In this Motley Fool Money podcast, host Chris Hill kicks off the year with a 2018 preview show, aided by Hidden Gems' Abi Malin, Million Dollar Portfolio's Jason Moser, and David Kretzmann of Motley Fool Rule Breakers and SuperNova.
In this segment, Chris begins the show by surveying the crew with a two-part question: What sector are you watching this year, and what is your key question regarding it? The spaces they replied with -- legal marijuana, consumer retail, and healthcare -- are all undergoing significant evolutions.
A full transcript follows the video.
This video was recorded on Jan. 5 2018.
Chris Hill: What's an industry you're watching this year, and what is your question about that industry?
David Kretzmann: I'm going with the Reefer Madness, Chris. I'm talking about marijuana. I guess the question or questions I have here, first, are legitimate markets forming within the marijuana space? And following up from that, are there legitimate companies emerging that can benefit from those markets? Canada is set to legalize recreational marijuana sometime this year, possibly as soon as July. They will be the first major country to do so. So that could really legitimize the marijuana space and give companies a legal, legit opportunity to compete. You are seeing some states, like California, now that 2018 is here, that had legalized recreational marijuana, but there is the growing question mark with attorney general Jeff Sessions opening the door for the federal government to intervene in the states that have legalized marijuana to some capacity. So that's why my overall question here is, there's clearly an opportunity, potentially multibillion or tens of billions of dollars opportunity here. But with very few legal legitimate markets, I still wonder if companies can succeed this year.
Hill: I would say, Jason, other than bitcoin, we probably had more questions last year about marijuana stocks than any other industry. David, is Canada the first tipping point for you, the legalization in Canada?
Kretzmann: Yeah, because you already have a fair amount of marijuana companies in Canada that are bracing for this recreational marijuana push there. Because there's already some medicinal marijuana sold in Canada, and obviously in some states in the U.S. But right now, it looks very overheated. Just looking at four of the bigger cannabis or marijuana companies in Canada right now, combined, their market value is $14.5. Their trailing revenue over the past year is $100 million. So these companies are trading for 145 times revenue. And that's just looking at four companies. There are a ton of other start-ups that aren't even selling anything yet. So, there's a lot of excitement here. And I think there will eventually be an opportunity here. But I just wonder if these very early companies are going to be the ones to actually benefit.
Jason Moser: Yeah. I'm on board with this. I think legalizing marijuana makes perfect sense for a lot of reasons. I think the big problem early on, and investors need to at least keep this in mind, is the disconnect between the states that want to do it vs. the federal government, which is still playing hardball. I think eventually, that risk goes away as administrations change. It's not like you need to jump into this thing headfirst right now. But I think it's definitely a market worth keeping an eye on.
Kretzmann: Yeah, I think Canada is where you want to look first, because if they do legalize it on a national level, that really gives us an idea of how that competitive space shakes out.
Hill: Abi Malin, same question for you. What are you watching this year, and what's your big question?
Abi Malin: I guess, reflecting back on 2017, I think we saw a lot of headlines, Death of Retail, Retail Apocalypse, things of that nature. And we definitely saw a lot of store closings. But something I think about is that people are still buying. Consumers spent almost $20 billion online over the five days between Thanksgiving and Cyber Monday. This is up more than 15% from last year, according to Adobe Analytics. And I also saw a stat about, the purchase of luxury items has quadrupled since 2014, according to Walker Sands Communications. And, on top of that, we've seen a little bit of M&A activity.
So I think something kind of interesting that's been going on, Coach has formally changed their name to Tapestry, and they've transitioned to more of a holding company structure. They now have Coach, Kate Spade and Stuart Weitzman all under one conglomerate, more in that LVMH luxury category. And Michael Kors bought Jimmy Choo for shoes. And then, I think you've seen a lot of younger companies starting up looking for customers in new ways. One I looked at recently was Stitch Fix. They make a box of five products and mail it out to their subscribers, either on demand or on a schedule, and people can pick and choose out of that box what they want to keep. So, I think you've seen a lot of changes in this area. And I think aside from who's going to win, whenever you see a big transition like this, it leaves space for, what are those other opportunities when one door closes and another one opens? And I think something really interesting to think about in this regard is, what's going to happen to that retail space with all these brick-and-mortar locations closing and leaving a lot of space behind?
Hill: So in terms of commercial real estate, should I be optimistic about it for the opportunity that lies ahead with more mall closings? Or is this an area to stay away from?
Malin: I think it's interesting, according to PwC, the U.S. has about 23.6% square feet of retail space purpose. That's twice the amount of Australia and about five times the amount of Europe or Japan. And that definitely seems heavy, it definitely seems bloated, especially as people are moving more to online. But people aren't buying less things. There has to be warehouses, there has to be some sort of means to connecting those dots. And I think it's going to be interesting to see how those physical spaces play out.
Hill: Jason Moser, same question.
Moser: Looking at healthcare, specifically telehealth, my question is, I wonder if 2018, will this mark the year where telehealth really starts to get buy in from the consumer, particularly the aging population? And when I say aging, Chris, I'm not talking about you and me. I'm talking about our parents --
Hill: I mean, we are aging.
Moser: We are, but we're not quite there yet. I think you and I have probably bought into this concept. And they will be regulatory hurdles to clear. They're clearing them now. I think we're starting to open our minds to this Evolution and healthcare as we have a shortage of doctors, figuring out new ways to scale healthcare and add efficiencies to a system in dire need of it. We've talked a lot about Teladoc on the show over the last couple of years, and I think that's one company that is going to continue to benefit. But the market here, according to IBISWorld research, is projected to hit about $3.5 billion in revenue by 2020, versus around $750 million today. So, it's a big opportunity, and I think the question really centers around getting the buy-in from the consumer. I think this is the year where it happens.
Abi Malin has no position in any of the stocks mentioned. Chris Hill has no position in any of the stocks mentioned. David Kretzmann has no position in any of the stocks mentioned. Jason Moser owns shares of Teladoc. The Motley Fool owns shares of and recommends Tapestry. The Motley Fool owns shares of Michael Kors Holdings. The Motley Fool recommends Adobe Systems and Teladoc. The Motley Fool has a disclosure policy.