In this episode of Motley Fool Money, Chris Hill talks with Motley Fool analysts Jason Moser, Andy Cross, and Ron Gross about the importance of knowing your investment horizon and planning accordingly to achieve your investment goals. They also dig deeper into three specific parts of the market including the suddenly popular stay-at-home stocks. And Motley Fool co-founder David Gardner shares his thoughts on investing in a bear market.
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 March 13, 2020.
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This video was recorded on March 13, 2020.
Chris Hill: Eleven years to the week after the last bear market ended, a new one has begun. Thursday's drop in the stock market was the worst single day since 1987. There is a lot to discuss here, guys, but, Andy Cross, let me start with you. And the idea that, now more than ever, investors really need to make sure they know what their time horizon is.
Andy Cross: They need to know their time horizon, Chris. They need to know what they are invested for, what are their goals. Really focused on your portfolio, on your equity positions. What we saw this week was really incredible. This bear market, on the backs of what is happening with the coronavirus and COVID-19 and the spread of it. Now, we're seeing the actions from so many different organizations around the world, here in the U.S. especially, we are now starting to see that come out.
And how fast stocks fell and entered a bear market in fewer than two weeks, when the market fell 20%, 25%. Like, you just don't see that; you go back over the years. Now, that was so fast. And investors just got really shocked, and citizens as well too. So, now we're seeing this. Investors, really, more than ever have to understand that if you are investing in equities, first of all, any capital you need in the next two to three years, you do not want in stocks. So, make sure you don't have that in the stocks, have that safely set aside in cash. But if you are investing in equities, make sure this is an opportunity to set your portfolio up looking out five years. Because we've seen these rough days and we will continue to see them over the next few months.
Ron Gross: Agree with all of that. If you are a long-term investor, and that's really the only kind of investor you should be in my opinion, this is now a game of emotions, and what you do with those emotions are going to dictate what happens to your portfolio, I think, over the next five or ten years. This feels more to me like 2009 than anything I've been through, obviously, in the last 11 years or so. And 2009 was really scary, we wondered, if the U.S. was going out of business? And this is really scary, because it's not just a financial crisis, it began as a health crisis and it's still a very serious one and it's turning into a financial one. So, what are you going to do about it?
Obviously, easy to say, don't panic. But when your livelihood is at risk, your portfolio is at risk, your 401(k) is at risk, it's very hard to be calm, but it is essential at this point in time to be calm. So, as I've always said, don't look at your portfolio every single day, don't watch the ticks of the stock market every single day, don't watch every single stock you own -- is it up or down? Step away, be calm, make good decisions.
Jason Moser: It's very interesting. I'm glad you referred back to the financial crisis, the Great Recession. Because, I mean, we all went through that, we all learned a lot from it. And it's interesting for me to see -- you know, I talk with people who went through that with us and I talk to people who are still relatively new to investing and this is their first major bear market/corrections style crisis.
And it is easy to say, "Calm down, don't let your emotions get the best of you," it is far more difficult to put that into practice unless you've been there before. And so, we do have that luxury. Obviously, that's why we're here. It is a very scary time for younger investors, in particular. And I know the knee jerk reaction is to want to sell, get out and just try to wait this out. And then when things get back to normal, you start investing again. Now, that really does defeat the entire purpose of investing, particularly the dollar-cost average style of investing we do with our retirement plans.
And so, I would encourage folks, No. 1, do not stop that ball from rolling, and No. 2, if you have the opportunity to maybe bump up that contribution 1% or 2% even, give that a thought, because right now is really where the opportunity lies. It's tough right now. In a few years, it's going to make a lot more sense.
Hill: I'm glad you mentioned the younger investors, because we've certainly seen, over the past decade, a lot of first-time investors enter the market. And when you're looking at a historic bull run, it's easier and more fun to invest into that. And I think this is a gut-check moment for a lot of first-time investors out there. And by the way, it's totally fine if you check your emotions and say, "This isn't for me. Trying to invest in individual stocks is not for me. I'm going to ... " As you said, Jason, " ... I'm going to put money away every couple of weeks, every month into a broad market index fund. I'm just not interested in individual stocks."
Cross: For me, I think it's more scary if you're an older investor. If you're an older investor who just got into the market in the last couple years, this is going to be even worse for you than a younger investor. Younger investors, if you're just starting out, whether you're buying an index fund or stock -- and I think that's great advice, Chris, we've talked about this this week -- if you're just starting out, index fund, a great way to start, then add some stocks from there. You have years of investing, if you're taking Ron's approach and being the long-term investor.
After almost, I think, every recession, every bear market, stocks eventually do rebound. If you're an older investor and you have capital that you set aside and now it is down 20% and you're in some growth stocks maybe you weren't ready for, that can be scary. So, I think, if you're an older investor, you really have to pay attention to where your stocks are, you really want to have that capital if you need it in the next couple of years not in the stock market. Stocks can go down further from this. I mean, in 2009, we entered that bear market, stocks fell 20%, 25%, then they went down another 45% until they bottomed. So, it can get worse.
It could also rebound very quickly and maybe see that V-shaped recovery that people are talking about. But if you're an older investor, you want to make sure you have that capital set aside that you're going to need in the next couple of years in cash.
Moser: Yeah. And I mean, everybody is asking, when, how long, when does this end? I mean, obviously there are a lot of --
Hill: Are you about to say?
Moser: [laughs] Well, I'm going to give you some context, at least, because there is some good data out there from Goldman Sachs. They did some research back into the history of bear markets and corrections. In event-driven bear markets, and this is an event-driven bear market, on average they result in 29% declines. So, we're kind of in that ballpark.
Now, in regard to recovery, they regain their previous levels within about 15 months. Now, maybe that happens sooner, maybe that happens later. Again, that's just an average, but at least it provides some context. But we're also talking about 15 months to get back to where we started. So, you don't want to ignore the 15 months that lead up to that, because that's where a lot of the opportunity lies, but that just gives you some context as far as timing as far as how far down this could go. I do really, firmly believe that this past week was the most important step we've taken yet to-date and it was not on the part, unfortunately, of our representatives in D.C., it was more the institutions, the events, the sporting world going ahead and saying, "You know what, we're calling all of the stuff off, because clearly there's something we had to get out in front of here." That's that first step, right, admitting there's a problem. [laughs]
And now we start going through the motions of trying to resolve that problem. It's going to take some time, but I really do believe this past week was the most important first step. It doesn't mean, I'm calling the bottom, but we're certainly a lot closer.
Gross: Yeah, actually, don't burden yourself with attempting to call the bottom, because you're not going to be able to do it. Take that completely off the table, don't put that in your head. Be a consistent buyer of stocks. If the stocks you like are on sale, it's fine to put money into them. If they go down again next week, you can continue to nibble at them there. You'll never know where the bottom is. This isn't going to get better overnight. I believe we're going to go into a recession, if we're not there already. The stocks are already accounting for some of that, I don't think necessarily all of that, but we will rebound. And the rebound will probably be pretty significant, because we're going to be coming off of what is considered to be a major crisis.
Moser: I got a question on Twitter just yesterday, an individual bought shares of Microsoft and Disney (NYSE: DIS) maybe a week or two ago, stocks continue to go down, she's asking, "Now, I'm feeling... Was that a good thing to do, were those good purchases?" Sure, they were great purchases. You bought shares of good businesses at good prices, you're never going to get the bottom, you're never going to get the top, you do have to go ahead accept that. That's why we don't even bother trying to time these things, because it's just a fool's errand. It is more about just constant investing in good businesses, and over time it just becomes more apparent.
Hill: Howard Marks, the Co-Founder of Oaktree Capital, sent a letter to clients and wrote, "All great investments begin in discomfort. One thing we know is that there is great discomfort today." So, Jason, I'll start with you; we'll go around the table. For investors who are out there looking for opportunities, what areas of the market would you suggest they look?
Moser: I mean, whenever we hit times like these, and obviously, they don't happen very often, I tend to look for the biggest and baddest players in their respective spaces. I think that these are times when market leaders are able to really double down the gain market share and establish even stronger positions. Look at -- I don't want to beat a dead horse on the wrong cashier, but -- Visa and MasterCard are down 15% and 19%, respectively, year-to-date. Are you telling me those businesses are worse now than they were -- I mean, I could argue that cashless is more attractive an opportunity now than ever before. So, looking toward markets like that and leaders like that, I think are a great place to start.
Cross: I think, if you have five, ten years of investing ahead of you and you really are going to use this as an opportunity to build positions and businesses that you're going to hold for that long, I would encourage you not to look too conservatively. I think, sometimes when you see these kinds of market conditions, it's like, oh, my gosh, I have to go into large cap, stable dividend, utility stocks maybe or those kinds, certainly stay away from the energy plays right now in the energy market. So, I would use this as an opportunity to look at, to Jason's point, wonderful businesses.
And Tom and I were talking about businesses that are really serving customers that are going to continue to use the products over many, many years and have high retention rates. So, focus on businesses that are really helping solve those customer challenges they have. And those customers are going to continue to resignup for those businesses. I think they're out there, you can find them, and you're finding them now at 20%, 25% cheaper than they were a month ago.
Gross: A little bit counter to what Andy said. I do like a lot of the dividend aristocrats here. Those companies in the S&P 500 that have increased their dividend for 25 consecutive years or more. Not the energy companies; I would stay away from those. But you've got many really strong companies that consistently produce very stable cash flow, down 20%, 25%, 30%; dividend yields now 3%, 4%. There's no reason to think these companies are in jeopardy. They have strong balance sheets and they're a nice, stable place to put money to work, especially now that they're 20% cheaper.
Hill: Let's talk about a couple of areas in the market. And, Andy, we'll start with acquisitions, because earlier this week [PepsiCo] added to its beverage portfolio, buying Rockstar Energy for $3.8 billion. One of the things that I think we're probably going to see more of in this market environment is more acquisitions.
Cross: Certainly, as prices go down, I think we will, especially from those companies that have lots of cash on the balance sheet. I think this was just a strategic move by Pepsi to buy Rockstar. They have a distribution agreement with Rockstar, and that's a high growth area with Red Bull and Monster beverage. So, they want to get more into that space that is struggling for them. So, that was a strategic play.
Now that stock prices have just been falling down, it'll be very interesting to see who wants to be part of a larger organization and which large organization decides to go out and buy, whether it's a big acquisition or whether it's one of those small tuck-in acquisitions. I was making a little bit of a joke that, you know, Alphabet would have gotten Fitbit for a little bit cheaper right now. So, you're going to see a little bit more of those, as well as, I think, you will see some big players go in there and make some large acquisitions.
Gross: Yeah, agreed. Small cap market has been decimated. Look there, I think, for a lot of these smaller tuck-in acquisitions; a lot of big companies can gobble them right up.
Hill: What about the stay-at-home stocks, as we're seeing reported in the market, different outfits coming out with their reports of 20 stocks that they think are going to benefit from more people staying at home, more people working from home. Jason, we've talked about the obvious candidates, like, Netflix, Amazon, Zoom Video, Slack (WORK), which we'll get to in a minute. But DocuSign (DOCU 6.71%) is probably in that category, they had their latest quarterly report and it looked pretty good.
Moser: Yeah, I mean, I would definitely put DocuSign in that category. And I think when you look at -- I mean, it's interesting because we've been talking a lot about these businesses: DocuSign, Teladoc, Slack. These are companies that have already gotten the ball rolling. And it's not like this idea of making getting work done easier by doing it at home, I mean, that's not new. But I think, maybe the expectations going into this particular earnings call for DocuSign versus Slack, with Slack, you're seeing a tremendous sell-off because of the conservative nature of guidance and the tone that management struck on the call.
I think, probably people were expecting them to say, "Hey, you know what, business is going to double based on what's been going on." And that's not necessarily how this works. And I think Stewart Butterfield, the CEO of Slack, has noted that a lot of companies right now are becoming a little bit more conservative in nature in new deals that they're signing. And so, that's why they laid out conservative guidance there.
DocuSign, on the other hand, is far more established, a tremendous customer base. And I think they've communicated their value proposition a little bit more clearly at this point. I mean, it is more of a leader in its space whereas Slack is one helping shape that space, but there's plenty of competition coming in the form of Microsoft as well.
Hill: But, Ron, that speaks to something that we've talked about before, which is, in times like these -- look, we always want the leaders of these companies to be communicating in a clear and transparent manner, but it seems especially important in times like these.
Gross: Without a doubt, there's a lot of nervous employees out there, a lot of nervous shareholders out there. We look to our leaders, whether in the corporate environment or the government environment, to be transparent, to be honest and to be true leaders. And those are the kind of companies you want to own.
Cross: Yeah, it was very interesting. This week we saw Fauci from the CDC, I think, go out there and become very transparent. Really, I think to Jason's point, that helps set some expectations, and helps reset the landscape a little bit. And I think we need that in time, and we're going to be looking for that from all of our CEOs of our companies, especially as they go and report first quarter results. It'll be very interesting to see how they are tackling and talking about COVID-19.
Hill: Ron, we saw more travel restrictions this week. Airline stocks are getting hammered. I'm not even going to talk about the cruise lines. But Disney announced the closure of its parks in California and Florida. While that was absolutely the right call. Those are such iconic places; it still felt a little jarring.
Gross: It is a little jarring. And it's obviously, actually a big piece of Disney's business still. You know, we talk about streaming most of the time nowadays, because that's the future, but Parks, Experience and Product are 38% of Disney's total revenue and 45% of operating income. So, this is not inconsequential. Disney Cruise Lines are suspending departures starting Saturday through the end of the month. Disney's credit outlook from Standard & Poor's was reduced to negative from stable. So, real implications here. Travel, tourism are being pretty devastated.
However, saying that, long-term, Disney is a wonderful company and a pretty cheap stock right here at only 17X, whereas it was at 26X earnings at the end of 2019.
Moser: It is. And you think about some of these companies, certainly in the service, whether its restaurants or parks, traffic is the key. I mean, that's why we talk about it so much, those comp stores. Less traffic, obviously less sales, but they have high fixed costs in keeping those businesses open. And so, profitability really gets hammered. And I'm glad you mentioned, Ron, Disney's exposure to that Parks revenue, because it is still a bread-and-butter of that business at this point. That's going to be money they don't get back.
And on top of that, and I think this is the right call, you're seeing companies, like, Disney and others reach out and say, "Listen, we're coming up with plans to take care of our employees during this time, when hours are either cut or they're not working at all." That leads to, certainly, what's been deliberated in D.C. as far as how we're going to provide any economic stimulus? Because I think you're going to see more and more companies get out there in front of this and say, "You know what, we know this is a finite period of time, we're going to make sure to take care of our employees." That's the right thing to do, but it comes at a cost in the near-term and that's why you see pressure on these really great companies like Disney.
Gross: And even not the great companies. Gap, for example, came out and said, they expect a $100 million hit to first quarter sales due to the coronavirus. Obviously, they've struggled, but lots of retailers will feel the same pain.
Hill: David Gardner is the Co-Founder, Co-Chairman of the Board and Chief Rule Breaker here at The Motley Fool. He joins me in studio now. Thanks for being here.
David Gardner: It's my pleasure to be here, Chris, thank you.
Hill: This is one of those times where it's really important for me to timestamp this conversation, because of how volatile the market has been this week. So, for the dozens of listeners out there. It is Thursday afternoon, after the market has closed that we are having this conversation.
Gardner: We should note for historical purposes, Chris, that the Dow Jones declined 2,352.60 points, that was exactly a minus 9.99% drop on this hallowed Thursday.
Hill: Hallowed and awful Thursday.
Gardner: Not a 10% drop, Chris.
Hill: Not a 10% drop. To those who would be a slave to rounding up, we would stand here and correct you. I'm curious about how, if at all, your routine around investing has changed over the last few weeks, let's just call it the last month, because of the drop that we've seen because of the volatility? You are a very methodical investor, in part, because of the services that you run here at The Motley Fool, but you're a very disciplined investor. And I'm curious, if you've even spent more time, even if it's just looking at stocks that are down, thinking about what your next buy is going to be?
Gardner: I certainly thought about the world differently and I've changed some of my own habits. Chris, you and I are socially distanced for the purpose of this Motley Fool Money interview. We want to give a shout-out to people like Dan Boyd, who helps produce this show, who took the time, because we're, like, the only three employees in Fool HQ today. Well, actually Austin was here as well. So, I want to make sure that everybody who's about here my answer knows that I've seen some of my own rhythms, I think we all should be and I bet we have.
But as an investor, I haven't changed a thing. I haven't made any heroic buys on a given day of this week. Anybody who's followed me over the years knows that I pick one stock for Stock Advisor and two stocks for Rule Breakers every single month, so that's three stock picks every month. 12 times 3 is 36 new stock picks a year, times about 20 years at this point. And so, through every market environment we've done the same thing. And I think there's a real strength to that.
I'm too lazy to want to change, but I find that laziness is often rewarded for investors, it goes the opposite of what we think. In life, we think, as humans, the more effort, the more reward, but truly, the more laziness/inertia in times like this, sticking to your protocols, going through the regular ... I'm going to be picking another Stock Advisor stock pick soon, two more Rule Breakers. The strength of that, I hope, is an exemplar to anybody listening to be reminded to just stick with the program. All the people who've succeeded -- and many have over a couple decades as Motley Fool members -- have basically been methodical and aren't making emotional, whipsaw decisions about whether the Dow is up 9.99% today or down 9.99%, because it is not about today.
Hill: You just reminded me of maybe my favorite quotation about investing philosophy, which is Charlie Munger, Warren Buffett's right-hand man was asked, what his philosophy was? And I'm paraphrasing, but he basically said, "I like to buy great companies and sit on my butt." People who know you know that one of the things you like to do is add to your winners, it's one of the things that makes you a bit of a contrarian as an investor. How do you make the decision or do you make the decision ever to add to a stock that has dropped over time? And maybe, if you're buying a new stock, it's clearly a business you believe in, what do you look for to decide whether or not you're going to add at a lower price?
Gardner: So, I'm a big fan of adding to your winners, you mentioned that. I like to look at the list of 52-week high stocks for my next purchase, as opposed to the 52-week lows. I feel the reason this works is because everybody's doing the opposite and so this is, indeed, a highly contrarian approach to investing, and I think that's why it's worked so well over a couple of decades. It also has you, Chris, buying quality, because what's winning, why is it winning? Well, winners win, Chris. What do winners do?
Hill: They win.
Gardner: They win. And so, think about Amazon, Netflix, Tesla, Apple, just think about Starbucks, the list goes on across all industries, who's the leader, Nike, the winners typically keep making new highs. And so, to think that we should avoid that list and look at all the losers and try to figure out where the bargains are, it's just never sung to me, and I've just done so well by thinking about winners.
You asked about, adding to winners. And all I'll say about that is, that it's all relative, isn't it? Everything has lost in the last few weeks. A month ago, we were at all-time highs. This can happen. And it's happened in the past, so it'll happen again in the future. So, just because something is down, cut-in-half in some cases in a few weeks, doesn't mean it's not still a winner, because we're not just looking at the last few weeks, right, we're looking at the last, how about three years. That's a good timeframe to ask, who's winning out there?
So, let's double-click out of the treacherous environment we find ourselves in right now. Just be reminded of a little bit of time and distance. And so, a lot of companies that are down 40% right now are still big-time winners over the last three years, still, even after a 40% drop. And so those are your winners. And I look at the market and I compare myself to the S&P 500. So, if a stock is 30%, 50%, 100% ahead of the S&P, even after a big drop like this, that looks like a winner to me that I probably want to add to.
There's, I guess, one final answer, which is, sometimes I do add to losers, it's rare, but it's going to be a company that I obviously deeply believe in and they have a strong balance sheet. They have a lot of cash, probably, a little to no debt. Because that gives potential energy to a business to evolve as necessary in harsh environments or times that you have to really, as our human species has done, evolve in order to survive into the next era. So, what we're seeing right now with coronavirus is going to cause some things not to survive. But the things that do, some of them will, because they had the permission, thanks to their big bank account, to figure it out, and those are the ones I would add to if I'm looking to add to a loser.
Hill: One of the things we like to look at when we're deciding whether or not to buy shares of a company, is the leadership, who are the people running this company? Do you think leadership becomes more important in times like these? You mentioned the balance sheet strength of any given company. We've seen companies already come out and start to cut their dividends. They're going to have to make decisions about capital allocation. And in the case of smaller growth stock companies, that maybe aren't profitable yet, there's a slightly higher risk factor for the decisions that that leadership team will have to make.
Gardner: Yeah, I think that leadership counts for so much. And I did mention on my podcast this week, because I talk some about leadership, it's Rule Breaker Investing is my podcast, Chris, as you know. I talked about how I don't feel great leadership from the public sector, it's not just in a harsh time like this where we can almost ask too much of the public sector it can't really shift as fast as it can, but I felt that way before coronavirus. So, for me, most of the best leaders that I've met in the world, and I've been deeply inspired by many of them, they come from business, they come from the private sector, they're having to please all their stakeholders, right, they have to please their customers and their employees and their partners and suppliers. They're not in the political world today pitting one-half of America against the other-half for votes. These are people who really understand leadership.
Take somebody like Toby Lütke, Shopify's CEO, he just announced -- this is not something they had to do, there is no government mandate to do this, this is a Canadian company, but Shopify giving employees $1,000 stipend to buy supplies while they work from home during coronavirus pandemic. That's what leadership looks like.
Hill: One of the conversations that is going on right now in the investing world writ large is about, "Well, once we get past this virus, what businesses out there are threatened in a long-term way?" One example is around business travel. How a lot of companies, including ours, have placed a moratorium on business travel. So, that's part of the reason we're seeing the airline stocks hit the way that they are. A lot of people, myself included, think that once this is all cleared, a lot of businesses aren't necessarily going to go back up to that full capacity they were at before, they're rethinking how important business travel is.
Let me take this to a completely different realm, and that's education. Colleges across the country are sending students, for their safety, back home. Some are canceling classes out right; others are doing remote learning. I can't imagine that graduation ceremonies will take place in person. Is this an event in your mind that puts university education at risk?
Gardner: I think it's a really great question. You and I talked about this briefly off the air. I want to give a plug to one of my favorite Fools on Twitter. And that's Benson Moss @Benson_Moss, because on Wednesday, he just tweeted this out, "Is the coronavirus the black swan that leads to disruption in the traditional higher education model and a rise in more online content delivery formats in higher ed?" And I would say, it is. So, trying to get out of this, again, treacherous environment, we're all kind of down there at Maslow's first rung of the hierarchy, and it's more about survival this week than it was a month ago. But trying to get away from that for a second, thinking about how the world changes. I think, all of this shift on the part of universities to get kids out of the classroom and online, probably shows the way to the disruption finally happening for higher education.
You know, bricks-and-mortar has been disrupted in almost every aspect of our world except for, I would say, university education and maybe healthcare. These things continue, somehow, to stop the internet from allowing them to be improved. And tuition rates go up 3% to 7% every year. There's a whole generation in debt. I mean, I appreciate my college experience, but I don't think that that model has legs. And I've been waiting for years, things like 2U, which has been a sometimes successful stock pick, has been up-and-down for Motley Fool Rule Breakers, or K12, ticker symbol, LRN. These are companies that are online learning focused. So, I think that they probably are well-positioned to be part of the solution. And I think this could help our society overall.
Because, Chris, just as I felt like there were too many newspapers about 25 years ago when the internet showed up, and turns out we didn't need all those different newspapers. I don't think we need all of those institutes of higher learning. Some of them are excellent. Some of them not so much, but there's a lot of redundancy and so we're going to need to transition, I think, to a more comprehensive higher education world that serves all of its stakeholders.
And I kind of feel, ironically, like the student stakeholder has gotten an increasingly raw deal. And so, I think we may see a change. I appreciate Benson Moss' rhetorical question.
Hill: You mentioned a couple of businesses that might benefit from a rise in online education. And a lot of investors, myself included, are thinking about the next few months. Even though we're long-term investors, we're thinking about the next few months and how we are going to be spending this time, because we're certainly not going to have major professional sports in America to watch. [laughs]
So, with that in mind, for anyone who's thinking about the binge watching that they might be doing over the next couple of months, do you have a recommendation or two? It could be a movie, it could be a television series, something that you've enjoyed that maybe people can put in their Netflix queue?
Gardner: Sure. Actually, the show that I'm enjoying most of all right now. And this is me, the sci-fi fan -- I have other hats that I wear too. But, Chris, if you watch on Amazon Prime Video, have you watched The Expanse?
Hill: I have not. I've seen promotions for it, but I haven't watched it yet.
Gardner: Yeah. I recommend it. I think it's a pretty great show. It's a couple hundred years in the future, and we as humans, have now fully, basically, investigated our own solar system. And so, we've started to terraform Mars. We also are out there in the asteroid belt with kind of a new community there. And then a new threat emerges. It's very scientifically legit. It's very believable and it's kind of Game of Thrones in space, because you have different factions that are competing. So, it strikes me as a realistic way of thinking about the year 2300-ish and just seeing where humanity is, but really, it's just a great tale with multiple plot lines.
I will mention, it was on the Syfy Network for three years. They canceled it in advance of the third season airing. So, they had already fully filmed it. I wasn't a fan; I wasn't aware of it back then. So, I surmise that it was an expensive show to do. It was doing well, people liked the show, but they precanceled it in advance of the third season. So, they air the third season and then Amazon swoops in and says, "We're going to finance the fourth season." The fourth season, check out the Internet Movie Database ratings or Metacritic or whatever you like, just see how great people think the fourth season is. And of course, they've already set up a fifth season.
So, there's a little hype for my present favorite show, but I mean, I watch just dozens and dozens of shows across all the streaming networks as well as video games, games, books. We are living an incredible golden age of content creation. There's far more than I can consume, that I possibly could, that I still want to though. So, Chris, what about you?
Hill: We were talking about this earlier. I watched The Mandalorian on Disney+ as fast as I could, and can't wait for season two. So, that was part of why I was looking for a recommendation. So, The Expanse is now on my list. If you're looking for a weekly dose of investing insights, and possibly video game and binge-watching recommendations as well, you can listen to the Rule Breaker Investing podcast. It is free to subscribe; you can find it everywhere. David Gardner, thanks for being here.
Gardner: Thank you, Chris. Stay healthy out there, everybody, and wash your darn hands.
Hill: We've heard from so many investors this week, some of them listeners to this show, some watching the live Q&As that we've done recently on The Motley Fool's YouTube channel. And it is so heartening to hear from investors who are looking to be proactive even during a volatile time like this. And as we talked about earlier, some of them are just getting started, they're looking to buy their first stock. So, if that's you or that's someone you know, we have a free investing starter kit, it covers 401(k)s, setting up an account, it includes five stocks selected from our investing team and it's free. It's a great 15-page report. You can go to fool.com/starterkit; put in your email address and we will send it to you.
Let's get to the stocks on our radar. Ron Gross, our man behind the glass Steve Broido is going to hit you with a question, what are you looking at?
Gross: I went looking for a strong company, solid cash flow and a growing dividend. And I'm going to go with American Tower (AMT 0.81%). A Real Estate Investment Trust. One of the largest owners of multi-tenant communication towers in the world. Stock is down about 13% over the last month, so it's held up relatively well. They provide a critical part of the digital infrastructure, business model that benefits from other people's spending, like Verizon and AT&T who're going to spend enormous sums of money on CapEx to upgrade to 5G. They've increased their distribution, which is their form of dividend, for the past 30 consecutive quarters. The yield currently stands at 1.7%.
Hill: Steve, question about American Tower?
Steve Broido: Sure. With the 5G revolution coming, will they be earning more? Because, I guess, people would need to be investing in infrastructure that goes into those towers.
Gross: Yes, that will definitely spur growth. Tenants sign these long-term 10-year leases. They upgrade all the equipment. American Tower will benefit pretty significantly from that.
Hill: Jason Moser, what are you looking at?
Moser: Yeah, digging more into Globant (GLOB 2.58%). Ticker GLOB. This is a tech consulting firm in, what they call, the digital and cognitive transformations. They're utilizing things like artificial intelligence, immersive technology, like, AR and VR to help companies leap into this bold new tech-driven world. And we talk about customers, they've got some doozies, including Disney, Google, Electronic Arts and more. But I mean, this is something, where you figure that between digital and cognitive revolution -- I mean, you're talking about experiences with immersive technology, you're talking about doing things with data more quickly, making more educated decisions. I mean, these are affecting how companies connect and deal with consumers and employees and build more efficient business models. And so, an interesting company, run by its founders. Growing nicely, topline growth of 27% annualized over the last three years. Most importantly, in this trying time, it is profitable and cash flow positive. So, one that I'm learning more about, Steve.
Hill: Steve, question about Globant?
Broido: How do you stand out in this space? It seems like every company is a digital communications company these days, how do you stand out?
Moser: Yeah, I think it really boils down to the talent. They're really good at finding and recruiting talent from all over the world. And then, really utilizing a global footprint.
Hill: Andy Cross, what are you looking at?
Cross: Steve, you got two in the technology consulting space, because I'm looking at EPAM Systems (EPAM 0.27%), because the stock fell 19% on one day this week. It rebounded on Friday a little bit. So, EPAM is another global technology consultant. They have been around for +25 years, focusing on entertainment, digital services and the travel and leisure space, which represents about 20% of their bookings, which is one reason why I think the stock got hit this week. Founded by Arkadiy Dobkin. Very well-run, very profitable, has grown at 25% per year per quarter for many, many years. So, really solid business EPAM Systems. That stock is down significantly this year.
Broido: Do they benefit if people stay home?
Cross: Yes, they do, because of the products they design for their clients, and the clients that their clients serve.
Hill: What do you want to add to your watchlist, Steve?
Broido: I own American Tower, so let's go with some Globant.
Moser: Hey, now. [laughs]
Hill: Ron Gross, Jason Moser, Andy Cross, guys, thanks for being here.
All: Thanks, Chris.
Hill: That's going to do it for this week's edition of Motley Fool Money. Our engineer is Steve Broido, our producer is Mac Greer, I'm Chris Hill, thanks for listening. We'll see you next week.