Where to Invest $1,000 Right Now

hey we're coming to you from full global headquarters in Alexandria Virginia I'm Chris and I'm joined by senior analyst bill man thanks for being here I'm sitting way over here Chris where we are practicing the social distancing here in the studio we're gonna be talking about where to invest $1,000 right now we're gonna be taking your questions Bill's got three stock ideas that you can put on your watchlist and if you're looking for even more stock ideas just go to fool.com slash 2020 you can get Tom Gardner Motley Fool CEO Tom Gardner's recommendations for the year ahead let's start before we get to your stuff so let's start with the market writ large I've been watching a lot of financial television lately you got a few people on there talking about like how cheap the market is it's certainly cheaper than it was a couple of months ago but do you look at this market right now and say the whole thing is cheap no I don't actually I think I think it really bears remembering that twelve years into a bull market call it that the market was actually really historically expensive coming into February of this year it is of course much cheaper than it was a really great measure to talk about the relative valuation of the market is called the Shiller p/e ratio which is a which is a capital adjusted p/e ratio and it takes ten years worth of back data and and you know at its peak even a few weeks ago it was 32 33 and now it's at 22 which is historically still above average so yes I mean I think that now there are definitely opportunities out there you know as you know we here at the Motley Fool don't really say buy the market or don't buy the market we're gonna focus on companies themselves but if you're looking just for a straight opportunity in the market I don't think it's here yet so it's not available for the market writ large but when you look at particularly in distri ZAR they're ones that are starting to look attractive certainly oil stocks have gotten hammered but I don't know of anyone including you who thinks they are so cheap right now that they're attractive ya know obviously the energy has been hid amongst the hardest I think if you did to get exposure to the energy to to energy to oil and gas stocks the way to do it would be to buy the largest of them because what's inevitably going to happen in a in a capital intensive industry like that is that the weaker companies are in real real distress so a lot of those properties are gonna be bought at bargain prices there's no way that I would dare call the bottom at this point and there's no way that I would dare say it may not get a lot worse but that is an area where people have run you know screaming from so there may be some opportunity there but I would stick with the biggest names you know it's noteworthy that ExxonMobil decided to slash their dividend because they're hoarding cash for something absolutely and we've seen businesses across any number of industries who have cut their dividend we had Ford Motor coming out earlier today suspending their dividend Darden Restaurants parent company of Olive Garden and LongHorn Steakhouse are their industries that you do think look more attractive and also how are you finding them what are the one or two metrics that you're using to determine what's a value play as opposed to a value trap so from an industry perspective there are companies in the entertainment industry and we'll talk about some and you know in a little bit one of the things that I've focused on is not necessarily on an industry by industry basis but focusing on companies within certain industries that are the strongest that have the strongest balance sheets that do not have the same level of capital reinvestment requirements and those are the places where you're going to find opportunities because as we've seen on a day-to-day basis the market is being sold off or bought you know in the aggregate there really are very few companies that are you know when the market goes down 10% there are companies that are going down to 6% but there's you know very few companies that are actually going up one more thing on the dividend slashing that we talked about always worth remembering that we like to focus on businesses but human beings run these businesses and see are responsible for capital allocation when you look at whether it's exxon mobil ford motor or any other business out there suspending or cutting their dividend do you automatically give them the benefit of the doubt because in the case of some of these companies they've been paying a dividend for a long time I do in this instance really what we're going through right now the only real allegory that I could think of the only real comparable is you know with September 11th and 2001 because when you go back and you look at market crashes in the past I mean Ben Bernanke is an expert in the Great Depression and they're still debating what caused the Great Depression and we are now 91 years later we are talking about what caused the you know the the crash in 2008 and 2009 those sorts of things we think we know but we're not quite sure what you know what what caused what and what caused everything to cascade in this situation we know exactly what the problem is and we know exactly what the solution is going to be and the solution is going to be economically painful for a lot of companies and so for companies to come out and say we are hoarding cash right now so that they can continue to pay employees so that they can continue so that they can take some advantages I I have to applaud it let's get to the stocks obviously we you know a lot of industries out there are getting hit there are a lot of businesses that have just frankly too many x factors you know when you think about the next six to twelve months as foolish investors we like to think in terms of decades and not months now but here we are but here we are you've got three stocks what's up first the first of which is Disney and Disney as we know 30% of their cash flows come from their parks worldwide in the club and the parks are all closed right now but Disney was a stock this may be a really good you know a really good case study because Disney has come down very sharply from its beak and it was actually dropping rather sharply even before the beginning of the the coronavirus but Disney is a company at the end of the has such unbelievably valuable assets you know and and and has a great cash position and they have expenses that they can that they can cut back on and they do have things that people are going to continue to consume so Disney I think is that you know is a company that is much much more exciting as an investment than it was even two months ago before we get to your next stock I got to ask you about one piece of the Disney Empire and that is their cruise line because almost no industry has been hit as hard as the cruise line industry Royal Caribbean Carnival Cruise Line yeah do you sort of when you look at that industry do you put Disney off to the side because they have other business lines that are more meaningful yeah they are they are of the cruise companies the companies that have exposure to cruise is almost unique in that regard I I assign value to cruise companies of somewhere close to zero now and simply not because I'm saying they're all doomed but you know if if the worst case tenors you know the worst case duration of the shutdown you know and the slowdown and continues the cruise companies are in an in a tremendous amount of trouble and because they are flagged in places like Panama and Liberia there's no really you know there's there's there's nobody who is really either capable or willing to to you know to bail them out Disney's cruises I mean obviously they're in the exact same boat i pardon pardon the pun but they are in fact a little bit different simply because it is such a small part of the Disney of the Disney empire all right let's move off of Disney and cruises what's your second stock my next one is Starbucks and Starbucks got hit really hard they have an enormous amount of stores in in China and all of those were closed they are beginning to open back up that stock has been essentially it had been cut in half at this point is you know it's up a little bit it was the high of the year was about a hundred and it's at 60 now tremendous franchise you know absolutely addictive product did something that people when they go out you know when they when that when they do venture out now a lot of times it is to go and get that cup of coffee a little bit the you know a little bit of a little bit of happiness in their day so Starbucks is a company that is that that that I believe is going to come out on the other side very very strong you look in the private markets JB Holdings is a company that bought up a bunch of companies that used to be publicly traded caribou coffee coffee that sort of thing there was talk that they might be spinning some of those out I would also point out JB Holdings also owns Panera Bread yeah is it safe to assume that the IPO market and spin-offs of this nature are completely on hold at this point gosh that's a super question I don't functionally I don't know how you would go through the process of you of doing it given you know social distancing and given given all of the things that have to happen for companies do to actually you know to actually do a spinoff I would suspect that there may be ones that are done in you know under direct you know under duress and under you know negative circumstances I don't know the circumstances of JB by itself but if they do need capital you may see you you may see them spinning out some pretty valuable assets things like that absolutely did happen in 2008 and 2009 alright we got a lot of great questions coming in we're gonna get to us in just one second what's your third stuff the third stock maybe a little bit of a surprise it's actually JD comm which is a Chinese company they've recently announced that they're doing a two billion dollar buyback a lot of people might not might not know this and this would be a surprise that the Chinese stock market is the best performing so far in 2020 and has been for you know for several several weeks now JD comm actually got its start during the SARS crisis you know in 15 years ago they had a number of stores and they shut them all down and they went all online it is you know it is essentially where people get you know their goods and services in China and they have gone through the process of spending billions of dollars setting up all of their in their own infrastructure they do they're shipping themselves they do everything internally so it is what David Gardner loves this word it's a you know Nicholas Taleb word it's an anti fragile company and it's the stock has not actually come down that much during during the crisis but it is I think at the end of the day one of the things that you know that though that we are looking at and where we're gonna find opportunities is habits that get formed now that don't go back afterwards and I think for JD comm they really have a you know the potential to become you know a much larger you know a much larger player in China than they are now all right if you're enjoying the video please as always give us a thumbs up it helps other people find the video and we like doing these videos and again go to fool.com slash 20/20 you can get Tom Gardner's recommendations for the year ahead in addition to the three stocks that you just heard from bill man let's get to the questions Julie asking do you think it's better to invest in more growth stocks if you're in it for the long term instead of instead of recession-proof stocks great question because we've we've talked in the past about those businesses like waste management just to name one yeah that is in literally in the business of collecting trash that's a business that's going to go on whether there's a recession or not but to Julie's question if you've got a long time horizon would you be looking more at grow stocks and then the waste management's of the world I would be but that but there's there there's a difference between different types of growth stocks and waste management is that you know is is it is a great example of maybe a non growth stock that I would that I would look at Costco might be another one that people don't consider to be a growth stock where companies are going to come into trouble is ones that require a lot of additional capital to either grow or for their basic operations now so the airlines will need more capital growth companies that have had to tap the the public markets or the debt markets they are in some trouble now but companies companies that really don't require a lot of additional cash at all those are the kinds of companies at this point that I'm really excited about question from Josh who asks any buying opportunity in airline cruise hotels and retail industries that suffered the most so far boy you think about most of the industries that Josh name-checked there and it really is such a rough time for travel and tourism if you were going to buy in that segment the the answer is probably and if you want to sound like a genius you would say yes like yes because these the this segment has gotten hammered and a lot of people have been wondering what Warren Buffett is doing with with Berkshire Hathaway's a hundred and forty billion dollar dollar cash Ward and one of the things that I believe we may find out that you that they have done is to backstop some of the airline's maybe through up you know through a preferred purchase that may not help the shareholders all that much because the because the preferred would be would have seniority and have preference over over common shares but it is definitely possible if you do want to go into that segment I would look for some of the biggest players in the game ones like Hilton but you have to understand that if this keeps going on a lot of these companies are in huge trouble so I would not put a big percentage of my portfolio into that segment of the market well and you were talking earlier about you know capital investment that businesses would need to make certainly is a huge capital investment to throw up a hotel so question from Jim who is probably a regular viewer of our live Q&A s because yes is Bill Mann still holding stage stores that he recommended a while bouts that's painful so no I actually am NOT holding stage stores anymore the remind me of the business they were a they were a company that was making a transition into into low-cost retailing very soon after we had our you know we had our you know we had our discussion the company came out with with with earnings that were literally terrible and you know and just got got kind of overrun with you know with with with with credit issues and you know so definitely the corona violet virus has not helped them make that transition into off-price retailer they may they may actually come out on the other side but it was a situation where the gosh I you know I ain't even talking about this at this point but it was a situation where the the company got really overrun by it you know by subsequent events and yeah it's you know it's it's a little bit painful but no I've moved on from it great question from Emma who asked can I make money with only $800 I'm a student so I don't have much to invest with great that a student is looking to invest and I'll just point out the name of this video is where to invest a thousand dollars right now so you're basically there yeah but but I think you know Emma's question speaks to one of the great myths about investing in the stock market that still persists to this day this day where we have zero dollar trading commissions and that is you need a lot of money to invest yes now the the answer is a little bit too full because if $800 is all you're ever gonna put into the stock market it's really really hard to suggest that that that you're gonna make a lot of money doing it but if you are getting started in Emma I believe you said was a student you are you have almost all of your earnings coming ahead of you absolutely absolutely now what we can't tell you is that things are gonna be better tomorrow I mean that's it's it's just completely you know it's it's it's impossible and I you know I don't I wouldn't trust anyone who comes out and says yes you know we've hit the bottom because we don't you know we don't we don't really know but if you are you know if you are looking to put a little money to work in the market now the prices that you're getting now are so much better than they were even a couple of weeks ago so yes absolutely and eight hundred and eight hundred dollars start is a great place a question from Dakota that speaks to a topic we touched on earlier I've read some companies are cutting dividends and more will follow I know this is not ideal but probably necessary to save cash do you think this will further push stock prices down a great question particularly when you consider we haven't really talked about funds but there's all manner of mutual funds out there including funds that focus exclusively on dividend payers yeah it it may but keep in mind that you know that the Fed Funds rate is essentially zero now so companies can cut their dividends and still it you and still have an income preference over over what you can get in the debt market at this point so yeah it probably will affect them I think I think by and large that people have the understanding that what's happening now and the reason the companies are doing it is due to an exogenous risk you're not talking about something that is impacting one company it's impacting everybody so yeah I would assume that there's going to be a lot more it may be painful for people who are you know who are looking for income from from from dividend payers but in some respects where else you gonna go right it's not you know it's not like you can get you you can get much from a CD ray or they're essentially paying zero now Eric who is starting out just like Emma I'm just opening an IRA and I want to buy an allocation of ETFs what are some ETFs that you would recommend some of the ones that I would recommend at this point we were talking earlier about how the the US stock market is not necessarily all that cheap when you're talking about that in general you're talking about the S&P 500 which is the largest 500 companies there are ETFs that track the smaller segments of the market you know the small and mid caps and the mid cap the the mid cat B TF is ticker mdy it's you know in it and it attracts companies that aren't in the largest 500 companies and what we have seen is that the market now is a little bit separate like so just for example today the S&P 500 went up 1.4 percent the russell 2000 which is 2000 smaller companies is up seven and a half percent so there is a lot more you know there there is a lot of opportunity and there is a lot more it's a lot cheaper in the smaller segment of the US stock market question from airco who writes greetings from Finland thank you for life antastic would your answers to today's question be the same if you were talking about investing $100,000 instead of just one thousand dollars would the basic rule remain the same regardless of the investment amount essentially what you have if you were investing a larger sum of money is is the opportunity to take a little bit of the of the time risk out of what you're doing in my time risk i means i mean if you have $100,000 to invest you know I'm assuming that you're not a billionaire so if you have $100,000 it's free and clear to invest but you're worried about the stock market dropping over the next couple of weeks what you can do is set up a plan and say I'm going to invest $20,000 today and I'm gonna set a timer so two weeks from now I'm going to invest 20,000 more two weeks after that 20,000 more with the thing that people need to remember when we're talking about the stock market it is one of the very few places where when things go on sale people will run away and we are hard-wired to do it so yes any amount of money that you are interested investing now is great have a plan great question from Debra what do you think about buying shares of Walmart Target Costco CBS and other stores right now that are profiting from coronavirus I think what she's asking about is should I invest in hoarding because when I think about those kimberly-clark when I when I've walked through the grocery store what I've walked through CBS there there are entire aisles that are just our empty shelves our out the giant store by us yeah looks like what I would imagine Venezuelans yeah you know stores look like I mean just absolutely stripped clean apparently and you know I can't confirm this but Walmart is is is taking a huge share of the grocery delivery business so much of that you know is upward of 50 percent I've been here is coming from Walmart and I would never suggest that you know that you go out and you invest in hoarding right b-but I would say that it is certainly possible that people who are starting habits now will continue doing so once things return to normal so things are definitely not normal now but Walmart is is I mean it's a great company to start with but it may be you know at the end you know at the end of the scare with kovat 19 that people continue shopping oh you know online and using grocery delivery from Walmart well and you talk about habits forming I mean that's certainly an opportunity for to go back to entertainment businesses like Netflix Disney Plus Hulu Amazon Prime more people spending time in their homes yeah one is well more binge watching yeah question from Beth how do we keep calm during this storm I've seen thousands of dollars disappear from my portfolio Beth in good company yeah I assure you because I've seen thousands disappear from my portfolio and so is Bill no don't keep calm there's no I mean there's there's there's no don't keep calm that's you're not saying yeah yes exactly now is the perfect time to panic was that monster saying Caillou no no there's no there's no reason to you know to suppress the fact that what is happening right now is scary right just just embrace it and understand that everyone is scared even the people you know you go onto Twitter and you see people say oh it's a great opportunity you know a buying opportunity right the you know the the real the real key is that even though you're terrified by anyway right really come up with a plan and be as unemotional as possible when you were executing it and which is why I suggest you know if you're really if you're really worried you're trying to put some money to work set a plan you know so you you you buy a little today you buy a little whatever a month from now and you just do it that way the people who ended up getting hurt the worst in 2008 and 2009 were the ones who couldn't take it and I'm not saying that this is you know that this is the exact same as 2008 and 2009 but we have recovered from every problem that we've had in the past and we will recover from this as well great strategy question from Paul who asks would you prioritize adding to a position that is down big or a position that has largely held up over the past month I think the first question I would ask is I would want to know why but yeah you know and by the way if there's a good reason that stock has held up over the past month or so then yeah maybe that's the one to add to yeah I think that I think that the market is actually showing us although almost every company is down but they are the market is showing us the companies that are less fragile than others so I actually kind of would focus on companies and and the three that I recommended there you know two of which are down pretty sharply from their Peaks I would really more focus on companies that have you know that have low cash needs even if you know even if they're bad business looks bad in the you know in the interim and don't let the stock price be the thing that guides you a question from Jamal who asks greetings from a fool in South Africa at the international audience yes fantastic what does Bill man think about Visa and has it fallen more than was necessary yeah buzz Visa and MasterCard are absolutely fantastic companies I think that they are in you know in a range where they can be bought today I would have you know I would have been buying them in in February as well I mean at the end of the day a Jason moszer our colleague has talked about the war on cash I think that one of the things that is going to come out of this is that cash is going to be less and less of a means of transaction as we go forward so companies like visa which take a little tiny piece of every single you know non-cash transaction are absolutely great place to place us to look for some value now we've talked a little bit about China we've gotten questions from Finland in South Africa you're someone who likes to look literally around the world for investments yeah what is one other region investors who are watching should look at because I think most investors in the United States tend to just focus on the companies here in the US yeah it makes sense with the thousands of opportunities in the public market but what's one area outside of China where we should look as in any place yeah any place where there is a a dramatic increase in the net you know in credit transactions there are a lot of their markets like in Latin America where it is primarily a cat a cash driven Society but you are seeing you know in Latin America you've got mercado libre you've got Stone Co you've got companies that have been hit very hard because they provide services to small and medium enterprises but in the longer term I think that that is a you know that you know to get back to the same point I just made with visa a you know an area where there is going to be a sea change as we come out from this we've gotten a couple of questions about blue chip stocks specifically BP and 3m both beaten-down both blue chips for a couple of decades if not longer do they look attractive at this moment I would prefer 3m to two BP for the exact reasons that we were talking about the you know the the oil patch beyond everything else beyond the drop in the drop in consumption that is happening worldwide you've got a price war that's going on essentially between the Saudis and the and and the Russians the agreement that was in place what they called OPEC plus has fallen apart so there are some real geopolitical you know issues in the oil industry if you if you are interested in participating in you know in the potential rebound you know of the energy industry BP is a good place to start Royal Dutch Shell Shell Exxon the companies like that but I think that I always get a little bit worried about you know about commodities and then commodities that have you know that have a geopolitical risk built on top of them and there are none that are that are you have that more than the oil industry so I would say between the two 3m is my preference last question before we wrap up we're seeing all these news stories about the reduction of pollution since the corona virus shut down would it be smart to invest in companies that are helping us go green certainly a long trend yeah yeah I saw actually today that the the the the nitrous oxide readings in China have actually gone back up a little bit which will show you know the factories are starting to work again I don't know that there's a link between what's going on now in the green industries but I think I was actually thinking about this earlier in here well you know like think about this you know live now like what learning are we going to get from the fact that pollution has dropped so quickly so you know around the world as a result of the shutdown from the coronavirus and what types of technologies are we are we going to look to and say this is where we need to go I don't I don't really have the answer there next time I come on I promise I won't talk about it all right bill man thanks for being here thanks thank you so much for watching again thanks for the thumbs up and don't forget to click the subscribe button so you can check out all of the stock market q and A's that we do here on the Motley Fool's YouTube channel I'm Chris Hill thanks again for watching we'll see you next time you

Channel: The Motley Fool

Views: 417,074

Keywords: stock market, bear market, coronavirus, covid-19, investing, wall street, recession, cheap stocks, stocks for beginners, investing 101

Id: Q10cULymuR4

Length: 30min 28sec (1828 seconds)

Published: Thu Mar 19 2020