Motley Fool Money - Record Stimulus, Record Unemployment, Volatile Market

Episode Date: March 27, 2020

Congress passes a $2 trillion-dollar stimulus. A record 3.3 million Americans file for unemployment. The Federal Reserve cranks up lending. And the stock market has its best 3-day gain since 1931.  Motley Fool analysts Andy Cross, Jason Moser, and Ron Gross discuss what it all means for investors and discuss the future of the insurance, retail, and cruise industries. Our analysts weigh in on how Starbucks CEO Kevin Johnson and Nike CEO John Donahoe are navigating the coronavirus crisis. And we make the case for why Warren Buffett should consider buying Chubb, Costco, PayPal, Progessive, Moody’s, Southwest Airlines, or Starbucks. Plus, Jason and Ron share a couple of stocks on their radar: Disney and Sony.   Learn more about your ad choices. Visit megaphone.fm/adchoices

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app, which makes it so much easier to stay on track. And you can get unlimited expert help at no extra cost, even on nights and weekends during tax season. Visit turbotax.com to get matched with an expert today, only available with TurboTax full service experts. Hey, it's Chris. How you doing? You hanging in there? Another crazy week, right? Don't worry. We're going to help you get through this. This episode of Motleyful Money is brought to you by Indeed. We're going to go through all the big headlines. We're going to make a couple of suggestions for Warren Buffett, not that he needs our advice. And we're going to get you through this. So let's start the show. Everybody needs money. That's why they call it money. From Fool Global Headquarters, this is Motley Fool Money Radio Show. I'm Chris Hill, joining me in studio this week, senior analyst Jason Moser, and connecting from his home, senior analyst Andy Cross. Thanks for being here, guys.

Hey, hey. Hey, Chris. We're going to dig into everything that's gone on this week. Yes, we have some stocks on our radar, but we're going to start with the big macro. The Senate passed a $2 trillion stimulus bill that the House of Representatives will now consider 3.3 million people filed for unemployment. The chairman of the Federal Reserve says there's no limit to the Fed's lending power. And yes, guys, in the middle of the week, we had a three-day rally that was the biggest three-day rise since the 1930s. Andy Cross, let me start with you.

Take any of that. Take anything else that's gone on this week. Where is your mind right now as an investor. It's a pretty incredible week, Chris. I mean, it started with Monday when the Federal Reserve opened the checkbook. They basically said, we are not limiting ourselves when we are buying these assets, specifically treasuries and thinking about what they are going to do to support the U.S. economy, really the global economy, continuing to work with central banks around the world. But they just basically laid it all out on the table.

And then, of course, the stocks just got wallow. on Monday, and I think a lot of that was just out of fear of like, wow, are things that bad? And then still not no, at that point, no deal on the federal side. Now, since then, we've seen the Senate pass that massive support bill, the $2.2 trillion relief bill that's going to help so many people once the checks start flowing, supporting loans, supporting small businesses, especially, and citizens around around the country. So then the markets rallied and we saw this massive three-day jump where the Dow, I believe, basically came out of its bear market and ticked into a little bit of a positive back into a bull market territory for a small little bit when it rallied 20%. So a lot of volatility continuing going to the markets.

We're going to continue to see this, Chris. I think it was good news in the short term for investors who have been investing through this as so many of us have been, which is great. But continuing to see that volatility as we see the ultimate results through the spring and summer of what's happening with COVID-19. Yeah, I mean, I think this really all this past week, along with the past several weeks, I think it really just reinforce our approach, our philosophy, our foolish style of investing. It does, we've seen some really, really heavy market moves.

It seems like a thousand point spike or a thousand point drop is almost just the new norm. Hopefully that doesn't last forever. But there's no question, it feels more and more like we as individual investors are kind of along for the ride. I mean, when you look at the high frequency trading data that's out there, you listen to some of the insight from the boots on the ground, so to speak. It's clear that high frequency trading is having a moment here. I mean, Thomas Petterfee, who's the CEO of Interactive Brokers.

He mentioned that essentially their trading volume has more than doubled. here recently as the markets have become a little bit more volatile. And information is, the direction, at least of the information is not so terribly clear. I think we could probably expect that to continue for the near future. I don't think that's really unreasonable to expect. But I do, in looking at the stimulus package, that ultimately, I think the House will pass that by this weekend, and it will be something that goes in a law. And then everybody's going to start to benefit from that.

We consider him bigger politically back and forth on this bill, probably till the cows come home. But the fact of the matter is, it's a step forward, right? It's something we need, and we need it now. And it was really reassuring to hear that ultimately our government is going to leave no stone unturned. I mean, I think you hear a lot. You see this a lot on Twitter that Fed is out of bullets and even get nothing left. And that's BS. We got everything left. We got a lot of levers to pull a lot different ways to approach this. And so I do think, I mean, that's at least encouraging from the perspective, not only of investors, but really of citizens, because we are going to feel the health and the economic

impacts of this for a long, long time to come. There's not some finish line that we're looking across here. It's more about managing life going forward with COVID-19 as a part of. As Jason mentioned, Chris, so much of it is tied to high-frequency trading, but just algorithms, ETFs. We've talked about this as they are kind of going through and matching what is into their either algorithms or into their index funds and trying to figure out, figure out how those flows are changing. And I think that is driving so much of the, of the market, as Jason said, I think appropriately, we're kind of a long individual investors are along for the ride, but we're there. And we are actually the ones who are being, I think, the most reasonable

and sane out there. So, so really, it's, it's continuing to stay the course with your allocation strategy, your investment decisions, using the opportunity to make smart buying. And then holding as long as you can through this situation, because in the end, markets will recover at some point, and you want to be invested through this. Yeah, it's just you want to own businesses. Don't worry about the stock. Focus on the underlying business. When you can look through your portfolio and see a collection of businesses that you believe

in, that you think will stand the test of time, that alone can help you really handle the emotions of a time like this, where emotions are going to be. really on edge, I think, for most of us. We're all experiencing it to a degree. Well, let's get to the business side of this. I want to talk about guidance for a second. Andy, we've seen some companies come out this week, Target, Gap, MasterCard. They've suspended their guidance. And I will point out that most of the companies in the S&P 500 have not done that yet. We're getting ready to go into earnings season next month. Do you expect to see more companies suspending guidance altogether or just lowering it?

No, I think even before earnings come out for the official announcement, Chris, I think they'll start to get a little bit ahead of this. I don't think you can be surprised to hear that. It's just a really unusual situation as companies are trying to come to grips of what this means for their customers, what it means for their supply chains, what it means for their overall business economically, financially, how stable they are, how much they can get funding. We saw a lot of companies start to tap their credit lines, and that which actually put a lot of financial pressure onto the financial plumbing, as we've talked about on the show for the past couple weeks. And a lot of the Fed work has gone about to try to help alleviate that. So I'm not

surprised that we're seeing the companies suspend some of their guidance or just say, you know what, at this point, we don't know. And I think, frankly, investors are going to give them a pass that. Yeah, I kind of wonder, I mean, maybe this is the glass half full of me, but like, how many CEOs do you think are out there right now, debating whether or not this is a good opportunity to start incorporating less guidance into their financial reporting going forward? How many CEOs out there right now do you feel are envious of someone like a Warren Buffett who can basically just file a 10Q and then let the financial media write whatever they want to write? But he's not offering any guidance or any perspective. Just, hey, here's the way the way things look

now, and we'll tell you how things look next quarter again. How many CEOs do you feel like, man, I'd love to be able to do that. Because I would wager there are a few, and I would wager there are a few out there right now deliberating whether this would be a good of time as any to start incorporating. Maybe not eliminating guidance altogether, but at least not getting so granular with it, not getting so specific with it. Well, Jason, it would be great if they did that. That's going to come from the investor base, right? So the institutional investors, who are, as we just talked about, are tend to be short-term focus. So that would be great. Buffett can do it because he owns so much

in Berkshire Hathaway. It'd be great if companies start taking a little longer-term focus, but that's going to have to come from their investor base. We encourage all institutional investors and individual investors out there to think much longer term than just one or two quarters out. We also saw guidance of a different version this week in the form of some CEOs that we follow pretty closely here at the Motley Fool stepping up and providing the kind of reassurance and leadership that I think we like to see, whether it's Kent Taylor at Texas Roadhouse or Andy, someone like Kevin Johnson at Starbucks, who published a letter to employees. He refers to them as partners, so he published a letter to all the Starbucks partners,

talking about resilience, talking about giving them economic certainty for the next month. It was really pretty inspiring to see. It was, Chris. And if you think about a company who's been on the near front lines of this, this from over the last few months because Starbucks dealt with this over in China, and they saw this early in January, started to affect their business, and they made some moves very quickly. So they know he's been following this for months closer than probably most CEOs and most boards are.

So I really applaud them. He came out there and announced that they will continue to pay employees for 30 days, whether they come or not. So they've pivoted very quickly to drive-thrus, and he's been very communicative with the employees with his partners, as he says, and they have a lot of them. They close down their stores and Starbucks. They've now opened, I think about 95% of those. So this is really the leadership you want. And that's great from Kevin Johnson because he does have such, there was such a brand equity tied to Howard Schultz with Starbucks and the fact that he can come out here, take these

leadership positions. I really like him. My own Starbucks shares myself and continue to hold them. And just that's what you really want to see from your companies in a situation like this. Yeah, I'll piggyback on that. I mean, I think John Donahoe was another great example. John Donahoe, the new CEO of Nike. This was his first earnings call with the company this week as the CEO. Much like Andy said with Kevin Johnson at Starbucks, I mean, Donahoe very much the same thing. He displayed empathy, resilience. Talked about the experiences that they've gone through in China. And now on the other side of this crisis, so to speak, in China and starting to witness a little bit of the recovery and sort of this new world post-co-co. COVID-19, so to speak, recognizing that at the core of the business, it really all boils down to people, continuing to maintain pay continuity, even while facilities are closed or have altered schedules, again, knowing that the business, this really all boils down to people at the end of the day. I read through that call, and you can't help but walk away feeling more optimistic. And I have a feeling that when earning season starts in full force here in mid-April, we're

going to see, I think, I think we're going to see a lot of our favorite leader step up and really sort of follow suit there. Coming up, Warren Buffett has been very quiet lately. We have a couple of ideas on what the Oracle of Omaha could be or should be by. Stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money. Chris Hill here in studio with Jason Moser. Andy Cross joining us from his home. Our email address is Radio at Fool.com. from Amar Setti, who writes, Markell has fallen about 50% more than the market as a whole. Why is this when it should be more stable? Are insurance businesses at higher risk due to the coronavirus? Markell, a fool favorite.

And not just because it's located about 100 miles south of us. What do you think to Amar's question? I mean, I think it's a good question. I don't know that I look at Markell. I view Markell as a company that potentially would be a little bit less stable than perhaps some of the bigger, more state insurance companies, but to make some sense of why Markele has been so volatile, why it has felt so much of this impact, there's still a lot that we don't know about its insurance book, about what types of policies have been written.

It's not even very clear what exactly insurance claims are going to exist from a pandemic perspective. I just don't know. But what I do know is Markell is not just an insurance business. I mean, let's remember that they have a very large investment portfolio that has taken a pretty big wallop as most of ours has. There's also the Markell Venture side of the business, which 10 years ago was a rounding error, right? I mean, you're talking about a part of the business that brought in $86 million in 2009. In 2019, Markle Ventures revenues were $2 billion, over $2 billion. And this is a collection of small businesses. And so all of those small businesses are going to feel the impacts from this as well. And further, we just don't know how long that's going

the last. And so when you look at it from the perspective of three of the drivers of the business in the insurance book, the portfolio, and Markell Ventures, all three of them, all three of those drivers are exposed here and feeling some pain from this with a company where 2019 total revenue was about nine and a half billion dollars. These are all very meaningful parts of the business and they are feeling an impact as well. And so to me, it makes perfect sense that Markell is feeling perhaps a little bit more pain than others. But with that said, as the dust settles, I mean, Markell is still going to be a business poised to continue to gain share, to continue to grow up that Markell Ventures in that investment portfolio,

like all of ours, will eventually come back. I think interest rates are clearly driving some of this, so much of Markell's revenue is just from their investment portfolio, as Jason was saying, it's just going to be based on the rates of return. And interest rates are much lower. Insurance companies don't invest in tons of stocks, so they have the ventures business and some, but they have big bond portfolios, and that's going to impact their longer-term return. So I think that is clearly impacting them. Now the stock is selling near book value.

Typically, it's sold at one and a half, two times book value over the last couple of years. So the stock has come down, and the valuation is much more reasonable now for a business that long term probably could recover from the COVID-19 situation. Warren Buffett, I'm waiting for him. I'm waiting for Warren. Warren Buffett to come out and say something, publish another op-ed like he did in late 2008. But here's what I suspect, and I think we all suspect, is that he's probably doing some buying. And so let's offer up a suggestion or two for the Oracle of Omaha in terms of an acquisition

or just a business to take a stake in. And Jason, I'll start with you. Well, I'm not going to cop out and just go with McCormick, Chris. I promised myself this morning when we were talking about this. I am not going to go with McCormick this time, although I do believe McCormick could be a good answer here. But that was said, I do think, I mean, there are a couple of big businesses out there. I don't necessarily, I wouldn't say he should acquire these businesses. I think he could take meaningful stakes in.

He already has MasterCard and Visa in the portfolio. I think throwing PayPal in there would make perfect sense. Clearly, Todd and Ted have a forward-thinking perspective when it comes to the payments industry as well. I think PayPal would fit in nicely. Even more nicely than that, though, honestly, I kind of feel like Starbucks would be an ideal holding for that portfolio. It's very much in line with the type of business that he would invest in. I mean, he loves Coca-Cola. He gets the beverage industry, of course. Starbucks, I think, is an attractive-looking stock today. I mean, I think I told you guys, I started a position to Starbucks maybe a week or so ago. Tremendous dividend

then yield there that will keep on growing tremendous market opportunity in front with an addictive, let's say in the good way, at least, beverage that I don't think is going to run into too many headwinds for the rest of our lifetimes, at least. It's legally addictive. Legally addictive. Just remember that. That's good. Good guy.

It's legally addictive. Andy Cross, what do you think? What should Buffett buy? Yeah. I've actually been thinking about what he's been going to buy completely. He's talked about his elephant guy, not a metaphor I like to use, but he's mentioned that about He has a lot of cash north of $100 billion to suspend. So he's talked about the lack of valuations to buy complete companies.

So we talked about insurance in Markell. I think the insurance company that they might go after is something like maybe progressive, maybe Chubb. They're both $40, $50 billion organization. So that would be meaningful to them. I've actually said MasterCard, or I'm sorry, Moody's. They own a bunch of Moody's already, and it's a $40 billion organization. and one, he knows very well.

So if they went shopping completely to buy complete businesses, which is really what he wants to do with Berkshire Hathaway, something like Moody's might not be too far-fetched, Chris. Now, one of the better-known brands in the Berkshire Hathaway umbrella is Geico. Would taking a stake in progress? I'm just wondering about how regulators would feel about Warren Buffett buying another insurance company. I don't know.

I mean, I feel like these, I mean, I mean, it's a very good point in how that might be viewed from an antitrust perspective. I mean, GEICO and Progressive certainly possess a lot of brand equity in the space. But it is their focus on auto insurance and some homeowners insurance and other things like boats, motorcycles, whatnot. I mean, that is a very, very big and fragmented market at the end of the day with a lot of competition out there. So I actually think they could get away with combining those two and sliding right under

that regulatory radar, but I don't know. Progressive is probably a little bit more expensive on the valuation front than some of the other insurers, like the travelers, which is a little bit smaller than progressive. So maybe not progressive as much, Chris, but maybe another insurance company doesn't run into the risk on the regulatory front. All right, Andy Cross, we're going to have to let you go. Thanks for being here. Thanks, Chris, so much.

Ron Gross joins us next. So stay right here. You're listening to Motley Fool Money. Welcome back to Motley Full Money, Chris Hill here in studio with Jason Moser, senior analyst. Ron Gross now joins us from his home. Ron, thanks for being here. Before we get to some other topics, I want to give you a chance to weigh in on the big macro and a suggestion for Warren Buffett. But let's talk about the market. When you think back on everything that happened this week, what stands out to you and where are you moving forward as an investor? Well, for sure, I think the stimulus was essential. We both have monetary and fiscal policy in place now to help. My question is, is the package big enough to provide the bridge we need until we can get back to what's close to normal, where workers are back to work, companies are for the most part up and running again. And the problem with answering that question is that we actually don't know when the virus will be under control. So my hope is that the Congress stands ready to do this again, quite frankly, if needed. And my guess is it will be needed. I think this is going to linger longer, and perhaps $2 trillion isn't even enough, although I think it's a great start.

And I'm pleased that our politicians have come together for the good of the worker and the good of the nation. But as a long-term investor, I'm still very optimistic. And I'm seeing bargains in place that I haven't seen in quite some time. And so I'm doing my best to tune out the anxiety and the panic. And I'm thinking to the long term and I continue to pull up that long term chart of the S&P 500 where I see the big downturn when the dot com bubble burst and the big downturn in the 08-09 Great Recession. And to me, they look just like moments in time when I do it that way. and I'm hoping this would be the same thing. Yeah, I do think that makes a lot of sense.

I do agree. I think we're going to end up seeing this stimulus cost more. I mean, I think $2 trillion is a great start. Put things in a context. US GDP in 2019 was $21.5 trillion. So you can see how that matches up. You know, I like you, Ron, I'm optimistic. I mean, when I look further out, I think that, you know, things will be okay.

ultimately. I play a little bit of devil's advocate from the investing perspective, though. And I do wonder, because I think this is going to be a longer, more protracted battle with COVID-19 and probably a lot of people realize today. I think we're going to be dealing with the impact of this for many, many quarters, potentially years to come. It makes me wonder just kind of what should the growth prospects, what should reasonable growth prospects over the course of the next five years start looking like. Because for investors who are looking for us to just kind of get back to where we were and resume that torrid growth that we were on at pace, I don't know that that's necessarily reasonable. I mean, I do feel like we're going to be entering a stretch

here. Maybe it's two years. Maybe it's five years. We're just the growth expectations need to be ratcheted back considerably. And that doesn't mean, by the way, that as investors, where we shouldn't be invested. It just means you got to alter your expectations a little bit. Maybe some of these prices that seem like bargains today. Maybe they aren't such bargains if our growth prospects aren't quite as attractive as we hoped. Yeah, maybe the other side of that coin is before this hit to our economic system and the downtrend in the market, professional investors were warning that you should not necessarily expect the 9% or 10% annual returns that we've historically seen, and maybe something like 6% is more reasonable.

And that's because, quite frankly, after an 11-year bull market valuations were somewhat stretched, and they couldn't theoretically continue to go up at 9 or 10% unless cash flows really took off for some reason that wasn't readily a seat. Now with the pullback, I'm wondering, maybe we can actually get back to somewhere higher than 6 closer to the more historical 9 or 10 percent. And of course, as a result of the pain, we're feeling now with stocks coming down, but maybe the future does look bright. Ron, Warren Buffett calls you on the phone.

He says, I'm looking at everything that's out there. There's a lot of stuff getting cheaper. What do you recommend? Well, I'm sure Mr. Buffett is putting some money to work in his own stock right now, which is trading at a round or even at a discount to book value. So I'm sure he thinks it's quite attractive. We'll see him definitely purchase back some of his own stock. But I would love to see him take a position in Costco here, even though it's not one of the

stocks that has pulled back, you know, that far. Maybe it's down 13 to 15 percent from its high, but it's certainly a better valuation than it was. Now, for him to acquire that entire company at $125 billion market cap, that might be a strategy. You would put almost every dollar of his available cash to work. So I'm not sure if that'll happen. We know that he's been a fan of the airlines as of late.

Southwest, probably the best run out airline, both from an operational perspective as well as a cultural one, would be a great fit. I don't personally love the airlines, but he does at $19 billion, Southwest, $19 billion Delta, if I'm not mistaken. Those are perfectly reasonable acquisition targets. I wouldn't expect them to do both. I think Southwest would probably be the bigger bet. So can't wait to hear from him, though. As you said at the top of the show, he has not been outspoken in times of crisis. He usually is a common voice. So if he's out there, I'd love to hear from him. Let's move on to retail for a second because Nike reported this week. They came out with their third quarter report, Jason. And the stock rose about 30% this week, in part because sales for Nike were higher than Wall Street was expecting. But it also seemed like, Look, we're all looking for not just signs of positivity, but we're looking for signs of assuredness

that there was a path forward through this unprecedented time. And I don't want to read too much into Nike's third quarter report, but it looked like the kind of report that gave retailers maybe not an outright blueprint for how to get through this, but certainly some clues to the path. Well, yeah, I mean, definitely some retailers more than others. I mean, you could see brand names like a Lulu Lemon or an Under Armour or an Adidas or something like that, looking on what Nike did and saying, hey, man, this is a, like you said, a blueprint. I mean, as far as the results, I mean, the quarter that, this is a quarter that ended February 29th. So let's remember, March is not reflected in these results, but sales were up 7% on

a currency neutral basis. Digital sales grew 36% from a year ago. And certainly the story for a quarter for them was more about the headwinds that they've been experiencing in China along with the headwinds that they will be experiencing and starting, you know, are starting to experience now here domestically and in Europe. But there are silver linings there. I mean, they're showing that even if their physical presence is hindered or stifled, and they had to close all of their stores in China while this was going on. I mean, they really doubled down on the digital presence there. With all of their activity apps, I mean, they saw their digital business and trying to grow more than 30 percent for the Corps. They're talking

about things like digital-only releases now, where they might have a new shoe line or something where they would be utilizing their physical infrastructure of stores for that release. Well, that option was off the table. Rather than postponing, they just moved it to the digital environment, which they've already made so many investments into up to this point. So, you It just goes to show that I think there are certain businesses that have been more set up to deal with times like this than others. Nike is certainly one of them. Going back to companies pulling back on guidance or not offering guidance, I mean, they too did not offer any guidance as far as this upcoming quarter in how this next year is going to shake out for them.

But with that said, I mean, I think overall, I mean, the earnings released, the call, absolutely a net win for the company and definitely a blueprint with some ideas on how other retailers could navigate this crisis. Yes, speaking to the blueprint, they discussed kind of four phases of how they see this playing out. And they're not necessarily brain surgery, but maybe they do provide a nice framework for how as investors we can think about how retailers are going to get through this. The first phase being containment, which is a partial shutdown of a country, stores closing.

Second phase, recovery, brick and mortar stores slowly begin to reopen. Third phase, return to normalcy, and finally, fourth, return to growth. Nike specifically thinks they're going to return to growth early next year. As Jason said, those that have the ability to either bolster their digital offerings or move more to digital are going to be the ones that recover more quickly. Nike had started this quite some time ago. So kudos to them for thinking ahead. Others might be a little bit behind the April. You know, for all of the pressures that CEOs are under, and we look to the CEOs running the companies we own shares of to be good at maybe not everything, but we want

them to be good at capital allocation. And this seems like one of those times where that gets a little trickier, because if you haven't made the investments in digital sales that Nike, has already made and you're a different retailer. You're looking at a situation where you've probably got to shore up some cash just to get through this crisis. And so making those investment decisions seems like it's tougher right now. I absolutely think so because now you've got more moving parts, right? I mean, dividend policies, share repurchase policies. I mean, there are some companies that can deal with this without any problem. I mean, Nike can just keep on going status quo as far as dividends and share

repurchase. I mean, Starbucks is the same. I mean, is that a That's something you should begrudge them. Well, I mean, you know, we can debate that. But I mean, I think all of us would want to make sure that they're taking care of their partners and their employees first and foremost. But yeah, there's no question. I think we even saw recently Home Depot and MasterCard reached out to the debt markets to raise a lot of capital. Very attractive interest rates now. Do Home Depot and MasterCard need that money? No, they don't. But I tell you what, when all of the dust settles, they come out of this thing even stronger than before. That goes back to what we've been talking about for investors building up a watch,

those looking for ideas. And keep a sharp focus on the market leaders in their respective spaces because they typically emerge from these types of stretches much stronger. And on the other hand, keep a sharp focus on those that could actually get into deeper trouble here. Those companies that have a lot of debt where at the same time their cash flows are decreasing, and that as you said, Chris, in order to compete, perhaps their capital, expenditures are increasing. Those three things combined are a disaster waiting to happen and could

result in bankruptcies for some companies across industries. More after this, including a couple of stocks on our radar. Stay right here. You're listening to Motley Fool money. Just a little piece of paper coated with chlorophyll. 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 yourself stocks based solely on what you hear. Welcome back to the program. to Motley Fool Money, Chris Hill, here in studio with Jason Moser, Ron Gross, joining us from his home. Our email address is Radio at Fool.com. From Stephen Kraft, who writes, thank you so much for the consistency the Motley Fool podcast

have provided during these times. It brings some normalcy to my day when most other aspects of my life have been disrupted. My question is this. Are cruise lines a value trap right now? They're excluded from the bailout. Many people are losing jobs and will be traveling and vacationing less. Their customers are generally older and could face even more strict pollution regulation in the coming years. It seems like there are too many headwinds for the industry to be a viable investment currently. Thanks for your insight. Ron Gross, let me go to you first. I mean, Stephen certainly laid out a lot of headwinds there, and I agree with every single one of them. Yes, I think that his insights were very insightful, and I think he kind of nailed it.

You know, the cruise lines had the demographics going their way in the sense that an aging population very much likes to cruise. Now, obviously, the elderly population are the most at risk, and I think cruises have lost some of their customers permanently. There is no bailout in the stimulus package for this industry. It's a very capital-intensive business. They're basically shut down right now. Dividends are likely to be cut. some companies have high debt loads. I think dividends will be cut.

And then the way I think about it in terms of deciding if it's a good investment or not is, can I figure out when these ships will sail once again? And if so, what will the occupancy rates be like? And I actually can't answer either of those questions. So I don't see how it's possible to invest in this yet. Those that can maybe, are more of industry experts than I could maybe make some predictions there. And if they're

right, make some good money here, I think the risk is way too high. Yeah, I tend to agree. Maybe it's a timing thing. I'm not really very interested in investing in cruise liners on a good day. I do feel like, I have a hard time believing that cruise, the industry itself just disappears. I don't think that's going to happen from this. I do think that as time goes on, people are going to want to get back out. I think there will continue to be a market. I think that we will see some of the stronger companies in the space bounce back, at least to somewhat normal levels. And so then it becomes a timing thing. Maybe in the short run it is a value trap. I mean, I could definitely see investors

winning from this, as long as you feel like that industry is going to remain relevant for some time to come. You know, it's interesting because Steven's asking about the cruise lines. But Ron, we're getting this question from listeners and from our members, as we increasingly do live video Q&A with our members, we're getting this question about oil stocks. We're getting this about Ford Motor, the established companies, well-known. There is a business there. The stock is knocked down. And it's natural to ask, well, is this a value play now? Yeah. Well, the first thing is to make sure if you're considering a company that may be a value

player or a value trap that you focus on the balance sheet. Because when times are tough like this, you need to make sure a company can last long enough to turn their business around. Value traps typically occur when a company is going through some type of problem and you think it is short term. When you get into trouble is when it turns out it's longer term and the company can't break out of it and eventually continues to spiral down and in many cases goes out of business. Now, for the most part, none of this is the fault of particular businesses. This is an exogenous attack to our economy that is affecting lots of different industries. But nonetheless, regardless of who's fault it is, there are industries and companies that are going to be affected more than others. Make sure you

look at that balance. If you think this is going to turn, make sure that they have the wherewithal to last out however long it takes. If you're listening on the radio, thanks for tuning into your local station. If you're listening to us on a podcast, just want to give you a heads up that we are redesigning the icons for our podcast. So, sometimes starting next week, you're going to see a new look from the Motley Fool podcast. And the good news is that I wasn't the one who designed them. So we actually put professionals on this, Jason. Let's get to the stocks on our radar. Our man behind the glass, Steve Broido. We call him the man behind the glass. And now it's more important than ever because of social distancing. But actually, wrong.

Gross, you're up first. What do you got this week? What are you looking at? So many wonderful companies trading down 20 or 30 percent. It was not hard to really pick one, quite frankly. But I'm going to go with Disney, D-I-S, off 36 percent from its high. As everyone knows, a tremendous grouping of assets, whether it's the parks or Pixar, Marvel, ABC, ESPN, Fox Acquisition in 2019, Disney Plus launched late 2019 as well. A tremendous, tremendous entertainment behemoth. New CEO Bob Chapic, formerly head of parks, which is probably someone good to have at the helm right now,

being that parks are going to be the main drag for quite some time, being that they're almost 40% of revenue, and they're not going to be generating any cash flow in the near term. Bob Eiger, still around, still as executive chairman, focusing on creative issues. I'm sure he's actually intimately involved in day-to-day operations, to during this difficult time. They've raised a dividend for 10 consecutive years. The risk here is the debt. There is a lot of debt, 52 billion of it. They're actually looking to raise a little

bit more. But I think they should be able to weather this storm, pay that the interest. That's about $1.5 billion annually. They should be fine. Steve? Well, none of us can predict, you know, why a stock did what it did. What is the biggest driver you think that brought that stock down 30 percent? Is it the parks? Yeah, it's got to be the general sell-off and the marketing in general and the facts that parks, which are, you know, 35% of operating income, I believe, just are not going to be generating any income for the time being. Jason Moser, what are you looking at? Yeah, I don't even know if we've ever talked about this one of Mottiful money ever before, but Sony, ticker S&E is one that I've been digging into a little bit more primarily for our augmented reality service, but a very diversified business both geographically and from a business. segment perspective. About 35% of operating profit comes from its gaming division with the

PlayStation platform and whatnot. But they're making all sorts of investments in immersive technology now from AR visors to VR gaming experiences. And they're helping customers build out solutions for industrial AR uses today. Strong presence in music, imaging, consumer electronics, and even, believe it or not, financial services outperform the market really handily over the last five years. I wonder if this thing doesn't have a better days ahead. Steve? What's your favorite Sony product? Well, I mean, I guess I got to go a PlayStation, right?

I'm not the biggest gamer in the world, but I used to have one, and I really did love playing that PlayStation. What do you want to add to your watch list, Steve? I think I may go with Sony. Hey now. All right, Ryan Gross. Jason Moser, thanks for being here. Thank you.

That's going to do it for this week's show. I'm Chris Hill. Thanks for listening. We'll see you next week.