What Warren Buffett Has Been Buying and Selling

In this week's installment of Industry Focus: Financials, host Jason Moser and Fool.com contributor Matt Frankel, CFP, take a look at the latest 13-F filing from Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) to see what stocks Warren Buffett and his team have been buying and selling. Plus, Paycom (PAYC 1.24%) had a decent quarter but the stock is down, so Jason takes a closer look at the numbers. And finally, Matt's pick for the best financial stock of 2021, Wells Fargo (WFC -0.03%), has been firing on all cylinders. Could there be more room to climb?

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This video was recorded on February 22, 2021.

Jason Moser: It's Monday, February 22nd. I'm your host Jason Moser, and on this week's Financial show, we'll dig into Berkshire Hathaway's latest buys and sells. We'll take a closer look at Paycom's most recent quarter. We've got an update on Wells Fargo along with a listener question we'll tackle, and we'll wrap it up with ones to watch. Joining me this week, it's certified fly podcaster, that's right, CFP, Matt Frankel. Matt, how's everything going?

Matt Frankel: Just great. It's raining here a little bit, but other than that, it's a pretty nice little Monday. How about you? Back from the stables, I see.

Moser: I haven't gotten out to the stables yet today, trust me. That's coming later this afternoon. [...] the horses make a mess. No, it's very much the same up here. Rainy, starting to melt some of the snow and the ice. Still got some of that stuff on the ground. But I'm hoping maybe we're through the worst of winter up here and we can start looking forward to some spring-like behavior. Got to get that pre-emergent down a little long. Got to make sure that there comes a nice breeze this spring.

Frankel: Yeah, we even thought about stuff like that. [laughs]

Moser: Well, Matt, let's open this week's show with something I think a lot of people have been talking about here over the past several days, something we always like to tackle when this filing comes up. Berkshire Hathaway has been buying and selling. Their recent 13-F filing, which just came out, gave us a nice glimpse into everything that they have been buying and selling. You've recently published an article on fool.com, by the way, called Here Are All 10 Stocks Warren Buffett Has Been Buying, so we'll make sure to tweet that out on the Industry Focus feed later. But for now, Matt, let's tackle what's been going on in Berkshire Hathaway's portfolio? Let's start with the newcomers. There are four new stocks in Berkshire's portfolio. Correct me if I'm wrong, I feel like one of these new stocks he owned before too. It's like he reestablished a position in, I think, one of these companies, didn't he?

Frankel: Yes. There were four. There was a company called E.W. Scripps, which he technically bought in January, but we already knew about that one. That's the publishing company. There's Marsh & McLennan, which is a financial services firm. Both of those are relatively small investments by Berkshire standards. When I say small, I mean only about a half a billion dollars. [laughs] The two big ones by far were Verizon and Chevron. I know Buffett used to own Verizon to some extent, I think.

Moser: Okay. I was thinking Chevron.

Frankel: Or was it Chevron?

Moser: For some reason, I felt like he may have held an interest in Chevron before and then closed it out at some point.

Frankel: I think you're right. I've to double check on the particulars of that. But those were big investments. They're not big compared to Berkshire's, say, Apple or Bank of America investments. But those were built up over time. For the Verizon one in particular, it was almost $9 billion. That's a lot for Buffett to spend on one stock to establish a position all at once. A lot of investors were not happy to see that those were the two big buys, I mean, $13 billion between Verizon and Chevron. Because a lot of people think of those as boring stocks. They thought Buffett lost his touch, things like that. A couple of things I would say to that. First of all, I would much rather $9 billion of Berkshire Hathaway's capital be in Verizon than in cash. It's a much more productive use of the money. Verizon pays a very nice dividend, I want to say in the 5% ballpark right now.

Moser: I'm looking at it right now, 4.4% yield. I mean, you can't discount that.

Frankel: Right. What was it, sitting in treasury securities earning like 0.1%? [laughs] So this is definitely a better use of capital.

Moser: Sure.

Frankel: Verizon is not going to double your money overnight, but that's not what Buffett is trying to do. He wants steady cash flow. If you remember when we had Kevin O'Leary on a few weeks ago, he emphasized cash flow, and he specifically talked about Buffett and Munger. [laughs] You want cash flow, Buffett wants dividends to be able to reinvest. 4.4% yield on a $9 billion investment is quite a bit of money to eventually reinvest. Remember, there's the 5G rollout coming, there's a lot of reasons why Verizon's growth should be slow and steady going forward. [...] once.

Moser: Yeah. I think to your point there, I'm glad you mentioned the 5G rollout because that is something I'm sure many of our listeners. One of the services I run here at work is focused on that 5G rollout, and all of the different companies and markets that will benefit from that. I will say, it is one thing in looking at the recent bidding for all of that spectrum for these operators to roll out that 5G capability. The demand for that spectrum far exceeded what was forecasted. I want to say the estimates were somewhere in the neighborhood between $20 billion and $30 billion bid for the spectrum. It turned out to be closer to $90 billion. Certainly, Verizon is one of the companies in there, bidding for that spectrum because it's one of the largest wireless providers out there.

Frankel: Yeah. Going to the other side, Chevron. Chevron has proven this year, and Buffett's been an energy fan, he's admitted he was wrong on the timing, but he loves energy. Chevron has been the better financial energy play this year, in terms of the quality of the balance sheet, resiliency, not having to cut its dividend, things like that. Whereas, ExxonMobil was removed from the Dow because of those reasons. Buffett has two energy plays now, and it's really interesting the different ways he plays them. He's got Chevron, which he has a $4 billion common stock position in. Then he has Occidental Petroleum, which he only owns as preferred shares, so he's not risking his principal as much there. It's interesting he has those two energy plays. Occidental is the bigger investment. I think it's about $10 billion. But a lot of people weren't happy with that, but it's what I expect from Buffett. I want to see him put money into these kinds of stocks when he's establishing a big position to just grow slowly.

Moser: I feel like you're right. On the one hand, I understand folks may be a little bit disappointed, and perhaps that's due to some of the investments that they've made recently, smaller international fintech plays like StoneCo or talking about data, investing in Snowflake. That's really not his circle, so to speak. I certainly see Verizon and Chevron, things like that, more within his circle of competences. More within his philosophy, so to speak. I understand the disappointment, by the same token, I'm definitely not surprised at those purchases. Now, there were six stocks that Berkshire Hathaway bought more of, and it certainly seems at least with one of these companies, that there is a little bit of a theme going in there with the Verizon investment, if we talk a little bit about those six stocks that Berkshire bought more of.

Frankel: Well, I don't think you're talking about Kroger. I think you're talking about T-Mobile.

Moser: That's correct. I'm talking about T-Mobile. [laughs] Exactly. [laughs]

Frankel: Buffett started to establish a position in T-Mobile last quarter. So maybe this was some kind of foreshadowing that he was going to jump into Verizon too. But he seems to believe in telecoms as the way to play 5G, is what I'm seeing here. He added to a T-Mobile stake, and established a new Verizon stake. Interestingly, he sold AT&T a few years back, but I wouldn't be shocked if he bought some of that. There was T-Mobile, he added to three of the company's healthcare plays, AbbVie, Merck, and Bristol Myers, collectively a little over $1 billion between the three. He established those positions in the third quarter, it looks like you added to them, which Buffett does, he builds positions, he doesn't necessarily buy. If you want to buy $1 billion of a stock, it's not like opening my brokerage account and hitting a buy button. [laughs] That usually has to be done in increments.

Moser: I'd like to submit a limit order, please. [laughs]

Frankel: Right. That just can't be done by opening your TD Ameritrade account and hitting "Buy."

Moser: No.

Frankel: So that's four of them. I mentioned Kroger, he's been building a position in Kroger for some time. Remember, grocery stores have gone out-of-favor in a while. Everyone thought Amazon was going to take over the business.

Moser: Yeah. I remember when Amazon made that acquisition of Whole Foods. Back then, we saw every grocer on the day of that deal's announcement, every grocery store stock just tanked. I don't know. It just seemed like it was such a knee-jerk reaction, because people forget about that grocery opportunity, how big it is. I think Walmart, technically, is the country's largest grocer. Kroger, right there behind them. Obviously, Kroger owns Harris Teeter, among other brands. It was just a big opportunity. Grocery, people got to eat. That's just, again, maybe not the most exciting business in the world, but pretty steady.

Frankel: Yeah. One thing during the pandemic, grocery stores have gotten really good at the omni-channel thing, which is something else I think Buffett might be seeing here. Everyone thought that that was going to be Amazon's secret sauce when it bought Whole Foods, that that was going to be the grocery store you could do curbside, or delivery, or things like that. But now I can get delivery from Publix if I want to, I can get delivery from Kroger if I want to. There's a chain in the Southeast called Lowes Foods that's amazing. They're doing curbside pickups, and it's so efficient and easy. Grocery stores have really taken away Amazon's key advantage there, in a lot of ways. If I could just drive up and someone puts the groceries in my trunk, what's the difference between that and ordering them for next day delivery on Amazon? It's almost more convenient.

Moser: You're seeing a lot of operations that are really pulling it off on a national scale. Target's the one that comes to mind immediately. That's just done such a terrific job with that.

Frankel: Right. Kroger was so beaten down when Buffett first started getting into it. I don't really blame them. That's a great value investment in my mind. The sixth one on the list was RH, which is Restoration Hardware. But that was a tiny addition. Even by normal hedge fund standards, it was a tiny addition, about $11 million, which for Berkshire, is like me or you dropping a dime on the ground. [laughs] Or maybe a quarter. Maybe a quarter.

Moser: [laughs] Well, what about these stocks that they reduced their positions in? I don't know, honestly, I was a little bit surprised at some of these names. Anything standout to you?

Frankel: Well, the big one was Apple, and I'm not really surprised about that.

Moser: No? That actually did surprise me a little.

Frankel: Well, Apple has grown to the point in Berkshire's portfolio where it's like a quarter of the company's market cap. Pretty soon, they're going to change their names to Berkshire Apple Holdings or something like that. They sold a little over $7 billion worth of Apple stock. That's a pretty big chunk, but it's still the company's biggest stock position by far. It seems like a matter of diversifying and rebalancing, like you would do in your 401k.

Moser: Yeah. Portfolio management, that's what it sounds like.

Frankel: Yeah, regardless of what you think of the Apple investment, Buffett is not a guy to let 50% of his assets be in one thing, even if that's Apple. I'm not that big of a fan of that move, but I get it. The financial ones weren't a surprise. He's pretty much been selling every bank except Wells Fargo for a while. Not except Wells Fargo, except for Bank of America. He sold Wells Fargo. That's why I got tongue-twisted there. [laughs]. He sold almost $3 billion more of his Wells Fargo stake. Now, Berkshire went from owning a little under 10% of Wells Fargo to less than 1% of the bank --

Moser: Wow.

Frankel: -- Over the past few quarters, he's been paring that went down for some time now. The big one that really stood out to me as a surprise was General Motors, which he sold, not a bunch of it. Berkshire still owns a good deal of General Motors stock, but they sold a good chunk of it. Berkshire owns about 5% of GM.

Moser: You feel like he's thumbing his nose at you, man. I remember reading your takes on GM recently, that's your --

Frankel: Maybe, [...] and Wells Fargo. He's just going against me on all sides of the business.

Moser: What's the deal with that?

Frankel: [laughs] I don't know why he decided to sell some GM. I'd like to know the answer to that question, because I honestly can't figure it out.

Moser: What about Liberty? What's this Liberty Latin America? I see he reduced stake in Liberty Latin America.

Frankel: Well, Liberty Media, you know what Liberty Media is?

Moser: Yeah.

Frankel: They have a very complicated share structure.

Moser: I recall.

Frankel: If you look at any of Berkshire's portfolio stuff, there's like two different classes of Liberty Sirius XM, because they have a majority stake in Sirius. There's some Liberty Media, there's some Liberty Global, there's some Liberty Latin America. So on occasion, Buffett will just shuffle a little bit of that around. That was a tiny sell, $1.7 million, which is like us dropping a penny on the ground to Berkshire. It's a very, very small, I don't even want to call it really a sale, but for whatever reason, they decided they needed that $1 million of cash to do something else with. I don't look too much into it. Between all the classes of the Liberty stocks, Berkshire still has a pretty big position.

Moser: There you go. Then he exited completely, it looks like, five positions here. Anything that stands out to you there?

Frankel: Well, the ones that didn't surprise me were the banks, like I said, he's been selling pretty much every bank but Bank of America, he's calling that the winner. He sold PNC Financial, JP Morgan Chase, and M&T Bank completely, which surprised me a little bit. The big surprise here was that he sold Barrick Gold, which he just bought. Remember he made the investment in the gold miner about a quarter, I think just the quarter before.

Moser: Yeah. I was going to say, I feel like that just happened. It sounds like it did.

Frankel: It didn't last long and Buffett's normally not one to make a short-term trade. So that just happened, he sold all 12 million shares that they bought.

Moser: Maybe he's going bitcoin now.

Frankel: No, I don't think so. I would bet money that he's not going Bitcoin.

Moser: I'm just kidding. [laughs]

Frankel: But I have been wrong about things before. You never know, especially with his lieutenants, Ted and Todd, in charge of a lot of it.

Moser: Yeah. They're more forward-looking.

Frankel: It's not out of the realm of possibilities. Buffett and Munger have both said that they don't like Bitcoin. That has nothing to do with his stock pickers who have complete control over billions of dollars. It's not outside the realm of possibilities.

Moser: Not at all.

Frankel: I'll keep my Bitcoin opinions zipped up for a moment, just because I don't want to get down that rabbit hole today. The fifth one that he sold was Pfizer, which actually surprised me a little bit. He added to his other three healthcare plays. I mentioned Bristol Myers, AbbVie, but sold out of Pfizer completely. What do you think about that? Do you think it was a vaccine play or --

Moser: Obviously, the market being very forward looking, I think a lot of what the market has been looking forward with in regards to Pfizer has probably really come to fruition and being pulled forward. So maybe he is looking at that, thinking I've got other opportunities. Perhaps part of that was that Verizon idea. A little more of a slow and steady, reliable dividend play there with Verizon. That was obviously a massive investment he made, that it may not seem very exciting. I tell you, those operators, whether it's utilities or the mobile operators, they have that annuity quality to them. There are things that people need, and so, they more or less are going to keep running, and they are able to offer up those dividends. It's not like the sun coming up, but they're pretty reliable, Matt.

Frankel: Buffett likes reliable dividends. Berkshire makes billions in dividend income each year off of that portfolio, and that's money that Berkshire can reinvest.

Moser: That's a good point. That's a very good point. Well, let's pivot over to Paycom here for a minute, Matt. I know this isn't the company we talk a whole heck of a lot about on the show, but we're going to change that, because we're talking about Paycom today. I have a feeling that we will continue to talk about it more and more as time goes on, because the thing that stands out to me first and foremost, this is a quality business. It looked like their earnings report, which came earlier in the last week, we were off obviously last Monday, so we weren't able to cover it on that show, but wanted to cover it on this show. Paycom software, for those who don't know, they sell Cloud-based HR software, ultimately geared toward helping companies hire, and manage, and train, and pay their employees. I will say it is the pay part that really is the gist of their business today. Most of their business is based on the payroll service. They do have a suite of offerings. They compete a little bit more with companies like Workday, for example, but it does really seem like payroll for now is the company's bread and butter.

Interesting business from a number of different perspectives. It's got Founder and CEO Chad Richison, who still owns just under 15% of the business. So that founder or leader, there is some good alignment there and shareholders can take solace in that. I think in regard to the results; fourth quarter revenue, $221 million, that was up just a bit over 14% from a year ago. It looks like earnings per share, it looks like $0.84 per diluted share, versus $0.86 a year ago. They are able to tread water here in what's been a difficult situation. Obviously, a tricky situation for a lot of businesses. But really, I think that has probably played into Paycom's favor, given the tech-driven nature of the business, and the Cloud offering that they provide. If you look at the actual business itself, the forecasts they're calling for here in the coming year, they're calling for 11.5% revenue growth for the current quarter, and growth for the full year of about 20%. Now, it's worth noting, you look at this business historically over the last five years, they've grown revenue at a compounded annual rate of about 30% over the last five years there. I mean, growth is slowing down, and that's to be expected. This is going to be a $1 billion revenue business here in 2021. They're going to cross that billion-dollar revenue mark. Big deal for them for sure. Growth is slowing down and that's something to at least keep an eye on.

I noted the stock is down about 11% since the release, and maybe that is, maybe there's some concern there with the growth slowing down a little bit, because it's not a cheap stock, at least by conventional [laughs] valuation methods. Maybe price to sales is the more appropriate way to look at anything now. I'm only saying that half-kidding. But if you look at Paycom, the business is profitable, is cash flow positive, still trading at something like 165 times free cash flow and earnings. It's clearly a business where a lot of growth has been baked into that share price, and maybe that growth is slowing down a little bit and that's concerning the market. When you look at the competition in the space, something like an ADP, for example, $72 billion market cap, makes 14 times the revenue of Paycom, a ton of cash flow. Paycom right now, the opportunity there, they quote themselves having about a 5% market share on the call. So there are plenty of opportunities for them to continue serving that small- to medium-sized business demographic on which they focus. But price does matter, and maybe the market is looking at that growth here in the near-term and wondering if the headwinds that they've been facing won't last a little bit longer. But I think all-in-all, a positive quarter, full-year total client count expanded to almost 31,000. That was up 17% from the prior year-end, so that growth was encouraging to see. Clearly, they are doing something right. They are providing a service that customers like, because the customers keep reupping and new customers keep signing up. All-in-all, a positive quarter, but maybe a little bit of a valuation concern there and that's understandable.

Frankel: The one thing I saw that maybe is concerning to investors, the revenue retention rate was 93%. We talk about a lot of these newer tech companies with subscription-based services having revenue retention in the 120%-130% range. There's a good reason for it. A lot of Paycom's customers went bankrupt during the pandemic. They focus on businesses. Unfortunately, a lot of businesses didn't make it. That's 93% of the revenue they came into the year with is still coming. They've added new clients, but the pandemic might have had a little bigger of an impact on the business than investors thought, and that could be concerning people as well.

Moser: Yeah, very understandable. Listen, 2020 was a difficult year for everyone, some more than others. Hopefully, we'll see 2021 here and things will start to turnaround a little bit. My suspicion is this is a bit more of a near-term concern with Paycom, not something so business fundamental, rather than just a bigger picture, economic driven type of situation for the business. I think it's one that has a pretty well-established track record of impressive growth. Again, you love to see a founder leader with those types of ownership stakes still in the business.

Speaking of stocks, individual stocks, Matt, listen, I feel like I'd be doing you a disservice if I didn't at least mention the fact that your financial stock for 2021, the stock that you highlighted on this very show at the beginning of the year, and loyal listeners will recall that stock is Wells Fargo. Well, I think Wells Fargo's given you the old Larry David, Matt, making you feel pretty pretty, pretty good with shares up 25% year-to-date. Congratulations on that. Recently, we got an update on Wells Fargo in regard to regulators, and I'm going to let you take it from here. What exactly is going on with Wells Fargo, and why should investors be encouraged?

Frankel: Yes, they're up 25% year-to-date. That's compared to 11% for the overall financial sector. Bank of America, JP Morgan, and Citigroup are all below that level. They have been outperforming and for some good reasons, I'll get to that update in one second. For one, they have the most to gain from reopening because they're mostly a consumer bank. Unlike Bank of America, JP Morgan Chase, Citigroup, all have big investment banking divisions that have actually held up well during the pandemic. As things start to normalize, things like trailing revenue and stuff like that could really start to taper off. Wells Fargo doesn't care about that. They're a consumer bank, so they care about the health of the consumer, which is why they stand to benefit really a lot from reopening. They also stand to benefit the most from interest rates normalizing. Since the beginning of the year, you mentioned Wells Fargo's up by 25%, the 10-year Treasury yield is up by 44% year-to-date. It's gone from below 1% to 1.34% as I write this. The 10-year is usually a really good benchmark of just overall interest rate activity. Wells Fargo makes its money primarily from consumer banking, which means loaning money out and collecting interest. The higher interest goes, the more that the bank benefits.

No. 3, as you mentioned, we got an update that the Federal Reserve has approved Wells Fargo's plan to make things right in terms of its governance, after years of misbehavior and getting it wrong. The Fed has finally approved its plan. If you're not familiar, Wells Fargo got slapped with a Federal Reserve penalty in early 2018. It never happened before to a bank. Essentially it said Wells Fargo can not grow beyond the size that it was at the end of 2017. So, Wells Fargo missed out on 2018, 2019, and 2020, which 2018 and 2019 were two of the best years for growth in the banking business. The economy was firing on all cylinders, the tax cuts were just passed. Wells Fargo missed out on all that. Now it looks like they're taking the first steps to get that asset cap lifted. If Wells Fargo is allowed to grow again, that's a game changer in the investing thesis. It's not there yet, but this is definitely an important first step that regulators have signed on and said, OK, your governance plan, you're doing it right this time. They brought in an outside CEO, they overhauled the board, they overhauled the sales practices, things like that. So, the Federal Reserve is finally saying, OK, you're on the right track. That's definitely a positive. I'd think Wells Fargo still has a ways to go from here. I'm holding onto the stock, but I'm definitely happy that I made the call, and hopefully a few of our listeners bought Wells Fargo as well, and are equally happy with me, not going to throw something at me if they see me in public.

Moser: [laughs] Hopefully, indeed. Hopefully, indeed. Yeah, that is good news. It sounds like they are making progress, and are definitely headed in the right direction, and that'll be something we will continue to keep up with all year long for obvious reasons. But so far, so good, so congratulations on that, Matt, and I know our listeners appreciate it too. Speaking of listeners, we have a question from a listener this week, Matt, a question from Zee, and she's all the way in Malaysia. All right, so listen, we're reaching all over, all over [laughs] the place. We're global here on Industry Focus, and love getting this question from Zee, and I've consolidated a little bit. But it's a good question and it's one I feel like we could talk about for a few minutes this week, because it is something that pertains really to younger investors.

Zee asks, "For younger investors like myself, how can we grow our portfolio when we're trading with smaller amounts of capital? Take the average millennials are earning, you've got a fixed monthly income of, say, $3,000 to $7,000, but considering student loan, rent, daily expenses, it's funny how people say we have a higher risk tolerance if we're younger in age, when in fact, that's really all we have, and if we invest in the wrong business, sometimes it's a big deal. What if we want to grow our portfolio further or faster, is there a proper way to do so? What if we were to take more risks? What kind of risks would be easier or safer to manage?" Matt, this really is something, I think it really gets to something we talk about a lot with younger investors often, is this idea of getting rich quick, and it's an understandable desire. Yet, you and I know, and it's something we focus on trying to teach our members, and listeners, and subscribers every day. It's just a lot easier said than done, it's really not the best way to go about things. Let's talk about this for a minute though, because I think she makes a really good point actually. We often talk about how younger investors should feel like they can take on more risk, and the main reason we say that is because you have more time in front of you. You've got more time to work, and make money, and make up for potential losses. But at the time, in that immediate point in time, your resources are limited, so picking a loser is going to be something that can have a more dramatic impact on your finances earlier on in life. How do we square that up for her, in regard to the risk versus wanting to be able to get that portfolio to grow a little bit further, a little bit faster?

Frankel: For one thing, I would push back a little bit in that you shouldn't have money in the stock market you can afford to lose. Regardless of your risk tolerance, you shouldn't have money in the stock market that you, not just can't afford to lose, but you're going to need in the next few years. As a younger investor, you have that advantage that you won't need the money for a while. It's easier to make up for losses if you're a newer investor. For example, when you get to be my age or Jason's age, and your portfolio gets cut in half, it can be devastating. At least a lot more so than when we were 25. I'm not 25 anymore, I don't think Jason is either.

Moser: [laughs] No, I'm not.

Frankel: It is all about time. But having said that, there's a real blurred line these days between risk and speculation. Especially in the gamified investing world that we've seen in 2020, the GameStop's, the AMC's, all the crazy stuff. All the SPAC mergers and all this kind of stuff, it's just become a game to a lot of people, and you have to really manage risk. If you're a younger investor starting out with a relatively small portfolio, chasing things that are going to double in a year or two, or going after the next big thing, or even putting one or two stocks in your portfolio because you think they are the way to go, is not the right way to do it. First establish a base, I always tell people that the lowest risk, highest reward thing you can do is to start a base of just high-quality ETFs in your portfolio. An S&P 500 ETF will historically return 10% a year over the long run, but it's not going to make you broke. If you're in your 20s, 10% compounded over a lifetime is a really good return. A really good return. You don't need to save that much in your account if you're investing in something like that to end up a millionaire. But you're not going to go broke doing that. Once you've established a base, that's when you branch out into individual stocks and things like that. But even then, it's important to remember that it's not a game, this is actual money that you're putting up. This is the money that you're going to need to send your kids to college, or to fund your retirement, or to, in Jason's case, buy a horse, [laughs] or whatever you want to do. Jason wouldn't have bought the horse if he had been irresponsible with his money.

Moser: No, I reckon not. I didn't put [laughs] the horse on a credit card, [laughs] I paid cash.

Frankel: You didn't sell your GameStop stock to buy it?

Moser: Yeah, I did not. [laughs]

Frankel: I'm guessing it came from wise financial planning.

Moser: I'd like to think so.

Frankel: The point is, establish a base. Don't take unnecessary risks. Know what you're getting into. Don't speculate, that's the wrong word. You want to invest, you could take on risk. Apple stock is a risk. Buying GameStop because it was on a Reddit board is speculating.

Moser: Yeah, that's a really good point there.

Frankel: I'd say, read up on the difference between investing and speculating, and really learn about risk tolerance. It's probably the best thing you can do as a younger investor. Now, I will shut up.

Moser: Well, now, I think you made a lot of really good points there. I like your idea of starting out with that firm base. As you were talking, I started envisioning this tree, and this tree was growing and you started with this base of maybe it's something just as simple as saying, with the first $5,000 or the first $10,000 that I save, I'm going to be just investing that methodically into this S&P 500 Index Fund because that's something -- you're right. No, it's not going to beat the market, it's going to match the market because you're investing in the market. You're getting immediate diversification because you're investing in that ETF that covers those 500 different companies. Then, as you get that base and as that tree starts to grow, you can branch out and start investing into other types of opportunities like individual companies, for example, other ETFs, if you like. One of the things that she noted in her question in different ideas as far as investing; choices from investing in long-term good businesses and just sitting and waiting, or investing in ETFs and mutual funds, or investing in speculating SPACs, the lots of different opportunities you can invest in out there, but I think that really she keyed in on something with the very first choice, investing in long-term good businesses and sitting and waiting. That ultimately is what it really all comes back to. You made a good point in referencing this current climate, it feels gamified. It feels like a lot of people view this as a game right now, and there are a lot of people out there in the media that I think are contributing to that narrative and we certainly don't want to be the ones who do that.

But the fact of the matter, it does feel like it's taken on that feeling of a gamification, and that's not how it works. That's this desire to try to get rich quick, and trying to get rich quick is essentially, well, just go buy a lottery ticket or gamble, and then you can take the good with the bad there. But if you're going to invest, the nature of investing is investing in long-term good businesses and just sitting and waiting, and that really ultimately is why we do what we do. When you're young, I can certainly understand that feeling of wanting to get to the finish line more quickly. Investing is a bit of a paradox in that regard though. So, we would encourage you just to continue to build up that base, allow yourself to branch out as you get older. First and foremost, as you mentioned in your question, investing in good businesses and then just sitting and waiting, continue to diversify that portfolio and be patient, and then I suspect in 10 years, even you'll look back and be glad that you did. Thank you for the question, and Matt, thank you for all of that great info in your opinion there. Before we wrap it up, Matt, we've got some stocks for our listeners to keep an eye on this week. What is your one to watch this week?

Frankel: I am watching one my favorite hotel real estate stocks, Ryman Hospitality Properties (NYSE: RHP), ticker symbol is RHP. We've talked about them on the show before. They're the company that owns all five of the big Gaylord Hotels in the U.S. They have a few entertainment assets, things like that. Their earnings come out on Friday morning, and I'm really curious to see how it does, because their business is terrible right now. I think the Gaylord in the U.S. is still closed. For a hotel to still be closed, that means that's pretty bad. These are hotels that are geared toward group events like conventions, conferences, concerts in their entertainment portfolio. Group events aren't happening and aren't going to be happening for some time. Meanwhile, the stock has shot up. It's more than doubled in the past few months. Since the vaccine news came out, Ryman has more than doubled. I want to see something there to justify the move. Whether it's a good projection for 2021, they've rebooked a ton of events for going forward, it would be a great reason for the stock to be higher. I want to see how they're doing and how they see things going forward. I'm hoping they do give some good news to justify the valuation so I'm a happy shareholder, [laughs] but that's one I'm watching.

Moser: Speaking of happy shareholders, I'm going to keep an eye on Etsy (NASDAQ: ETSY), and I'm a very happy shareholder of Etsy, but their earnings come out this Thursday after the market closes. We know the story, it's a two-sided network that brings buyers and sellers together. I really love the nature of the business model, very light in that regard. We pay attention to the numbers of customers, the number of buyers and sellers. We pay attention to gross merchandise volume, number of the dollar figures, how much merchandise is going through that network. Then I think also really, it's interesting to know the Etsy payments side of the business, becoming another big driver for the business, they offer Etsy payments as of the last quarter, now in 45 countries across 21 currencies, processing 92% of their gross merchandise sales in the third quarter, that was up 88% from the previous year. We'll get some more information regarding Etsy's business this coming Thursday. But Matt, I think that's going to do it for us this week. Thank you, as always, for taking the time to jump on the show.

Frankel: Of course, I will see you next Monday. Next Monday is going to be March already. Can you believe that?

Moser: I cannot believe it, but hey, man, we keep on marching forward. [laughs] With that, folks, remember you can always reach out to us on Twitter @MFindustryfocus or drop us an email @industryfocus.fool.com. As always, people on the program may have interest 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. Thanks, as always, to Tim Sparks for putting a show together for us, for Matt Frankel, I'm Jason Moser. Thanks for listening and we'll see you next week.