Are There Any Industries That Look Like Bargains Today?

Investors love a great stock at a low price. But with the major indexes in record territory -- again -- it can be tough to spot those great deals. Which leads listener Mark to ask if any industries look inexpensive right now.

In this segment of the MarketFoolery podcast, host Chris Hill and senior analyst Seth Jayson respond, but not in the way Mark might have expected -- because bargain hunting by industry is really not what they recommend, and they'll explain why. They'll also talk about what Seth is keeping a special eye on through the rest of 2019.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.

This video was recorded on Oct. 7, 2019.

Chris 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.

Seth Jayson: No.

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.