that state. West of the Mississippi, there's a Dunkin' Donuts for every, like, 1.5 million people. In New Hampshire, it's one for every 6,000. And that's sort of the case throughout New England.
Barker: How about in Boston?
Hill: Gosh, in Boston Proper?
Barker: One for every 25 or so?
Hill: Something like that, yeah. So, she's just going to have to make her peace with that.
Barker: And she's certainly going to need to hold her tongue, because I think she holds Dunkin' Donuts in far less esteem than Starbucks.
Hill: Let's check in this fall and we'll see how that's going for your daughter. Our email address is email@example.com. Speaking of coffee, email from Joe Walsh, who writes, "Let me be the 300th Fool to send you this link so you can talk about it with Bill Barker." Actually, Joe, you're the first Fool to send me this link. He sent me a link to a story about, this Thursday, April 12th, which is Wawa Day. Now, today, April 10th, is Free Cone Day at Ben & Jerry's. So, wherever you are, if it's still Tuesday, April 10th and there's a Ben & Jerry's nearby, stop listening right now and just go to Ben & Jerry's and get yourself some free ice cream. But Thursday, you've got a day or two to prepare for free coffee at Wawa. April 12th is the anniversary. Wawa started in the mid-1960s, so, it's Wawa's birthday, and they celebrate by giving away a couple of million cups of coffee.
Barker: Yeah. The reason that Wawa Day is superior to Ben & Jerry's Day --
Hill: Oh, careful now.
Barker: -- is, for those of us who can't stand waiting in line, it's a lot easier to get your free cup of coffee at Wawa. They have those dispensers of coffee, and they'll have 12 or 15 of them out there, so you can get whatever. If you want a flavor, they have a lot of choices for that. It's just easy to get yourself some coffee, whereas Ben & Jerry's, very popular day. And because of that popularity and the fact that there aren't as many Ben & Jerry's as there are Wawa's -- are you going to go today to get this free cone? Because if you do, I predict you're going to be waiting in line. Which is fair, right? I mean, it takes longer to serve ice cream than it does to get coffee, and ice cream's great.
Hill: Well, that's the point I was going to make. At Ben & Jerry's, for all their marvelous innovations on the flavor side of ice cream, they've not yet crossed over to the point where they've said, "Yeah, we're going to let people scoop their own ice cream." Nobody's going to do that. If they did do that, then there wouldn't be lines. But, yeah.
Barker: Yeah, you're going? You don't have time. You don't have time. That's the thing.
Hill: [laughs] I don't have time. I think my kids are going, but I'm probably not going.
Barker: Oh, kids. Kids have all the time in the world.
Hill: Exactly. To me, the interesting thing about the free coffee that they're doing at Wawa is, they're basically like, "Take whatever you want." Dunkin' Donuts does free coffee, I think, once a year, but it's like, "It's this size. We're going to give you free coffee, it's this size, no specialty drinks," that kind of thing. Wawa appears to be like, "Grab whatever cup you want, fill it up and get out."
Barker: Yeah. It's not a sample size. When you go to Wawa, they're not messing around. They're not lying to you the way Starbucks does, where every size is large, it's just different variations of the word large. Your choices are tall, grande and venti, which are three different words for large. You can actually get, what, a Short coffee, but you have to ask for it. It's not on the menu. If you only want 8 oz of coffee at Starbucks, you can get that, but they're hiding it from you.
Hill: You know, the irony here -- and this is an audio podcast, so no one can see this, so I'll just share with the dozens of listeners -- the irony is that you've actually got a cup of Starbucks coffee right next to you. It's not Wawa. For all your alleged allegiance to your home state's favorite convenience store/ restaurant/ gas station/ all the amazing things that Wawa is, you're still a Starbucks guy.
Barker: Well, thank you to Dave Meier for buying me my coffee this morning. And, yeah, I long for the days when Wawa will be as ubiquitous here as it is in my home state, my home territory.
Hill: Dare to dream. Thanks for being here!
Barker: I've got one question for you.
Hill: Oh, OK.
Barker: Are we doing another one of these Apropos of Nothing things ever?
Hill: It's possible.
Barker: Are you going to go with my idea?
Hill: What's your idea?
Hill: I don't know that we're going to do that, no. [laughs] You've had better ideas than that.
Barker: It's a great idea. It's not really about the names. It's just the stories that arise from these things. Like, we tell the story about how my dead guinea pig led to you meeting Bob Woodward.
Hill: That's ... OK. All right.
Barker: It's not about Bob Woodward at all, really.
Hill: It's a little bit about Bob Woodward, because actually, we got to chat with him and learn his investing -- you know what? We might have to share the Bob Woodward story at some point.
Barker: What about the time I hired Chris Rock?
Hill: Alright, we might have to do this.
Barker: You've got some names, because you've interviewed everybody at this point. You've got some names. It's the story around the story, not so much, "Here's some gossip about somebody."
Hill: No. I don't gossip.
Barker: Just weird, random people who have crossed our paths over the years, and sometimes it involves dead guinea pigs.
Hill: We don't truck in idle gossip on this show.
Barker: No. No.
Hill: There's plenty of other nonsense that happens, but not idle gossip.
Barker: Who do you have for this show?
Hill: You know what? I'm going to think on this. I have a couple of candidates. We'll talk about it off-air. Thanks for being here!
Barker: Thank you!
Hill: You can read more from Bill Barker and Dave Meier -- and maybe even Dave Meier will buy you a cup of coffee, who knows? -- if you go to foolfunds.com and check out the latest writings from Dave Meier, Bill Barker and the entire Motley Fool Asset Management team. You can sign up for Declarations, which is their free monthly newsletter. foolfunds.com, check it out.
That's going to do it for this edition of MarketFoolery. As always, people on the program may have interests 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. This show is mixed by Dan Boyd. I'm Chris Hill. Thanks for listening! We'll see you tomorrow!
Bill Barker owns shares of Walt Disney. Chris Hill owns shares of PayPal Holdings, Starbucks, and Walt Disney. The Motley Fool owns shares of and recommends Facebook, Hasbro, PayPal Holdings, Starbucks, and Walt Disney. The Motley Fool owns shares of Square. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.