In this segment from the Motley Fool Money radio show, host Chris Hill asks advisors Jason Moser, Matt Argersinger, and Ron Gross to tell us about the companies they had their eyes on this week, and why. The trio picks National Grid (NYSE:NGG), an owner of electricity and natural gas distribution networks; athletic gear giant Nike (NYSE:NKE); and entertainment megaplayer Disney (NYSE:DIS).
A full transcript follows the video.
This video was recorded on May 19, 2017.
Chris Hill: Time to get to the stocks on our radar. Our man behind the glass, Steve Broido, will hit you with a question. Ron Gross, what are you looking at?
Ron Gross: I got a recent Total Income recommendation for Steve, it's National Grid, NGG. It's a London-based company, but its ADR trades here on the New York Exchange. They own and operate regulated electric and gas distribution networks both in the U.S. and the U.K. Transmission business is kind of like a toll booth, which is a nice business, very consistent cash flow streams, which makes it a really great stock from a dividend perspective, 4.4% yield. That should be a pretty safe dividend. Just sold their U.K. debt gas distribution business, special dividend-ed, if that's a word --
Hill: It is.
Gross: It isn't. Special dividend-ed the profits on that out to shareholders, and I think the stock has potential as well, not just in the yield.
Hill: Steve, question about National Grid?
Steve Broido: With a utility company like this, what is one metric I should look for, not understanding distribution of power at all?
Gross: Certainly industrial output, the strength of the economy in general. Commodity prices don't affect this business as much as other businesses, because it's a distribution play, but I think economic output in general would do you well.
Hill: Jason Moser, what are you looking at this week?
Jason Moser: Dividend-ing embiggens all investors, OK? It's not a secret, Nike. Ticker is NKE. We were talking about this earlier, how poor results from Dick's Sporting Goods and Foot Locker have brought down companies like Nike and Under Armour. I think this is fairly short lived. I think the upside with these guys, particularly Nike, they had very strong direct-to-consumer businesses. You look at Nike, the direct-to-consumer business represents more than a quarter of total sales today, that's up from about 20% in 2014. We have Nike on a watch list in MDP. We've been really patient with this one, we target it at about $50 per share, that's a pretty risk-free way to get what we think is 8-10% annualized return over the coming five years. So, we are very close on this one.
Hill: Steve, question about Nike?
Broido: Do you understand their relationship with Apple? They had the thing you could put in your shoe for a while, and then it's the Watch, and I don't know what they're doing with them.
Moser: Yeah, I don't understand the relationship with Apple at all, Steve.
Matt Argersinger: Don't we all have a relationship with Apple in some way?
Hill: Matt Argersinger, what are you looking at?
Argersinger: Really, simple, Walt Disney. Ticker DIS. Everyone keeps worrying about ESPN and the networks business. Just stop already, Disney is doing fine. Double-digit growth, Star Wars, Marvel, Pixar, Beauty and the Beast, which was a monster, literally. Buying back loads of stock. You have Bob Iger in the saddle for the next two years. If you want a 10% annual return for the next 10 years, right now, buy Disney.
Broido: I'm a shareholder. How many more Star Wars movies do you think there will be in the next 20 years?
Hill: Three different businesses, Steve. You have one you want to add to your watch list?
Broido: I might look at Nike just so I can understand their relationship with Apple better.
Chris Hill owns shares of Walt Disney and Under Armour Class C. Jason Moser owns shares of Apple, Nike, Under Armour Class C, Under Armour Class A, and Walt Disney. Matthew Argersinger owns shares of Apple, Under Armour Class C, and Walt Disney. Matthew Argersinger has the following options: long January 2019 $45 calls on Nike and short July 2017 $17.5 puts on Under Armour Class C. Ron Gross owns shares of Apple, Nike, and Walt Disney. Steve Broido owns shares of Apple, National Grid, and Walt Disney. The Motley Fool owns shares of and recommends Apple, National Grid, Nike, and Walt Disney. The Motley Fool has a disclosure policy.
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