In this episode of Motley Fool Money, host Chris Hill is joined by Motley Fool analysts Jason Moser, Andy Cross, and Ron Gross to look at the latest headlines from the Wall Street.
The uncertainty in markets is going to have long-term effect on some stocks. JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon undergoes emergency heart surgery. Taco Bell completes its takeover of Chipotle (NYSE: CMG). We examine a surprising growth stock, and much more.
Finally, Chris talks with Emily Balcetis, Professor of Psychology at New York University, about decision-making processes, and we also have three stock recommendations.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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This video was recorded on March 6, 2020.
Chris Hill: The Nasdaq and S&P 500 were basically flat heading into Friday. Things fell a little bit Friday morning. Andy, as of this conversation, the market is down about 2%.
This was one of those weeks. It wasn’t nearly as bad as last week, but when you looked at all of the swings during the week, it actually felt worse.
Andy Cross: And the reason it feels worse, Chris, as we’ve talked about is, from a behavioral side, we know as investors and people in general, we feel our losses twice as much as we feel our gains. So those days when the Dow is down 1,000 points and then it snaps back 1,000 points the next day, those days when it’s down just feels much worse to us. We saw the Fed jump into the markets and cut rates by 50 basis points on Tuesday. The markets actually got spooked by that and they just thought that, hey, maybe the Fed knows some things that we don’t know. And then, of course, it rebounded on Wednesday, partly because of the election from Super Tuesday and the results we saw there.
So we’re seeing this rocky environment that we just have not experienced before. And furthermore, as we know because of the uncertainty around the coronavirus and just the news flow that is coming out, both, how it’s impacting our human psychology, investor psychology, and then just as citizens and how we take care of ourselves and what will happen with this? And just the length of it and the uncertainty behind that is just driving this market volatility.
Ron Gross: Yeah, I think the volatility creates the perception of weakness, but that isn’t always the case. So I use myself as an example. [laughs] I bought a stock on Friday, same stock I bought last week, I was thinking I was averaging down and getting a better price, when I looked at the actual data, I actually bought the stock higher than I did last week, and that’s because I mistakenly thought we had a really weak last four days, and that’s just incorrect.
Jason Moser: Yeah, this all happened very quickly; I mean, we did just witness the fastest correction in the history of the markets. So that’s worth keeping in mind. And I think, to that point too, it can always go lower, right. I mean, that was record-setting and it’s understandable why. I think a lot of it is based on the fact that we just don’t know. I mean, we continue to talk about all of the stuff. And really, at the end of the day, there’s just so much that we don’t know, that creates a lot of uncertainty.
And we’re going to find out, over the course of the next quarter to two quarters, exactly the economic impact here. So we’ve talked about how there could be a potential recession that comes from this, and that’s regardless of whatever monetary policy, whatever stimulus. I mean, you can only do so much. People are still going to be afraid to go out and do things. And this is a consumer economy for the most part.
So I think it’s worth keeping in mind that it certainly could get worse before it gets better, so it seems like there are a lot of opportunities on these dips out there; take it slow, because there likely will be more opportunities coming up.
Gross: Yeah, in the first few minutes here, we’ve actually talked more about stocks than we have about companies. And as Fools, we tend to say, let’s talk about companies more than we talk about stocks. And if we remove the volatility and we remove the up-and-downs of big moves in the stock market and we look to what’s actually happening with companies, it’s interesting to see, obviously, different industries are affected more than others. And we don’t know the severity or the length of time that these companies will be impacted. But I think it does slow us down just a bit and it even takes, kind of, the temperature down a little bit, if we just think about our companies and whether they’re strong companies run by great leaders.
Cross: Let’s not forget, in a normal environment, we would probably be talking about the jobs report today that came out very strong in the U.S. with 273,000 jobs added, way above the estimates. Now, of course, that was before a lot of the coronavirus. So we are at least coming into this on a very strong note from the U.S. economy.
But, of course, as Jason was saying, it’s just going to be the uncertainty with how long this will last and what will be the economic impact, and obviously, which businesses are most impacted by that.
Hill: Well, let’s close with this, because to Ron’s point, we like to focus on businesses. And a lot of businesses are much cheaper today than they were, say, a month ago, and yet, I think it’s also fair to say that there are some businesses out there, even though their stock is a lot cheaper, maybe it’s still one to avoid.
So, Ron, I’ll start with you, fill in the blank here. I know blank looks really cheap right now, but I wouldn’t buy it.
Gross: At the risk of stating the obvious, I’m going to go to travel, and that’s airlines, hotels, but really specifically, cruise lines and cruises. I’m not there yet; I think this is going to get significantly worse before it gets better over at folks like Royal Caribbean, Norwegian and Carnival. And although those stocks are trading at 6 or 7 times forward earnings, I’m just not ready to put my money there yet.
Moser: Yeah, I feel like restaurants. I mean, I don’t own a whole heck of a lot of restaurants, but I do feel like restaurants for now. I think there’s going to be an opportunity to buy them; I don’t think that time is now. I do think we’re going to see a lot of depressed numbers coming out from restaurants in the coming weeks and months, along with a lot of uncertainty as to when they feel like that traffic is going to come back. And we talk about this a lot with restaurants that, you can’t really get that traffic back. Those are lost sales. You’re not going to get them back.
When you look over the last month, Darden, down 20%; Bloomin’ Brands, down 20%; Brinker International, down 28%; heck, even Chipotle is down 15%. So I do think, the casual dining space, in particular, is going to feel a pinch here and I think it’s going to be something where we see – it’s going to be a long, sort of, protracted story to tell there. There will be a time to get into them, I just don’t think it’s now.
Cross: Chris, I think the retail environment, which has just been — outside of Amazon, Walmart and maybe Costco — just looking at the stocks of Nordstrom, Kohl’s, Macy’s, Gap, all down more than 20%. The stocks sell at a price-to-earnings multiples of less than 9, in general. I just think, that environment, they’ve already been struggling so much, and if you’re trying to catch a falling knife there, I just don’t think that’s a time to go shopping and shop in that retail environment.
Hill: Speaking of Costco, let’s get to some corporate headlines this week. Costco second quarter profits and revenue came in higher than expected. This is a good report, Ron; anecdotally, you see the stories about people here in the U.S. buying in bulk because of the coronavirus. That seems like it would bode well for a business like Costco.
Gross: Yeah, and they did note that February sales benefited from an uptick in consumer demand from coronavirus, possibly to the tune of about 3% on a comp sales basis. So that certainly is helping. But even X that, this is a very strong report with comp sales up 8.9% in the U.S. and overseas, e-commerce up 28%. Now, they got some help there because Thanksgiving occurred one week later. So, there was a little bit of a benefit there, but regardless it was a very strong quarter. Traffic increased 5.9% worldwide, 6.1% in the U.S. Transaction size was up, almost 3%. Membership fee income, all important for Costco, up 6%; and equally important, renewal rates, U.S. and Canada renewal rates almost 91% on the membership side, worldwide at about 88%. Margins down a bit, some lower margin products coming through due to promotional items being sold on Black Friday, Cyber Monday, but still, you had earnings per share up about 5%, a very strong report.
Hill: Hasn’t it been a bunch of years since Costco raised that membership fee? I’m not looking to raise everybody’s prices, but it seems like they’ve been very measured in the timing of the raise, the amount that they raise. It wouldn’t surprise me at all if they could pull that lever again in 2020.
Gross: Yeah, I’m drawing a blank; it’s maybe been a couple of years.
Cross: Yeah, I think maybe they do it much more on the business side, with the business clients they maybe more increasing their pricing there.
Gross: But I think, we’re a little bit due. You might be right, within a year or two. I mean that’s certainly is a lever that they’re going to continue to be able to pull every few years or so. We talk about the stocks; stock is trading 35X. I’ve been saying for a while, it’s just not cheap here, especially when you can buy Walmart at 22 or Target at 15, but it’s an exceptionally well-run company.
Hill: Okta (NASDAQ: OKTA), the cloud-based software company, closed out the fiscal year on a solid note. Okta’s fourth-quarter revenue came in higher than expected. Not profitable yet, Andy, but that loss is getting smaller.
Cross: Well, I think that is some of the concern, Chris, with investors. And the stock was a little bit rocky after the announcement came out. It was a very nice quarter from the sales side; from the revenues, they were up 45%. The subscription sales were up a little bit higher than that, up more than 46%, so that’s good to see. Their billings, when they look forward for the year, up more than 50%. They added more than 140 customers, with a contract value of more than $100,000. That’s important, because those large clients are very profitable and high-margin for them. Half of those new clients that they added were from totally new customers, not from existing customers. So, continue to see growth on the customer side.
The challenge is the profit side. So, the guidance on the profit side was a little bit weaker than I think maybe people were expecting, but the revenue growth was still very exceptional. And it’s just a really well-run business by two co-founders that are really continuing to get it done.
Hill: Fourth-quarter revenue for Zoom Video (NASDAQ: ZM) grew 78%. Jason, that’s the kind of growth that we like to see out of our growth company. But Zoom stock has already had such a great rise just in 2020 alone, maybe not a surprise that this report didn’t really move it any.
Moser: Well, coronavirus notwithstanding, I think, this is a really good business and it’s a stock worth owning. This quarter’s performance only reinforces that in my eyes. But when you look at what the stock has done from the release on Thursday, it was a little bit of a whipsaw, it seems like it’s given back all of those gains earlier on Friday. So, yeah, maybe the market can’t really make up its mind, but to your point, revenue up 70%, that’s just really, really impressive. But there are reasons, because of that, they now have 81,900 customers with more than 10 employees; that’s up 61% from a year ago. They have 641 customers contributing more than $100,000 in trailing 12-month revenue; that’s up 86% from a year ago.
So, they’re signing in clients that are spending a lot of money. And talk about big clients, they just signed Johnson & Johnson, maybe you’ve heard of them. [laughs] So, there’s a lot going on there. The net dollar expansion rate with customers with more than 10 employees, above 130% for the seventh consecutive quarter. So, they’re figuring out ways to continue to monetize that existing customer base as they bring new customers in. Strong guidance, they are closing in on $1 billion in revenue here in this coming year, and I suspect that’s really only the start.
With all of the options and the opportunities that they could do with that platform, and clearly a leader in Eric Yuan, who’s just dedicated to this business, dedicated to the cause of making people’s lives better, happier and just really in line with a lot of what we believe in here at The Motley Fool. So, yeah, I think steady as she goes, this is one you want to continue to hold.
Cross: Yeah, as you’re saying the stock has done very well because of the concern of the coronavirus and that more and more people will be working remotely. They said that in China they removed the 40-minute limit for the free meetings, so they expanded that to help give people more access to Zoom technology there. So in China, they are doing the right things to help people in that country that’s been hit by the coronavirus.
Moser: And the Zoom Phone product, I mean, that’s something that really is still very new, but really starting to gain traction. So it goes to show you, there are going to be a lot of different ways they can take this business. And really the video conferencing, I think is just the first step of many.
Hill: You know how every year there’s some sort of significant weather event and there will be businesses that will, in their quarterly conference call, they will blame the weather and they are right to do so. But there’s always a couple of management teams that try to get in from the side and use the weather as an excuse and we here, it’s like, “No, you don’t get to do that.” I feel like, with the coronavirus, we’ve entered this new phase where there are companies, and Zoom Video is one of them, where it’s like they can’t say, Eric Yuan, can’t come out and say “Holy cow! is this good for our business.” And yet it actually is really good for video conferencing.
Moser: You have to be careful how you message that. Another I would say, watch the whole Teladoc investor day presentation yesterday. They got a number of questions regarding that, management was very, very hesitant, very diplomatic – a very good word to use there – you do have to be very careful how you message those things.
Gross: I think the way to go, as you say, you know, because of the coronavirus more companies than ever were introduced to our products, now it’s up to us to execute and make sure that those companies are delighted by our products.
Moser: And I’m sorry, I mentioned Teladoc, Mac, I’ll drop $1 at the Teladoc jar on the way out of here after we’re done.
Hill: Two executives in the headlines this week. Late on Thursday, JPMorgan Chase announced that CEO, Jamie Dimon underwent emergency heart surgery earlier in the day. He is reported to be recovering well, and obviously, we wish him the best. Ron, there is a short list of business leaders whose impact goes far beyond the company that they run, Jamie Dimon is absolutely on that list.
Gross: Completely agree. It’s, kind of, one of these larger-than-life figures. Not only is he a great operator and a great banker, but he can opine on the economy, politics, he’s highly respected, he’s got great hair, there’s just many things about him that – you know, he can go to the White House and talk to the President and they will listen, whether it’s on the economy or a wide variety of subjects. So, hopefully, he recovers quickly and this is all fine. In the interim, I think the company is in good hands with Co-Presidents Daniel Pinto and Gordon Smith. But I emphasize, in the interim, while he’s recovering, if God forbid, this is worse than perhaps we think, that would be a little bit of trouble there, because we do want to see Jamie Dimon back at the helm of JPMorgan.
Hill: And I would imagine, that the CEOs of the other Wall Street banks want to see him back at the helm, because if not, then one of them is going to have to step up and take the heat on Capitol Hill, and nobody’s better at that than Dimon is.
Gross: Yes, I think everyone wants him back and wants him healthy. Let’s not forget, he did beat throat cancer in 2014. He’s a tough guy. I think we’ll see him back.
Moser: With the political angle there, I think that’s really because, at the end of the day, Dimon is the smartest guy in the room, right. I mean, he’s instructing everyone up there. I don’t know that you have that with anybody else in the industry or at least the perception of that. And that’s something to remember.
Hill: On a much lighter note, Taco Bell’s takeover of Chipotle is now complete. Steve Ells, the founder of Chipotle, is stepping down as chairman of the board. He was CEO until late 2017, when he stepped down, and a few months later Brian Niccol left Taco Bell to become Chipotle’s CEO.
Moser: Yeah, at first, I thought Ells stepping down was essentially a nothing burrito. I mean, it just didn’t matter. Now, with that said, I actually think this works out really well for the company, because Niccol has been calling the shots here since he took over. And the big question for us, as investors, for a while was, would Ells get back in there and start meddling? I mean, he came up with a great concept, but I think he hit that ceiling where he just wasn’t ready to take this company to the next level. And that’s understandable, it’s a specific skill set and it’s not easy to do. They’ve got this company in a different place now with different leadership. And I think that they just don’t need Steve Ells to guide them in any decision-making going forward. So, for me, this actually, at the end of the day, is a positive.
Hill: Shares of Campbell Soup (NYSE: CPB) up 15% this week after second quarter profits and revenue came in higher than expected. Campbell Soup, Ron, I mean, yes, they’ve got Goldfish and Pepperidge Farm, but this is a soup company and the stock was up 15%.
Gross: Soup is good food, my friend. Yeah, the stock has been on fire. It’s largely because, I think, of better than expected results. Because the report didn’t really knock the cover off the ball. Sales were flat. Sales at the U.S. soup unit up 1%. Organic sales in the snack division up 2%. So, nothing too extravagant there. But gross margins were up a bit.
They’re getting their house in order, they sold off some of their fresh food in their international snack brands, which was a pretty great move, because they were really over-levered, they had more than $9 billion in debt, they’re now down to $5.8 billion in debt. I think folks are focused on that largely. And they have a great savings program in place. They’ve already saved about $650 million.
Hill: Isn’t a little bit of the rise that we’re seeing, the fact that, to go back to Costco, people are hoarding, and soup is one of the things they’re hoarding?
Gross: Well, using myself as an example, there may be many cans of Campbell chicken noodle soup in my home as we speak, but they did raise guidance, which I think investors really appreciated seeing it. And adjusted earnings were up 11%. So, a very strong report, but an even stronger stock price.
Hill: Emily Balcetis is a Professor of Psychology at New York University. She’s just written her first book, entitled Clearer, Closer, Better: How Successful People See the World. I caught up with her last week and began our conversation by asking how, out of all the disciplines in psychology, she chose this as the topic that she wanted to tackle.
Emily Balcetis: I think what really got me was that I’ve been spending 20 years studying the science of motivation and uncovering those obstacles that get in the way of us meeting our goals, but also the surprising tactics that we have available to ourselves that we don’t realize that can help us overcome those challenges. So, that’s the science that I’ve been studying for 20 years. And then that book, this book, at this point in my life was really because I needed to figure out for myself, what would work for me and what wouldn’t.
I had just given birth to my first child, life was crazy for a reason that I talk about in the book, I decided this is the moment – when my son was four months old – that I needed to learn to play drums, which was a very odd decision, I admit from the outside. But there’s just so much going on my own plate that I wanted to apply the tactics that I’ve been studying in the lab to myself and see what stuck.
Hill: I’m definitely interested in the drums, but let me come back to that, because some of the examples that you highlight in the book are pretty interesting to me as someone who looks at businesses. And obviously when we’re looking to be more successful, goal-setting is involved. And one of the things that struck me was the way that a company like 3M (NYSE: MMM), which is one of those businesses that people have their products in their home and office, whether they realize it or not, but the way 3M goes about goal-setting was a little surprising to me.
Balcetis: Yeah, it’s really incredible because they set what might seem like unmeetable expectations for where sources of revenue should come from. That they hold the expectation that 25% of their revenue should come from products that didn’t exist five years ago. And since they set that goal, they’ve hit that mark and exceeded it every year. So, they’re constantly innovating.
And that’s what people have really been interested in, is how do they do that? How, from one year to the next year, are they reinventing 30% of their business? That’s the mark that they’ve actually hit exceeding their goal. And part of it comes down to the culture that they create. And perhaps, surprisingly, is that they have a real openness and acceptance of the possibility of failure.
So, the idea here is that, if we just put on the table that some of our approaches are going to be missteps, that something that we might have invested in may not have legs or may not bear out, that if we’re open about that, we can accept the possibility of defeat sooner, so call it faster. We can call in backup asking for help or bringing in a team for consultation faster without a stigma or without a feeling of embarrassment. And that really is part of the key to coming up with something that literally hasn’t existed before.
Hill: Well, speaking of embracing failure. One of the people you write about is Charlie Munger, the famous, not as famous as Warren Buffett, but famous to investors, Vice Chairman of Berkshire Hathaway. Munger always struck me as a smart guy. I don’t think that’s particularly a groundbreaking observation, but what was interesting to me was the amount of time that Charlie Munger focuses on failure, and in particular, his own failures, his own, I guess – I don’t want to say self-doubt, but it’s almost like he comes up with an idea and then spends more time trying to shoot down the idea he just came up with.
Balcetis: Yeah, exactly. What I didn’t know, before really diving into his personal story, is that Charlie Munger is a college dropout. He went to school to study math, he switched to physics, he left the university before he completed his degree and then went on to become a meteorologist in the U.S. army in World War II. When his military career was over, he went on to study law at Harvard Law School and he graduated magna cum laude, but none of that education is what he, and Warren Buffett, have built their business on. Of course, it’s finance and business and economics.
And when he explains, like, where did that knowledge come from? He never took a class in accounting or in economics. So, how did he learn what he needed to build this empire? And he says, it really is about his independent studies. That he would set aside time every day, from the beginning of career, to just read as widely as he could, reading the founding principles that our forefathers of America used to create the constitution, for example, and the principles that served as the founding force for Alcoholics Anonymous. I mean, he was just reading like a crazy wide library.
And what he was doing was trying to understand the principles of human decision-making, before that field even existed. What he recognized was that there is a wealth of ways that our decisions can be made in error. And he himself believed that he contributed to a lot of those errors in decision-making. And so, he was really trying to come up with, what are some principles that he could take from one decision to the next or across different issues and business that he might be facing? And what are those principles that might lead his decision-making astray?
And he spent decades formulating what he ultimately came up with as a list of 24. 24 issues or problems with decision-making that could cloud his own and others’ ability to come up with the right answer. He’s distilled that down into ten principles that he put into his book Poor Charlie’s Almanack. And he uses that list to cross-reference his own decisions before he rolls them out, recognizing that principle No. 1 is that, his own ability to assess whether the decision is a good one or a bad one, that his ability to assess that is circumspect, and so he should have some, sort of, external source of accountability, this checklist that he references.
Hill: One of the things you write about is visual framing; and I’m not going to try and explain what visual framing is. But the way it applies to business struck me, because you end up writing about Walmart and their very deliberate strategy of keeping their shelves cluttered, which goes against some other examples that we’ve seen in business over the past decade where, I’m thinking of a company like Best Buy, where part of Best Buy’s turnaround involved a strategy of completely remaking their stores, so that there was less clutter, they were more visually appealing. But Walmart appears to have had great success doing the opposite.
Balcetis: Walmart did have a period too where it tried that slimmed-down visual appearance and what they found was that tactic totally backfired for them. They saw that sales decreased during that period of time when they tried out that new visual strategy. And so, they went back to what they had always been doing before to great financial ends.
And the idea here with the visual frame is that what falls within our line-of-sight nudges our choices. It may be with our awareness and often without our awareness. So, what we see is what we act on. And the same goes with Walmart’s strategy, which is, if it’s in sight, then people will be interested; it’ll catch their eye and it might catch a bit of their wallet too.
So, when they took those items off of the endcaps or they took them off of the palates in the middle of the aisles, there was less to catch people’s eye, less that fill in their visual frame, and as a result, they purchased less.
Hill: Your book adds to the growing body of evidence regarding the drawbacks of multi-tasking. Why do you think a lot of employers continue to state, that’s a quality they’re looking for when they’re seeking to hire?
Balcetis: We live in a very busy world, anyone of us has probably far more on our to-do list then we’re going to be able to get done in a day. And when we couple that with these really ambitious goals that we set for ourselves, for our team or for our organizations, there’s just a lot to get done. And we think that multitasking is going to be the solution to that, where our needs maybe exceed our resources of time or personnel. And it seems like it’s an appealing solution to this dilemma. In fact, when people multitask, they report enjoying the experience, they feel like they’re productive, but actually, the science says that for the most part, they’re not, they are less effective when they’re multitasking than if they’re able to maintain a single focus.
Now, that makes multitasking sound like a bad idea. And that’s not the take-home message that I want to put out there. Instead, multitasking is a tool that we should use wisely. So, it’s sort of a two-edged sword here. That sometimes multitasking can be effective, for instance, when we’re feeling under-stimulated or it’s an area we have great expertise and it’s something we’ve done time and time again, you might feel burnt out or under-stimulated, in that case multitasking is effective. The more that we can, sort of, give our mind to juggle, it can actually be exciting and invigorating. And so, multitasking can actually help us to focus up, get more done, become more effective and more efficient and engage our brain in a way that perhaps it didn’t feel like it was before.
And we can do that up until a point. There are benefits of multi-tasking in the space where we have expertise or the task demands aren’t as great as we can handle. But then there’s this point where it starts to dip down again and where multitasking is actually ineffective. And that’s a space that we might find ourselves in a lot at work.
So, there is a really cool study done, actually, of emergency room doctors. And they were looking at how effective are doctors as their caseload changes, you know, across the evening or across their shift? And what they found was that, doctors, of course, do a really good job of handling their patients, but they can do an even better job as the patient caseload grows from one to two to three. There’s downtime when you’re working with any patient, you’re waiting for a consultation from another doctor or you’re waiting for lab results to come back in. And when their caseload increased, the doctors are actually more effective at figuring out how to take advantage of that downtime. It’s not just emergency room doctors that have downtime, right, so this is an analogy that we can take to, sort of, any space that we might be in where we’re waiting for somebody to report back or waiting for new information to come in. What do we do with that downtime? And when we have a little bit more on our plate, we figure out ways to be creative about how to use that downtime.
But, as I was saying, with the rest of us, these emergency room doctors had a tipping point. When their caseload got to about five or six patients, now it was just too much. There wasn’t a way to become more efficient with downtime, there just wasn’t any more time. And so, what they found, what these researchers found was that, around patient five or six, now, each patient was waiting a lot longer than the ones that had been there when the caseload was smaller. The patients were also returning to the emergency room within 24 hours at a higher rate, indicating that the doctors perhaps were misdiagnosing or not prescribing a course of treatment that would be sufficient to remedy the symptoms, and so the patients had to return.
And so, those were clear markers of declines in performance and efficiency. So, multitasking helped them ramp up and do their job better, until they reached that tipping point and then there was a decline and multi-tasking wasn’t effective.
Hill: The tools that you write about in the book, how helpful were they when you were trying to learn how to play the drums?
Balcetis: I like to say is that, as a social psychologist I have the science at my disposal. I know what the problems are, I know what some solutions are, but just like an MD doesn’t protect a doctor from getting the sniffles, having that knowledge didn’t protect me from making the same mistakes that I was investigating with the people who come through my lab.
Hill: Last thing and then I’ll let you go. At The Motley Fool, we spend a lot of time focused on the importance of long-term investing, that is a little bit more challenging to do on days when say, for example, the Dow Jones average drops 1,000 points. What is the best way to help people focus on long-term success?
Balcetis: I’m going to offer two pieces of advice, and they might sound contradictory, they’re two of the tools that I talk about in the book. One, is narrowed focus. And when should we really keep our eyes on the prize and what will that benefit? And then the second is a wide bracket. Almost the opposite. When do we take in the big picture? So, when we see blips like this, like this drop in the Dow Jones is a blip, it’s going to remedy itself. This isn’t going to last for months or for years. There is a tendency for us to overreact to those momentary blips. These blips will right themselves.
But if we are just focused on what happened today and we react to that, then we might make a decision that we could regret in a week or a month from now when we see this trend shift. So, by narrowly focusing on today’s market, we might make a mistake, we might make a choice that we regret. But zooming out, looking at the bigger picture, looking at the trajectories of our investments over time, I think we’ll find that what we’ve invested in has some staying power and maybe we should just stick with it.
Now, the other thing about the narrowed focus is that, it can be helpful when we’re talking about a goal that we have that might be in the far-off future, say, a year from now, two years from now. Sometimes people have a hard time connecting today with that distant future. And what we can do is by, instead of focusing on the market today, we can focus on what our goals are for a year from now or two years from now and we can contract that space, who is going to benefit in the future, who’s going to benefit at that one year out mark or that two year out mark? And it can help us realize that the choices we make today will have consequences for that far-off future, by keeping our eyes on the prize.
Hill: Emily, I know you’re busy, I really appreciate your time. And congrats on the book.
Balcetis: Thank you so much. I appreciate the opportunity to have a conversation with you and your audience.
Hill: The book is Clearer, Closer, Better: How Successful People See the World. It’s available everywhere you find books.
Time to get to the stocks on our radar. Our man behind the glass Dan Boyd is going to hit you with a question. So, Ron, you’re up first. What are you looking at?
Gross: I got 3M, MMM, coincidentally is the ticker. Large diversified manufacturer, post-it notes, Scotch tape, but everything else from healthcare, industrial and transportation as well. Currently yielding just over 4%. In the news a lot lately, because it manufactures the masks that are used to protect against coronavirus, but I caution investors, that’s not a reason to buy the stock, it’s a very small part of this business. The company is a dividend aristocrat, has increased its dividend for 62 consecutive years. Stock’s underperform lately, they’re undergoing a bit of a restructuring, moving a little bit more into healthcare, making some acquisitions around that. But I think this is a very stable, nice dividend paying company.
Hill: Dan, question about 3M?
Dan Boyd: Of course, Chris. Ron, do you have a favorite 3M product?
Gross: The yellow sticky note, for sure, is my go-to.
Hill: Jason Moser, what are you looking at?
Moser: Well, sound the trumpets, because I’m going with Churchill Downs (NASDAQ: CHDN) this week, ticker is CHDN. And everybody knows Churchill Downs probably as the Kentucky Derby company, Kentucky Derby starting, I think, [on] May 2nd, this year, right. So, it’ll be interesting to see how this plays out with everything that’s going on right now and the headlines with coronavirus.
But the company is far more than just the Kentucky Derby, they operate casinos, other tracks and gambling sites. They own TwinSpires, which is the largest online horse betting system in the U.S., gives you access to 203,000 races at 350 tracks, 365 days a year from 14 countries, Ron. If that’s not enough to convince you, they’re also building out their BetAmerica platform which is incorporating more sports betting. So, as we see the regulations come down for that, there’s a big opportunity there.
The shares are down 10% over the last month, I think there’s a good possibility we’ll see that come down even more as concerns play out in the headlines. Insiders own 13% of the company and we just recommended it recently in our new Future of Entertainment service.
Hill: Dan, question about Churchill Downs?
Boyd: Is there anything more eye rolling tedious than somebody who’s really into horse racing talking about horse racing?
Moser: Well, I’m not a horse racing aficionado and I don’t really know one in that line of work, so I’m going to just not say anything about eye rolling, Dan. I like all people and horses and just you know –
Hill: Andy Cross, what are you looking at?
Cross: I’m looking at Luckin Coffee (NASDAQ: LK), which is actually located in China and it has more than 4,000 locations. Very tech-focused, very China-focused. More than $10 billion market cap, and the stock has peaked at about $50. Now, it’s down to $37, obviously, concerns on the coronavirus. But I think the opportunity could be very interesting for Luckin Coffee. LK is the symbol, Dan.
Boyd: Andy, what’s your favorite type of coffee drink?
Cross: You know, I like an Americano, just straight up coffee with maybe a little bit of sugar.
Hill: What do you want to add to your watchlist, Dan?
Boyd: Surprising everybody, I’m adding 3M. I just love, love, love that scotch tape.
Hill: Alright. Andy Cross, Jason Moser, Ron Gross, thanks for being here.
Hill: That’s going to do it for this week’s show. Our engineer is Dan Boyd, our producer is Mac Greer. I’m Chris Hill, thanks for listening, we’ll see you next week.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Andy Cross owns shares of Chipotle Mexican Grill, Gap, and Johnson & Johnson. Chris Hill owns shares of Amazon and Johnson & Johnson. Jason Moser owns shares of Amazon, Chipotle Mexican Grill, and Teladoc Health. Ron Gross owns shares of Amazon and Costco Wholesale. The Motley Fool owns shares of and recommends Amazon, Chipotle Mexican Grill, Luckin Coffee Inc., Okta, Teladoc Health, and Zoom Video Communications. The Motley Fool recommends 3M, Carnival, Churchill Downs, Costco Wholesale, Johnson & Johnson, Nasdaq, and Nordstrom and recommends the following options: short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.