In this episode of Market Foolery, Mac Greer and Motley Fool analyst Jason Moser cover some of the day's headlines. They assess market sentiment. The Fed steps in to stimulate businesses. Learn how to approach markets in trying times. Regeneron Pharmaceuticals (REGN 1.69%) announces a breakthrough in the fight against COVID-19, and much more.
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This video was recorded on March 17, 2020.
Mac Greer: It's Tuesday, March 17th. Welcome to MarketFoolery. I'm Mac Greer, and joining me is Motley Fool analyst Jason Moser. Jason, welcome! How are you doing? We sound a bit different today.
Jason Moser: We do. And you know what, it's funny, you say normally joining us in studio, and I'm in studio, because of something I had to do earlier today, you're not in studio, and neither is our main man behind the glass Dan Boyd.
Greer: This is all true. You are joining us from Fool HQ. Dan is joining us from an undisclosed location in Virginia.
Dan Boyd: I'm in my basement. It's not that undisclosed. [laughs]
Greer: And I am at my home in Virginia. Obviously, we've got some special circumstances, but we're still bringing you MarketFoolery. And, Jason, we're connected via Zoom, but you know what, we want to be nice to our listeners, so we are going to spare them the video. That is our gift.
Moser: Nobody wants to look at us, Mac. We're lucky that they want to listen to us. Nobody wants to look at us.
Greer: Yeah. Just picture, I don't know, what would the picture be? I am wearing my collared shirt, I find that even though I'm working at home, if I put on a collared shirt that I've already accomplished something, so.
Moser: Oh, you got to get dressed, man, you got to take a shower and get dressed like you're going about your normal day. It'll keep things on a bit of a level of sanity that you might not otherwise be able to enjoy.
Greer: Well speaking of sanity, or maybe insanity, let's talk about the market. Now, we are taping this midday Tuesday, and the Dow is actually up a few percent, which really seems like a good day, Jason, because yesterday was the worst day for the market since the Black Monday crash of 1987. And if that sounds familiar, it's because last Thursday had been the worst day for the market since the Black Monday crash of 1987.
So, yesterday the Dow fell 13%, obviously, we've got growing concerns over the coronavirus. Jason, against that backdrop, the Fed coming out on Tuesday, launching a commercial paper funding facility to provide some emergency liquidity -- what do you make of it all?
Moser: Yeah, I mean, it is one of those things, we're seeing some real volatility here over the last several days, last few weeks. And it's understandable, because there's so much that we don't know, there's so much uncertainty out there in regard to not only the coronavirus itself and what COVID-19 actually means for us as a society going forward, but how this is going to impact the economy, how we're going to deal with the impacts of the economy and how long it's going to ultimately last?
And so, I see this, it seems that the market is looking less for things like rate cuts and they're looking for more reassurance of how we're going to actually move forward here. And I think now we're finally starting to get some of that reassurance. And we're getting a little bit more, sort of, a quantification of how things might play out.
In the commercial paper market, to your point there -- for folks that aren't familiar with that, that is essentially short-term borrowing for businesses, so that they can keep their operations running. It's cash that businesses need to keep their operations running. And right now we've seen millions of jobs and lives basically put on hold, and we can't really fully understand why or how long it's going to last. And in a lot of industries that do run, sort of, day-to-day on the cashflow that runs in their businesses, they've really been put in a pinch.
So, to see the Fed step in and help loosen this up a little bit, get more money flowing through the system and help, not offer guarantees, but at least give business owners some feeling that there's a light at the end of the tunnel. I think it starts to make people feel like, well, maybe things will get better one day, we don't know necessarily when that might be, but this definitely is a step in the right direction.
Greer: Jason, I want to find out how you are approaching your portfolio, how you're looking at your portfolio right now? Because yesterday, the Dow went down almost 13%. So, that was a Monday. On Friday, the Dow up almost 13%. And then on last Thursday, the Dow, of course, down around 10%. So, to say this market has been volatile would be a huge, huge understatement. It is dizzying. It reminds me of that teacup ride that always makes me sick. So, my question for you is, how are you thinking about your portfolio as you watch these dips?
Moser: You know, it's funny, I have caught myself, more than once, logging into my online brokerage and thinking on these down days, "Alright, I'm going to buy something, I'm going to buy something." And then I look at my overall portfolio and I start looking at these businesses and I'm thinking, "You know what, some of these things aren't nearly as screaming a buys as maybe I thought they would be." I feel like it needs to get cheaper, I feel like stocks need to actually go a little bit lower. But that's all to say, I do find myself second-guessing myself or double-checking myself, maybe just trying to not act in haste.
And it's the biggest lesson I took out of the Great Recession more than a decade ago, as an investor, was that there's no reason to rush, you need to take this slow because while we've seen before these massive drops on any given day and these massive spikes on any given day, you have to recognize that that's something that is going to be part-and-parcel of the markets here going forward. I'm not saying necessarily every day is going to be like this, but we're going to see this happen more and more often, I think, thanks to technology and the quiddity.
And so, it is important to take it slow, and that's the message I keep trying to communicate to people. Don't try to get in there and just make everything happen at once, pick-and-choose your spots. And the one thing I have found that really has helped me, you go back to that old Peter Lynch saying, where he always likes to say, "The best stock to buy is probably one that you already own." And his general thinking there is, "You already own it for a reason, so chances are you had some good reasons in buying it."
And so, maybe for investors out there looking to make some sense of this and trying to put a watchlist, go through your current holdings, look at the stocks that you currently own today and build a watchlist from the stocks you already own. I mean, you know build a watchlist from stocks that you want to buy too, but if you have 20, 25, 30 stocks in your portfolio, building a watchlist of stocks that you already own can be really helpful.
And then remember, that it's in times like these that the strong typically get stronger. And that's for some obvious reasons, clearly, they go into situations like this with more resources at their disposal, they're better prepared financially. So, just keep in mind that oftentimes market leaders tend to really entrench and build their market leading positions in times like these and that can help make some sense as to what priorities you want to throw up there on your buy list as well.
Greer: So, Jason, I want to bounce my strategy off you and just kind of get your expert insights into, if this is sound thinking. So, I used to try to avoid quoting my portfolio during the day, that was my goal. During market hours, just don't even quote your portfolio, especially when the market is having a bad day. And then I've since decided, you know what, that's unrealistic, but when I do the one-day quote of my portfolio, I also widen the lens, I broaden the view and I also look at my three-year, my five-year, my 10-year, my longer-term performance as well.
So, if I'm going to quote my stocks, that's fine, but I also make myself quote that longer-term performance, so at least I get that perspective. And, you know, from a psychology perspective, I find that comforting.
Moser: Yeah, I think that's actually a really good idea. I know that some people like to say on down days or in times like these, they don't like to check their portfolio. I mean, that's fine if that's what you want to do. I find that kind of difficult to really put into practice. And for me, personally, it doesn't change my thinking much one way or another, but you referred to something there that I think is really important and it's something that I do as well. I do pan-out and look at the longer-term performance of a lot of my holdings to just reemphasize, to reiterate the importance that time plays.
I mean, time is arguably the most important variable for individual investors. If we assume that we're going to buy a lot of great businesses, and that four times out of ten you'll be wrong, but six times out of ten you'll be right. We figure then, OK, we've got a decent portfolio. Time is really that variable that comes into play for us. And if you can look at how your performance has been through longer periods of time, that can reemphasize, that can reiterate that.
And for investors, you know we're investing for a reason, we have goals. And so, if you look at what your goals are, you understand what stage of life you're in, being able to sort of put things in that context and say, "You know what, this is one isolated incident, it's one window in a greater investing journey of mine." That can definitely keep things in perspective. But, yeah, I mean it is finding those little heuristics that work for you and what works for some, might not work for others, but I do love that approach there, Mac.
Greer: And I want to close this out with a couple of my favorite pieces of investing insight. First, Motley Fool Co-Founder, David Gardner, "Stocks go down faster than they go up, but go up more than they go down."
Moser: Yeah, I think that really does speak for itself. I mean, it's very easy to see these reactions in the near-term. I mean that pain, we feel that pain, but that's why we always encourage people to take that longer view look at the chart of the S&P 500 over 5, 10, 15, 20 years. I mean, you do see that ultimate trend, where, sure, over time the market ebbs-and-flows, but the general trend is in one direction. And I do like the way he emphasizes that point.
Greer: And then, I want to give a shout-out to our colleague at Motley Fool analysts Ben Ra. Ben wrote this, this week, and I just absolutely love this. He writes, "A famous poker player once described the game of no-limit hold'em as 'hours of boredom punctuated by moments of sheer terror.' Investing is like that too. How you act during those times, what you do, and more importantly, what you don't do, will have an outsized impact on your portfolio 5, 10 and 20 years from now."
Moser: Yeah, that's spot-on. And you said something key there, "In what you don't do." I think oftentimes in investing, particularly when we hit stretches like this, typically the best action is inaction. It's to do nothing except just keep the status quo. And for a lot of us the status quo is, thankfully, we get to get up and we go to work every morning and whether that work is here at home or whatever but we get to go to work every day and we're taking a piece of our paycheck every time we get paid and we're rolling that into the market and we're investing in good times and bad. And the idea is to keep doing that. I mean, that's the whole point behind it.
And I think, really, it's stretches of time like this that only reiterate how effective that strategy is. So, oftentimes the best action is inaction. And I think in this case, for most people, that would be the wise course, is to just keep doing what you're doing. If you're investing in your 401(k), your retirement plan, just keep that ball rolling. For the love of God, don't liquidate everything and then just go hide in the hills, because you're just locking in your losses if you sell, it's not a loss unless you actually sell it.
And I do also want to reiterate the fact that our listeners, our viewers, our members, we are investing with you, we're feeling this with you, we're right there with you for this trip. And so, it's easy to sit there and say, it's a little bit more difficult to put into practice, but we do want you to know, we want everyone to know, we're investing with you. So, we're feeling this pain, we're feeling that joy when stocks perform well too. And thankfully, here at The Motley Fool, we have a lot of folks who've been through this before. And I know, Mac, you and I have talked about this all the time, what we went through with the Great Recession and the lessons we learned from it, we're right there with you.
Greer: I'm showing my age, because I remember Black Monday in 1987, but the big difference is that it was pre-internet. So, back then, Jason, a lot of people didn't know about the stock market crash until the evening news or maybe even, in some cases, until the next day's morning newspaper. And this is, obviously, a very different animal when you can watch CNBC and you can track the market just minute-by-minute-by-minute.
Moser: And that I think is a great example of why we see such precipitous drops and gains of spikes in the market. It's the difference between '87 and now and what technology has done. It's made everything faster and the market is no exception.
Greer: Well, Jason, speaking of gains, some potential good news, shares of Regeneron Pharmaceuticals up around 13% at the time of our taping, after the biotech company said that it aims to have a potential drug for COVID-19 ready for trials this summer. Now, that's earlier than what was expected and the drug is designed to, both, treat and prevent COVID-19.
Moser: Yeah, and I'm trying to figure out what the bigger headline here is, Mac. Is the bigger headline, the Regeneron headline or is it the fact that Tom Hanks and Rita Wilson have actually been discharged from hospital, because I really thought there was going to be a Tom Hanks bounce, and maybe that's what today really is all about. I mean, people are seeing a little bit of a light at the end of the tunnel. Forrest Gump is going to be alright at the end of the show.
In all seriousness, this is wonderful news to see, it's one of those things that we were waiting for, and I think that as time goes on, we're going to see more headlines like this come out, as we've got some of the brightest minds in the world working on solving this problem.
Yeah, I think that in Regeneron's case, you can absolutely make the argument for investing in Regeneron regardless of this news. I'm not saying, go invest in it, but I'm saying, you could certainly make the case based on its history of success and collaboration in the space. And so, just looking at some of the fundamentals, it's a big company, $48 billion market cap. It's got $2.5 billion in cash on the balance sheet, 23% annualized revenue growth over the last five years, which is just astounding really. They have a Co-Founder as the CEO, another Co-Founder as the Chief Scientific Officer, and they both own, actually, a nice little slug of the company. So, you could certainly make the argument for investing in Regeneron regardless.
I do think that this is encouraging news from the sense that they have a relationship with the U.S. Department of Health and Human Services, they're working on this together, they have a history of being able to come up with effective treatment for Ebola. So, this isn't their first rodeo, so to speak.
With that said, they are not the only company out there really trying to help solve this problem. I mean, you got companies like Johnson & Johnson out there doing the same thing, and many others.
And so, I wouldn't look at Regeneron and think, "Okay, you know what, we're going to invest in this because this is the company that's going to save us from COVID-19." That's the wrong way to look at it. If you're going to invest in Regeneron, you invest in it for all of the reasons I mentioned before, but there's no question, it's great to see a big, well-capitalized company with a lot of smart minds, not only working so hard to fix this but also the collaboration that's going on in the space.
Greer: And as we wrap up here, Jason, let's dip into the Fool mailbag. And I'm just going to read this, "Hi, Chris." Okay, sorry, I'm not Chris, but I'm channeling Chris here. "Hi, Chris. Big fan from the highlands of Scotland. Hope you guys are holding up well over in Virginia. My question regarding the current situation is why are Federal banks cutting rates? I understand that you would cut rates in periods of economic instability to improve consumer mood and stimulate the economy, but surely in a situation such as this this is akin to rubbing ointment on a broken leg. Is it a case that banks need to be seen to be doing something rather than nothing? All the best and wash those damn hands. Robbie."
Okay. Thanks, Robbie. Jason, what do you think?
Moser: Robbie channeling his inner David Gardner there, right?! Wash your damn hands, I love it. And it's a good question. And I think on its surface, he is correct. I mean, if the only solution to this, if we just saw the focus remaining on cutting rates as far as rates could be cut, I mean, clearly, we've seen through this. The market doesn't really necessarily care so much about rate cuts, it's not looking for rate cuts, it's looking for reassurance and solutions. Now, rate cuts are one part of that overall toolbox, right. I think that what we're looking at is our policymakers to utilize every potential tool they have, every possible tool they have. And interest rates are one of those tools.
So, I heard a Fed banker earlier this morning, it was an interview on CNBC, and he was using the analogy of a car approaching a steep hill, and you could either step on the gas early to try to navigate that hill or you can step on the gas late to navigate that hill, but one way or the other, if you're going to get over that hill, you've got to step on the gas. And so, they view the rate policy that they've enacted as being a way to step on the gas early and utilize one of the tools that they have in order to try to keep this thing moving so that we can get over this hill.
But we brought up the mention of the commercial paper earlier in the show. Commercial paper is another tool. Bank liquidity. Now, there's talk of easing banks' liquidity requirements, so they can actually make more loans and help more businesses deal with times like these. Along with economic aid, the White House is looking for $850 billion in aid here. Now, politics, of course, is going to get in the way of this, as you got one side saying, that aid should come in the form of this, and the other side is saying, it should come in the form of that. But ultimately, I have to believe that they'll meet in the middle and come up with a solution there.
So, it is, I think, a matter of looking at it as one tool in the toolbox. And our policymakers are really trying to exercise all of these tools that they can. And I think that they are trying to act a little bit more in haste as opposed to just letting things play out and being too late to actually help get things fixed.
Now, I will say, I mean I do appreciate that haste, because as much as I feel like, we as a society, want to come together and deal with this and get past it, you know, we are not working with unlimited time here. I mean, you cannot just tell everybody to go hunker down in their house and just wait for us to tell you to come out. It sounds good in theory, but there's no way it's going to work in practice. People have lives to live, they have businesses to run, they have families to take care of, they have things to do.
So, regardless of where this COVID-19 is, there's going to be a point in time where people are going to start listening to themselves more than they start listening to others. And I think it's more about trying to figure out how we manage our lives, how do we live in a world going forward where COVID exists, how can we deal with it? And that's where it comes to companies like Regeneron and Johnson & Johnson to work on these treatments and vaccines in order to help us manage this. So, time is not unlimited here. And so, it's nice to see the Fed and our policymakers taking this approach and try to utilize as many tools as they possibly can.
Greer: Okay, Jason, given the times, it seems a bit strange for my desert island question. So, I'm going to modify it a bit, because we haven't really talked about that many individual stocks. And I'm going to say, over the next five years stocks or no stocks?
Moser: Oh, my word! It has to be stocks, 100%. I mean, this is what we're telling people. There is data out there that says that typical event-driven bear markets like what we're in right now, take, on average, 15 months for us to get back to where we started. And so, I think you hear that and the initial reaction from folks is, "Okay, well, I'm just going to go hide in the hills and wait 15 months till we get back to where we were, and then I'll start investing again." And that completely misses the point, that all of this opportunity, in getting back to where we started, exists and you want to take advantage of that opportunity. And that opportunity is going to come in the form of the stock market.
And so, as difficult as it is sometimes, I mean, your emotions can get the best of you, recognize the opportunity that is in front of us here, because the stock market, as it always does, it does come back when the situation improves. And I, for one, subscribe to the notion that things will get better, Mac, I don't know about you.
Greer: I agree. Jason Moser, thanks for joining me.
Moser: Thank you.
Greer: [email protected] is our email, for your questions, for your comments. As always, people on the show may have interests in the 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 it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Mac Greer, thanks for listening, wash your hands. And we will see you tomorrow.