Motley Fool’s “Brand Inside a Brand: The Next Intel”

By Travis Johnson, Stock Gumshoe, October 31, 2007

OK, so I’m starting to think that Fyodor Dostoyevsky has been reincarnated as a Motley Fool copywriter — the amount of text they throw into their teaser emails, many of them ten pages long or longer, is a bit ridiculous … I’d say they lead the industry in that category.

But more to the point, they certainly sometimes come up with a great idea … so let’s sniff out their latest teaser, shall we?

This one comes in with a healthy dose of fearmongering — as most of the newsletter pitches do these days, in homage to our uncertain times and jittery markets. “Read this before the market crashes” is certainly an effective tagline, if the dozens of readers who have frantically forwarded the email to me is any indication.

So, what is it they’re selling? It’s a subscription to the Motley Fool Stock Advisor, the brother-versus-brother newsletter at the fool, which I think is their oldest and least expensive.

The pitch for their teaser stock is that it’s maybe the “next Intel” as a “brand inside a brand”

What does that mean? It’s essentially the branding of a component part or capability for a product, and when they refer to “next Intel” it’s a reference to that company’s spectacular move to build a brand in the 1990s — did anyone ever care what the brand name of their computer chip was before the dancing clean suits and the “Intel Inside” campaign?

So this is following in those footsteps in some way, though they do clarify that it’s a much smaller company — explosive growth out of the Intel behemoth, after all, may not be all that likely at this point, not with a near-$200 billion market cap.

In the Fool’s words, “Before Intel, nobody dreamed a market leader like Dell would feature another company’s logo front and center on its top-of-the-line computers. But you see how it worked for them!”

So who is this that’s following in Intel’s footsteps? They do give plenty of clues in their long, long, long essay …

“The brilliant idea behind it was conceived by a precocious physics Ph.D. from Stanford and Cambridge while meditating in India. (He still owns about $2 BILLION worth of stock!)”

Sales are going up 20% a year on 35% margins.

They have $500 million in cash and no debt.

They are in cinema sound and electronics, and in personal stereo electronics and are the “undisputed industry leader”

And there’s some growth on the horizon, in their words: “You see, the Multiplex is just for starters. Home theaters, iPods, PDAs, and satellite car stereos… that’s where the REAL money is. And this little company’s patented technology is so powerful it could one day be used in virtually all of these products.”

There are only a handful of analysts covering this company, which they refer to as possibly the next Apple or next Dell, in addition to the next Intel.

So, worn out yet? Did you read the whole email? There’s lots of stuff in there about bear market panics, and the need to be invested in the stock market and to ignore those who chirp about the next crash … being out of the market because of fear is generally a big mistake, is the impression I get from them (and I personally mostly agree on that point).

Oh, and if you want to subscribe they’ll also send you some special reports, yada yada yada — one of those reports is for the New American Super Brand, which I wrote up in this space about six months ago for you if you’re interested.

But if you just want another investing idea without subscribing to another newsletter, then your friendly neighborhood Gumshoe is here to lend a helping hand.

This “brand within a brand” stock from Tom Gardner is, according to the detailed musings of the Cognitationizer 1700 …

Dolby Laboratories (DLB)

A couple of the fearless Gumshoe readers sent in the correct guess on this one, so congratulations to them — for the rest of you, this is a brand that’s been around in the consumer space for probably as long as Intel, maybe longer. I certainly remember the little double D logo on cassette decks from my misspent youth, and the accompanying personal conviction that Dolby was awesome without having any idea why.

There has been a lot written about this stock in the last year, given their remarkable performance since becoming a separately traded company back in 2005 — I’d recom