In this episode of MarketFoolery, host Chris Hill talks with Motley Fool analyst Seth Jayson about some of today's business news. Consumer-goods giant Unilever (NYSE:UN) has pledged to cut new plastics by 2025. Just how effective moves like this are at greening the world remains up for debate. Plus, the guys answer some listener questions. Will artificial intelligence replace most finance jobs in the next decade? Are there any beaten-down industries that investors should take a closer look at? And, as the market ramps up to the holidays, Seth shares what he's watching for the rest of the year. Tune in to find out more!
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This video was recorded on Oct. 7, 2019.
Chris Hill: It's Monday, Oct. 7. Welcome to MarketFoolery! I'm Chris Hill. Joining me in studio today, the one and only Seth Jayson. Thanks for being here! Quick shout out to Mac Greer for all of his work last week. When Mac said I was resting my voice, he was being polite. I had severe laryngitis, which is not fun. It's not fun for anyone, but if you're in my line of work, it's particularly a problem. It's nice to be back!
We're going to dip into the Fool mailbag. We're going to do a little bargain hunting in the world of stock investing. But we're going to start with Unilever, the consumer goods giant. Unilever announced it is pledging to cut its use of new plastics by 2025. Unilever is one of those companies that I'm sure a lot of people, they hear the name, they may not be familiar with it; chances are you've got Unilever products in your home.
Seth Jayson: What do your armpits smell like? Probably their soap.
Hill: Dove, Comfort, Dior, Hellmann's mayonnaise, my personal favorite, Colman's mustard. I like a spicy mustard now and then.
Jayson: It's weird that they have the food combined with the soap. But hey, good for them.
Hill: The point being, this is a $130 billion company and they've got over 400 brands. It's no small thing now for them to make this announcement.
Jayson: To say, "Hey, less plastic," which is very interesting. I applaud that! [claps] Do they sell any plastic little water bottles that drive me crazy? When I go running, all the plastic garbage I see is people hydrating. Visualize my finger quotes. Just bring a reusable bottle! No, this is interesting news. I think it's long overdue. Although one of the weird things about the plastic that gets headlines, like the Pacific garbage patch, the thing we're all so concerned about -- you know, it's half fishing nets? And the majority of the rest is other fishing stuff. So, this is a great step, but I think that most plastic, at least in non-developing countries actually ends up where it should, in landfills and so forth. Now, you can argue, should we be burning this stuff, or whatever. But this is a good step.
One of the places I think you can look for an investment story in this, if you are interested in playing it as a trend, is to take AptarGroup, ATR. It may sound counterintuitive, because they sell a lot of shampoo bottles and things like that, but they're also real innovators in packaging. We can't just get rid of all of our packaging entirely. Any solutions are going to require some innovation. Probably nobody in the packaging biz does a better job of coming up with new, interesting, and effective ways to ship and distribute stuff than AptarGroup. So, I would keep an eye on that company.
Hill: It's interesting to think about the ripple effects of this. You just hit on, from an investing standpoint, maybe the more important one. It's like, OK, they're going to cut plastics. Stuff has to get put in something, so someone is going to fill that void. We've gotten questions over the years about, "As Amazon and others ship more and more cardboard boxes, who's making the cardboard? It seems like there's an investing opportunity there." I'm also curious about a company like Procter & Gamble, which is a consumer goods giant like Unilever, only it's giant-er. It's about a $300 billion company. To the extent they feel pressure, or just decide on their own, "This is a move we would like to make."
Jayson: This is cross-industry, cross-sector. Tesco, for instance, in the U.K., is looking at getting rid of a lot of plastic. A lot of companies are. If you do this the right way, you can cut costs, and you can probably keep your consumer prices the same. But if you paid a nickel less for packaging, then you're pocketing a nickel more in profit. Tesco in the U.K. is doing that, of course, because there's some policy that's going to force them to pay up for excess plastic use. Those are other places to look for a pin action from a movement like this. P&G, I saw that for a couple of years now, they've been doing what's really a gimmick, but it could have some potential. They're using actually ocean plastic, reusable ocean plastic, renewed ocean plastic, to make some bottles.
The primary problem with this entire situation is we. We're all it. We have to have brand new, shiny, pretty plastic. We can't buy something in a plain brown cardboard box, recyclable cardboard. We have to have the shiny stuff. To the extent that changes, that'll be good news not only for the environment, but for all of us as consumers. We really don't need to spend so much on packaging. Amazon has been doing more to send less packaging. Obviously, that's a big cost for them. Luckily, price is still a lever in this situation. As companies realize, "Hey, we can probably do this and spend less money if we plan it carefully," we'll see more of it.
Hill: One other ripple effect at least to keep an eye on is the hotel industry.
Jayson: Oh yeah, a lot of them are getting rid of the bottles, which makes total sense. Nobody uses that bottle. And really, it's just something your mother-in-law takes and puts in her purse.
Hill: [laughs] Don't bring my mother in law into this. Our email address is firstname.lastname@example.org. Question from P in Canada, who writes, "I'm a 19 year old student starting my college education in the next three months. I'm very passionate about finance and the investing world. I started reading books and learning about the subject two years ago. This week, I read in The Economist that the majority of jobs in finance will be replaced by AI by the time I'm 30 years old. What do you make of this? Is a finance college degree still a good option?"
I don't know, the majority of jobs replaced by AI?
Jayson: That doesn't sound right to me. I'm the AI guy here, and that doesn't sound right to me.
Hill: I was going to say, of the two of us, you actually look into and study the rise of AI and its applications in different industries.
Jayson: Yeah. Well, you don't even need AI to automatically choose good investments. In fact, the biggest advantage in the investment game is the capacity to think long term and not have knee-jerk reactions. That said, I'm not sure you need to be a finance major. If you are going to college and you're passionate about investing, it's OK if that's a hobby. Why don't you study something that truly interests you and see where things go from there? If you haven't gone to college yet, don't lock yourself into what you think your career path is going to be. Keep your options open. There's a lot of research out there that shows big companies in the U.S. are actually looking for liberal arts type of graduates because they want people who have a broader background than just a narrow set of skills that you might get out of finance or something else. And you can always move into the finance area from other fields. I mean, look at me. I was an art history major. Luckily, I found The Motley Fool -- before we started hiring smart people, by the way. A lot of it is luck as well.
Hill: Well --
Jayson: You worked here when the place was big. And then...
Hill: And then it got a lot smaller.
Jayson: It got a lot smaller.
Hill: I was just going to say, worth pointing out that The Motley Fool was started by two brothers, neither of whom was a finance major. Both of them were English majors.
Jayson: I thought David was math and business. I know Tom, our CEO, was English.
Hill: They were both big English guys.
Jayson: For sure, the name, right? Critical thinking is really where it is. Use college as an opportunity to become well-rounded. Think of what Charlie Munger would say. He wouldn't tell you to go off and hide with finance books. If you want to have breakfast with Charlie while he's still on this earth, put down the finance books and read some philosophy.
Hill: And if you're going to have breakfast with Charlie Munger, bring a box of peanut brittle. I hear he likes that.
Jayson: And a notepad.
Hill: Question from Mark in Virginia, who writes, "The S&P 500 is close to an all-time high. Are there any industries that look particularly inexpensive to you right now?" Looking for bargains.
Hill: [laughs] No?
Jayson: [laughs] No. I'm going to take issue with the idea of investing by looking at industries. Maybe Mark is just looking for a starting point, to try and find good companies that are distressed. I think that's an OK way to do this. But I definitely would not recommend saying, "Hey, these industries are down, therefore they're bargains." I was looking through Capital IQ. They're one of our partners. They give us access to some excellent data. I was looking at which industries were down lately. Transportation hasn't been doing all that well this year. Healthcare, not so great, either. But, for instance, transportation is down for a pretty good reason -- railroad volumes have not been great. Real carmakers I follow on Greenbrier are a little bit distressed because when volumes are down, you're not selling as many cars, and so forth. And there are good potential reasons for that. One is, we've got this tariff war, so we're not hauling as much stuff, moving as much stuff around.
Looking at transportation and trying to pick through and find the companies you think are better, and are just looking at a temporary downturn, that's an OK way to do this. But I wouldn't just go out and buy a transportation index ETF. I'm sure such a thing exists because there's a jillion ETFs right now. That's the long-winded way of saying, don't depend on this as a way of finding the dogs of the Dow type of situation. Just use it as an idea generator at best.
Hill: Between now and the end of the year, is there anything in particular you're watching? We talked recently on Motley Fool Money about the run-up to retail we're heading into. The most important time of year for the retail industry. Retail is always on people's radars. Is there anything in particular you find yourself keeping an eye on between now and the end of 2019?
Jayson: Not really. I'm intending to just keep looking more at the companies and watch them execute. Retail and consumer discretionary in general has gotten tougher and tougher. There's a lot of competition. Formerly strong brands are getting pounded. When you can get really nice $8 wicking shirt at Target, it's pretty tough to go back to that $40 one from Under Armour. That's just a micro example of the macro situation. Mostly, I'm looking to see how consumers are going to hold up. We're seeing a little bit of some stress in the economy. We're seeing a little bit of worry. We're seeing stock markets start to gyrate a little, maybe even fall. Have some dry powder ready. I'm mostly just excited to see if we do get some pullback. I'll be able to buy some of my favorite companies for a little bit less money.
Hill: It's a micro example, as you said, but I think that's also an example of, in some ways, an overlooked story when it comes to major retailers -- Target, Walmart, Costco, and increasingly Amazon -- putting forth apparel in a way that presents a pretty compelling value proposition for people.
Jayson: I normally don't buy a lot of apparel. If I do, it's tech shirts or something.
Hill: You don't have enough from all the races you've run?
Jayson: You know, the ones I get from Target are actually better than those race shirts. Race shirts were always branded Brooks, and it was that like 15 to 20 year old tech fabric that all looked the same and was super easy to snag and run, and really didn't perform all that well. That's actually where I was headed with this comment -- a lot of the tech fabrics you'll get at a Target now are actually much better than they were five years ago. They're nearly comparable to maybe the top-of-the-line tech fabric you'd get from somebody like Under Armour. It's an example of what happens in an industry, how an edge is turned into a commodity, and then it goes away. It also goes back to, what is the essence of a moat or of a competitive advantage? In some cases, it's just a brand. I think you can argue Under Armour's brand didn't work out that well in a lot of ways.
Hill: Not so far. [laughs]
Jayson: There are other brands that, people just buy it because it is what it is, and it may not be any better. In fact, it may not be as good as what you can get for less money. Brands are in some ways one of the best competitive moats, as long as they somehow remain strong.
Hill: Marine Corps Marathon is in three weeks. It sounds like I need to go to Target and do some shopping.
Jayson: If it's warm, I would actually suit up with my nice, tight, long-sleeved Under Armour Captain Underpants outfit. That stuff actually did keep me a lot cooler.
Hill: Did it?
Jayson: Yeah, I drank less water when I was running in that stuff in the summer. It was a competitive advantage. It really was great. At Marine Corps, the trouble is, it can be 30 in the morning, as you know, and then it might get up to 65, which is a little bit hot for finishing up a marathon.
Hill: Yeah. I don't know if I can rock the Captain Underpants apparel.
Jayson: I stopped caring.
Hill: [laughs] That's one of the reasons you're a much better runner than I am. Seth Jayson, thanks for being here!
As always, people on the program may have interest in stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. That's going to do it for this edition of MarketFoolery! The show's mixed by Dan Boyd. I'm Chris Hill. Thanks for listening! We'll see you tomorrow!