In this podcast, Motley Fool analyst Bill Mann discusses:
- Johnson & Johnson's (JNJ -0.72%) rise despite lowering guidance.
- How J&J's margins are better than they appear.
- J&J's 60-year streak of increasing its dividend.
- DiDi Global's (DIDI 2.53%) upcoming shareholder meeting to vote on delisting from the New York Stock Exchange.
Motley Fool host Alison Southwick and Motley Fool personal finance expert Robert Brokamp talk with Motley Fool bureau chief Kirsten Guerra about how to find good financial advice on TikTok.
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.
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This video was recorded on April 19, 2022.
Chris Hill: [MUSIC] We've got a blue chip stock, a Chinese company in the spotlight, and a look at financial advice on TikTok. Motley Fool Money starts now. [MUSIC] I'm Chris Hill and I am joined by Motley Fool Senior Analyst Bill Mann. Thanks for being here.
Bill Mann: Hey, Chris, how're you?
Chris Hill: I am doing well.
Bill Mann: Missed you last week.
Chris Hill: No, you didn't.
Bill Mann: I did.
Chris Hill: You did just fine without me last week.
Bill Mann: I did.
Chris Hill: I'm doing fine because I'm a Johnson & Johnson shareholder. I know not everybody is, but we'll get to DiDi Global in a minute. But I did want to get your thoughts on Johnson & Johnson. This one of those times where-
Bill Mann: You just want me to talk about how smart you are for holding Johnson & Johnson.
Chris Hill: No, not at all. I was going to say this is one of those times where, and I say this as a fan of the financial media in general. But the headline on Johnson & Johnson is they lowered their guidance. Technically that is true, although when you look at the underlying results of this healthcare behemoth, pharma sales up 6%, medical devices up 6%. This is a business that is just quietly methodically chugging along as it has done for years now.
Bill Mann: The 60th straight year that they've raised their dividend. They've raised their dividend by a little more than 6%, which the pennant in me would point out, trails inflation, but nonetheless, it's a rather great hike. Yeah, their results were fine. They beat on earnings by a bit, they trailed on revenues by a bit, and so instantly, when you hear that sort of thing, you should think in your mind, their lower-margin stuff, the things that they sold where the area that they struggled, and this should tell you why the guidance doesn't matter all that much. Because the area where Johnson & Johnson struggled was in consumer health. It's the area where they sell the most volume, but it's also the area that's impacted the most by global trade and global supply chain problems.
Chris Hill: It's also the part that they're spinning off.
Bill Mann: It's also the part that they're spinning off. Here's not our problem anymore. The stock is now, as of this morning, was at an all-time high up about 12%, and it's just a cash flow machine. It really is. You're getting a bigger dividend, I'm going to say everything else like I'm just talking to you, here's what you are getting, Chris. You are getting a higher dividend. You are getting a higher-margin business, and the higher-margin part, as you know, is the part that's being retained, which is why you made the decision to retain that part and send the Global Consumer Health part into a separate division.
Chris Hill: They didn't ask me. They didn't ask most shareholders on that.
Bill Mann: [laughs] They didn't have to ask, they knew.
Chris Hill: I don't want to get ahead of myself. But I've been saying for months on the show that we're in an environment where no company is getting the benefit of the doubt, and Johnson & Johnson, well-known, bluest of the blue chips as far as I'm concerned.
Bill Mann: Heard of that.
Chris Hill: Had quarterly results that were good but not amazing, and they had guidance which was technically lower and the stock is up as a result of that.
Bill Mann: It's the margins.
Chris Hill: It's the part where I don't want to get ahead of myself. Are we moving out of this area, and now we're seeing some more nuanced thought on Wall Street?
Bill Mann: That would be nice. I just think that in the case of Johnson & Johnson, the fact that they trailed on revenues but beat on earnings showed that they were incredibly high-value earnings and high-value revenues. I think that the numbers themselves, as you say, because no quarter, especially not in an age of COVID, and in the age of all the macroeconomic things going on. No quarter is the same as the previous quarter. You don't get to throw a stone into the same river, and Johnson & Johnson turned in, to me, a dynamite quarter. It just doesn't look like it on the surface. It's like the old line about that Mark Twain said about Wagner's music, that it's better than it sounds. This quarter was better than it sounds.
Chris Hill: Let's move onto DiDi Global, also known as the Uber of China. DiDi Global, like Uber into ride handling and food delivery. Their fourth-quarter results came out on Monday. Revenue was down from a year earlier. We can talk about that. But I want to start with.
Bill Mann: Sure, whatever. [laughs]
Chris Hill: We can get to the actual results. But I want to start with the fact that DiDi Global announced they're having a shareholder meeting in late May, to vote on delisting from the New York Stock Exchange. You and I have talked over the past couple of months about the SEC coming out with their updated list of companies that might get delisted. Is this how it appears on the surface that a company based in China is voluntarily going to vote on whether or not they leave on their own?
Bill Mann: DiDi's behavior since the moment they came public has been and it's only been a little more than a year. It's been absolutely abominable. The Chinese government essentially, but maybe not clearly enough, forbid them from going public in the U.S., and they did it anyway. The Chinese government has removed the DiDi app from all of the super apps in China. It's a business that has been defenestrated. Now they are at the point where they're trying to figure out what's going to make the Chinese government happy, and one of the things that they believe was, if we undo this American listing, that might help. But they have no plans to go public someplace else. There's going to be a vote which may or may not pass. After which time, if it passes, DiDi's shares will go dark and there's no real plan to have them trade someplace else. It's wild to me.
Chris Hill: What happens if you're a shareholder of DiDi Global besides the fact that your stock is worth half of what it was just one month ago?
Bill Mann: You know how everybody really wants to try and get in on pre-IPO companies in a very bizarre way, that's what's about to happen. You don't lose your ownership in a company by virtue of the stock no longer trading, you absolutely retain your ownership, but you'd be retaining your ownership in a private company with no real path to gain any liquidity from it. As an individual investor, that's not a place that I would want to be. But yet you're holding a pre-IPO company at that point.
Chris Hill: Is there a scenario where because I can imagine at least a few investors looking at the stock beaten down the way it is and thinking, it's cheap and [LAUGHTER] if it gets in the good graces of the Chinese government, then maybe it's a steal at this price.
Bill Mann: Yeah, those people were also the people who love jumping onto the backs of bulls.
Chris Hill: Just for the excitement?
Bill Mann: For the excitement. Like, so I might break a bone or two. Just keep in mind that DiDi had all these warnings from the Chinese government when they held their IPO. They have had a year now where they could have figured out how to buyback the shares, to go have a traditional going private transaction, it happens all the time. Where you actually go in and you buy you the company or the company with investors buys the shares from minority shareholders and you close it out that way. That's not what they're doing here. What they're doing is they're like, if you vote for it, we're going to shut the doors and it's unconscionable behavior to me. It's OK, if you want to hold a private company, you probably shouldn't be an individual investor. You should probably be an institutional one where you have the capacity to trade with other large shareholders. But as an individual shareholder, I think you're risking quite a lot. I think you're risking to owning a company that has not behaved very well for a very long time.
Chris Hill: A reminder that among other things, setting your expectations accordingly in the same way that you look at Johnson & Johnson and you think, if I'm buying shares of this I've got the bluest of the blue-chip stocks. I'm not getting a lot of growth, I'll get a dividend that's going to increase year-after-year. [MUSIC] If you want to jump in on DiDi Global, just know you might be buying a private company and not getting that money anytime soon.
Bill Mann: That's right. The brownest of the brown chips, if you will. [laughs]
Chris Hill: Bill Mann, always great talking to you. Thanks for being here.
Bill Mann: Thank you, Chris. [MUSIC]
Chris Hill: TikTok is available in China, the U.S., as well as 150 other countries. TikTok has over a billion users and some of them are using the platform to get tips on investing. How do you separate the good financial advice from the downright horrible? With more, here is Robert Brokamp and Alison Southwick.
Alison Southwick: Over the last couple of weeks we're joined by Ron Lieber. He's the best-selling author and a writer for The New York Times. We talked to him about how do you talk to your kids about money. If you weren't inspired to talk to your kids about money and investing, today we'll helpfully scare you into it. A 2021 study by Wells Fargo found that 45 percent of teens became more interested in investing after the rise of meme stocks, like AMC and GameStop. When they asked teens where they learned about money over half said their parents, which is great, but they also pointed to other sources. In fact, almost half said school and over a third said social media. That means if you aren't talking to your kids about money, they're going to learn it on the street. By which I mean that mouthy and unjustifiably confident friend of your kid, you know the one I'm talking about, and places like TikTok, Reddit, Discord. TikToks with the hashtags like money talks, stock talk, Fintalk, have billions of views. The good news is that the advice isn't all bad, much of it is solid, preaching long-term investing and the miracle of compounding returns. But joining us today to talk about how to separate the good from the bad advice online is Kirsten Guerra. She is a Bureau Chief here at The Motley Fool. Hey, Kirsten. Thanks for joining us.
Kirsten Guerra: Hey, Alison. Thanks for having me.
Alison Southwick: We invited you on because you are no stranger to TikTok. In fact, I believe you help manage The Motley Fool's own TikTok account.
Kirsten Guerra: I do. It's a blast.
Alison Southwick: So Kirsten, what's the first kind of bad advice you're going to find on social media?
Kirsten Guerra: Yeah. A lot of the advice I think falls under a bucket we can call bad math, which is just creators playing very fast and loose with numbers in whatever way benefits their outrageous claim. This often targets retirement accounts making half-baked claims about the tax benefits that are offered or this can be inflated tax rates or unreasonably high returns, unreasonably low returns. Again, it's whatever supports their narratives without any of the necessary context to better understand. For example, here's a TikTok with a creator discussing the Google stock split with a kernel of truth, but a bit of an exaggeration.
MALE_1: What happens is that the price of the stock goes down because of the split, but then it quickly rises back up. I can expect Google to double here in the next 3-6 months.
Robert Brokamp: As Kirsten said, there's a kernel truth to this. There is historically evidence that a stock goes up after a stock split. But he's saying that this company, Google, is going to double over the next 3-6 months which is very difficult to do for any stock, let alone a stock that is already worth $1.8 trillion. Here at The Motley Fool, basically believe you can't really predict what's going to happen to a stock in the short-term, anyhow. In fact, that's what's happened here. This original TikTok was published on February 2nd. It's now toward middle to the end of April and Google actually has not gone up, but it's actually down 15 percent.
Alison Southwick: Probably you have an example. This is one that I found particularly terrifying.
Robert Brokamp: Let's give it a listen, shall we?
MALE_2: Say you want to do some trading, but you don't have a lot of money. You come and you give me a dollar and me, the brokerage, I give you $500. Now you're actually able to make some money. You give me $1,000, I give you back $500,000. You see where I'm going here?
Robert Brokamp: Here's what's interesting about this one. What this fellow is suggesting is actually illegal because in the United States the Federal Reserve mandates, how much you can borrow to invest? It's called investing on margin. In the United States, you can only borrow half of the amount you want to invest. If you want to invest $10,000, you have to put down $5,000. That's 50% equity. What this [laughs] guy is suggesting is you only have to put down a dollar to invest $500. How is this possible? Well, first of all, he is promoting a broker that isn't in the United States, it's in the Caribbean. New York Magazine did an article on this fellow and it turns out he's been involved in a few other things, such as promoting a cryptocurrency named Mando, as its Star Wars theme because it's named after The Mandalorian. Another fake crypto, Elongate, I guess, after Elon Musk. Do a little research into the person to find out what else they have promoted in the past.
Alison Southwick: Let's move on and talk about some of the worst offenders. In my opinion, they are also the most entertaining though. But again, also potentially the most dangerous for the youngest among us. Those are the people who are hyping or lying about success on social media. Kirsten, what are these people like?
Kirsten Guerra: Yeah, you said it Alison. These people are hyping their success and unfortunately, most often they're creating an illusion of success that they don't actually have. These people will talk very confidently. They will share how much money they make or their net worth. They'll show their accounts openly on screen. They'll film themselves in front of fancy houses dispensing this advice. Unfortunately, it's not that hard to do some of these things. I could film in front of someone's fancy house that is not my own. I could also pull up an account right now that has $1,000 in it and with some quick editing and Google Chrome, I could make it look like I have $1 million. Unfortunately for me, that wouldn't actually change the amount of money I have, but it could work to fool you into believing that I do have that and that I've been wildly successful. Now ultimately, all of this is for the purpose of appearing successful so that this person typically can try to sell you their course or their system and tell you how they've been so successful and you can repeat it yourself for the low price of too much money for what they're selling.
Alison Southwick: Some of my favorites of these are often, let's say, guys in their 20s and they're showing up in front of their lambos, can we call it raris? Is that what we call Ferrari [laughs] when they just spell, R-A-R-I?
MALE_3: Five hundred thousand dollars for my Rolls-Royce, 750,000 for my Aventador, another quarter million for a few other cars each. How do I have this at 22 years old? Let me tell you. It's NFTs.
MALE_4: Let me give you a new tour of my new $1.4 million house in Beverly Hills. First of, I've got this giant kitchen with super nice appliances and that's got my trading station looking out into the hills.
MALE_5: We have bet on the most legendary running stock market banking over $2 million in two days. Check this out. The madness starts here, were we sent [inaudible] duty for Facebook puts. It went nuclear going down $80 for our entry and changing a lot of lives, but wait it gets better.
Alison Southwick: In the final group of people on the street corners of social media is trying to get your kids hooked on bad financial advice is people who are hyping crypto, meme stock or penny stocks. Kirsten, tell us about these people.
Kirsten Guerra: Yes. These posts and videos are exactly that. They are all hype. There's very little substance in these videos. There's no nuance about the risks. They're typically presented not as what the business might do or improve upon in the future but how a stock price will move. It will double in six months or it will 10x in 2022. It's these outrageous claims that are centered on stock price alone. In fact, there's very often no talking in these videos at all. It just this pumped up hype music and a list of stocks that some random person says will soar.
Alison Southwick: He's usually driving a Lambo. You got to be giving [laughs] your hot penny stock tips from your Lambo.
Kirsten Guerra: Otherwise, why would you believe it?
Alison Southwick: Did the stock advice even happen if you're not giving it from your [laughs] wheel of your Lambo? Did the kid still call it that? Let us hear a couple of examples.
FEMALE_1: Three penny stocks that will go crazy this week. [MUSIC]
Robert Brokamp: What's interesting here is with this person, he was right but probably because he talked about it, and this is the classic pump and dump. So the three stocks he highlights are small companies with market caps of $100-$200 million. You can look at the price of these stocks and the volume. When you look at these three stocks, the stocks either went up 30-100 percent after he posted this video, and the volume on the stocks went up 3 times to 10 times. The reason it happened is because he posted the video. What he probably did, and I don't want to accuse him of anything, but it's quite possible he bought these very thinly traded stocks, posted the video, which pumped up the price, then sold because you want to get out before the suckers, and then the stock comes down and that's what happened. In fact, in each of these stocks, all three of them are now at a lower price than when he originally posted this video.
Alison Southwick: Kirsten, how do you tell the good advice from the bad on TikTok, social media, everywhere?
Kirsten Guerra: Look, promises of huge returns can be really tempting on these platforms, and kids on TikTok don't know any better, adults on TikTok don't know any better. A few red flags you can look out for or teach your kids to look out for is, first, and this will sound very simple, but just always ask yourself, who is this person? Influencers will come at you with a lot of confidence, but ask yourself, why should I listen to them? If someone is trying to sell you a course and they have no relevant certifications, their goal is probably to make money off of you, not to educate you.
Robert Brokamp: Yeah, that's all good advice. Certainly, you want to click on the links on their bios to see where it takes you. Sometimes it will take you to a very thorough website, sometimes it will take you to their WhatsApp number, so you just have to pay attention to that. Sometimes people will say they have certain certifications and they actually don't. For example, I'm a certified financial planner and you can go to the CFP Board's website and look up and see that I actually I'm a CFP. But sometimes people say they're some sort of a professional financial advisor, an accountant, lawyer, but they're actually not. You can check up on that too. But also, look for people. Basically, what are they trying to sell? You will often find that they are using their platform to delegitimize, in their eyes, a perfectly valid strategy in order to sell you something. One example is you'll see lots of videos of people who are denigrating the classic old 401K. They're saying you shouldn't do 401K, you should do something else. What's that something else? Often it's something very expensive that generates a large commission, like life insurance.
Kirsten Guerra: Another thing you can look for is to arm yourself or your kids with some basic knowledge so that you can help identify these wild claims when you come across them. For example, know that the stock market returns 7-10 percent per year. Know that risk is proportional to reward. Then when you see something that promises to double your money in six months, you'll know that that is beyond reason and incredibly risky.
Robert Brokamp: I think it's important to ask yourself, what could go wrong? What's the risks involved with it? Has this person laid out the risks? How likely is it, and can I handle the consequences? We've talked in the show about leverage, for example. Leverage is great because it magnifies gains, but it also magnifies losses. If you're going to use any leverage, you have to understand what's at stake and can you live with the downside possibilities.
Kirsten Guerra: Definitely. Similar to that, I would suggest that everyone always look for substance in these videos. Here at The Motley Fool, we always say that we invest in the businesses themselves, not the tickers, not the piece of paper that accompanies that. A video that goes into some business analysis might actually be worth doing further research into. But a video that simply makes a very positive claim that they want you to follow, something like x stock is about to double or x crypto will go to the moon in 2022, this is most likely a pump and dump.
Alison Southwick: Bro, what's your parting advice?
Robert Brokamp: I would just like to say that we at The Motley Fool got our start from a couple of 27s posting on the AOL discussion boards back in 1993, which I guess you could kind of say, was the TikTok of its day. Our message was, and still is really, you don't need high-priced, fancily dressed Wall Street types to manage your money. With a little time education and you do a lot of it yourself without all the conflicts of interest and maybe have some fun along the way. I don't want to denigrate anyone who's sharing financial education on TikTok, YouTube, Twitter, anywhere. I love it. It gets back to the DNA of The Motley Fool. We still believe there's a lot of value and technology that brings people together to learn from each other. That said, you got to be careful. Because of all the warnings we talked about here. Go ahead on all these social media platforms, learn as much as you can. Just make sure that you do a good bit of trust but verify.
Kirsten Guerra: Yes, that's exactly right. Something you alluded to earlier, Bro, I would just circle back on, which is that these videos are by design, most of them 60 seconds or less, which is an incredibly tight window to share financial advice [MUSIC] and to share all of the risks and the nuance like we've talked about is needed. Just know that going into it, use these platforms as a spark of inspiration for investing, for saving money, all of these things, but go and do further research. [MUSIC]
Chris Hill: That's all for today. But coming up tomorrow, we'll talk about investing in fitness. I'm not referring to your gym memberships. As always, people on the program may have interest in the stocks they talked 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. I'm Chris Hill, thanks for listening. We'll see you tomorrow.