Growth stocks are often riding long-term industry tailwinds, so finding those tailwinds can be a great way to find profitable investments. In this episode pf "The 5," Motley Fool contributors Travis Hoium, Jason Hall, and Demitri Kalogeropoulos discuss why real estate, healthcare, and e-commerce are areas they find attractive right now.
This segment was recorded on October 14, 2021.
Jason Hall: It's earnings season. The banks reported this week, so it's definitely officially earnings season. The next six weeks, we're just going to hear a lot about people talking about stuff that happened three months ago. It's helpful. It's helpful to go through the earnings process and to learn about companies and also to get that outlook and where management things are going to go forward. But I want to talk a little bit about the future here. Today's an interesting opportunity. Travis, first-time on here, you're renewables expert, you're engineer by training you're a nascent entrepreneur. There's so many cool things you've got going on. Demitri, you know a ton about a lot of stuff. I know a little bit about a lot of stuff. Anyway, let's talk about the future. Travis, kick it off here. What's an area you think investors absolutely need to invest in because it's going to be really big and generate really big returns for the future?
Travis Hoium: One of the areas that I'm really excited about is real estate, broadly. I'll put that into two buckets. I'm keeping a close eye on Zillow, and then there's a couple of companies that are related, Redfin and Opendoor. Here's an industry that hasn't really changed much in the last century. I bought a home a few years ago. It still is crazy to me that brokers control all the information and have this high fee structure that it's really hard to break into. Zillow was trying to break into that with buying homes when the Zillow offers business, same with Opendoor and Redfin. The question to me is, are buyers going to be willing to take a little bit of a discount to basically sell a home on their own terms not have to go through the sale process? I think long term that could be really disruptive to the real estate transaction business, so I'm very bullish on that, but there's still a lot of questions to be answered. The second thing and this is very related to the data that underlies real estate is the company called Matterport, and I'm looking at how companies are using the information spatial data that they're capturing. If you haven't tested out the Matterport Capture app with an iPhone or an Android phone, it's really crazy how they can capture basically a doll house of your home or your apartment, or your favorite park or whatever you want, and use a ton of that data in there. We're going to just see that start to be unlocked over the next few years. Not only for real estate transactions, but also for things like e-commerce. I want to place a piece of furniture in my actual home and see what it looks like before I buy it. Or maybe I want to send some information to a plumber to get an estimate for something. Real estate, broadly, I think is a space that's really ripe for disruption, like retail was 20 years ago. It's just a matter of what exactly that disruption looks like and what companies are going to able to take advantage.
Jason Hall: Yeah. I agree 100 percent. It's happening and it's going to take a long time to play out. It's so gigantic. I think that's the key. It's such a massive-
Travis Hoium: The number starts with a T. Like it's trillions of dollars in real estate. Even if you get a tiny fraction of the market share, you could have one of the biggest companies in the world.
Jason Hall: Demitri.
Demitri Kalogeropoulos: Exciting stuff. I'm going to go with something you might have heard of this e-commerce thing, I think has legs.
Jason Hall: It's a thing. This looks like it's real.
Demitri Kalogeropoulos: It could be big. Let me share this slide here from the FRED website which I love e-commerce retail sales as representative of total sales. This over the last 10 years. Hope that's showing up for you guys.
Jason Hall: Yeah.
Demitri Kalogeropoulos: We're seeing 10 years ago, mid 2011, e-commerce was about five percent or less than five percent of sales and over about eight years it got from that five percent to 11 percent. Then in two months, it did that same thing again.
Jason Hall: Those two months.
Demitri Kalogeropoulos: Right. Then it added six percentage points. In the beginning of the pandemic obviously, some of that has to do with some of the craziness that we saw with that disruption. But e-commerce is an amazing growth story that's impacting so many businesses. But when I like to gravitate toward these companies that are taking advantage of that shift, but that they'd already have a good brick-and-mortar presence and the stellar national or global platform already. These companies like Target, TGT, Tractor Supply, lately TSCO, they're doing really well using their online platforms in conjunction with these really great networks and brick-and-mortar stores.
Jason Hall: Demitri, guess what.
Demitri Kalogeropoulos: What's that?
Jason Hall: This week I ordered something online from Target, had it shipped to my house.
Demitri Kalogeropoulos: See.
Travis Hoium: You didn't go pick it up?
Jason Hall: No.
Travis Hoium: My wife literally before we started said, "Hey, I am going to go to a Target pickup order." What do you need?
Jason Hall: That's awesome.
Travis Hoium: Yeah, that's a tailwind for them.
Jason Hall: I have more.
Travis Hoium: Yeah.
Jason Hall: Hey, Demitri. I placed an online order from Tractor Supply on Sunday. I picked it up yesterday.
Demitri Kalogeropoulos: There we go. See.
Jason Hall: Like really I did. I'm not kidding, both of them.
Demitri Kalogeropoulos: I've got a copy of your bank statement or something. How am I doing that? [laughs] You didn't have to spend money at Wayfair recently, did you?
Jason Hall: No, my wife talked about ordering accounts from them.
Demitri Kalogeropoulos: That's the other company I would highlight there. Not so much in the brick-and-mortar space, but they're an interesting disruptor to look into and the stock has gone down here in 2021, disrupting that home furnishing space. Stitch Fix is also just another one I'll just throw out there. The headline that they shared in their last report was that, apparel sales are now up to 40 percent. Online sales are up to 40 percent of all Apparel sales now and they don't expect that to drop even a little bit, so that number is going to keep going. Lots of room for many winners and I like investing in a space like that.
Jason Hall: I think you're right. I think if there's one thing that we learned about shopping during the pandemic is that there's a lot of things that we thought we wouldn't really enjoy buying or really want to buy online. It's fine. It's completely fine. Couches and apparel or furniture and furnishings and apparel are some of those things. It's been very surprising to me. Really has. I've got one real quick here. Maybe it seemed obvious, but in healthcare. Between the aging of baby boomers, 10,000 a day on average turn 65. Between 2010 and 2030, the population of 65 plus Americans, just Americans, will double from 40 million to 80 million. We'll have 40 million Americans over age 80 in 2030. These are massive cost dynamics that are going to drive more dollars in healthcare spending. The companies that are driving down those costs, improving outcomes, are going to be really important. One that I continue to like is Teladoc ticker, TDOC. I think most of us probably heard about that company right now. But three or four years ago, Teladoc was a great business that was doing those things. Over the past year and a half, there was so much of the idea that is just like a COVID company, but it's not at all. There's so much more than the dynamics of what its business brings. Their visits actually picked up in the first quarter. They have more visits in the first quarter and again in the second quarter than they did back during some of the worst of the pandemic. It's just a really strong sticky business and I'm a huge fan.
Demitri Kalogeropoulos: I got it. Go ahead, Travis, sorry
Travis Hoium: Sorry. As somebody who has kids. I can't imagine going back to your first step being to go physically to the doctor. The first thing we do is a virtual visit now. Do you actually need to come into the doctor? Yes or no? Teladoc's one of those companies and we're just in the early phases of instituting that into our everyday medical experience, so long runway for a company like that.
Demitri Kalogeropoulos: I would just echo that same statement. When you think about a ripe for disruption industry like the healthcare process, that driving to the doctor and signing into a wait room, and just waiting for someone who's super busy. There's so much inefficiency built into their normal system and with the wearables now, doing your blood, O2 levels, and all stuff, I could just see that the opportunities for a company like Teladoc to just innovate is just going to be crazy.