In this podcast, Motley Fool senior analyst Jason Moser discusses topics including:
- The importance of staying invested through bear markets.
- JPMorgan Chase going after the rental payment market.
- How much the big bank has been investing in technology.
- Wells Fargo issuing a “double downgrade” of Hanesbrands.
Plus, Motley Fool contributor Matt Frankel joins Jason to discuss four companies they bought shares of recently.
To catch full episodes of all The Motley Fool’s free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Oct. 31, 2022.
Chris Hill: We’ve got the latest in the war on cash as well as the stocks that we’ve been buying. Motley Fool Money starts now. I’m Chris Hill, joining me today, Motley Fool senior analyst Jason Moser. Happy Halloween.
Jason Moser: Happy Halloween, man, it is just flying right by.
Chris Hill: It is and before we get to the war on cash, because there’s an interesting development in the war on cash. It’s Halloween, it’s the last day of the month. It’s been a good month for the S&P 500, up 8% for the month. The Dow Jones Industrial Average, which we don’t spend a lot of time focusing on. I would argue rightly so because it’s an average of just 30 stocks, but the Dow is up 14% for the month. It reminds me of something we’ve talked about before, Jason of just make sure you have room in your portfolio for those steady performers. Because every once in a while they can be even more than steady. They can be in positive territory.
Jason Moser: Yeah, absolutely. I mean, we’ve talked a lot recently about how there have been just so many of the no-brainer ideas, the no-brainer companies out there that seem to be trading at, just seem to be valued at just very reasonable prices today in relation to their long-term prospects. I mean, we’ve talked before about how the market performs in bear markets. We’ve been in and out of bear market all year, it feels like and given all of the macroeconomic concerns that exist today, that really hasn’t changed. The prospect of interest rates continuing their trek upward remains. The war in Ukraine remains. China’s zero-COVID policy remains.
I mean, there are a lot of things going on out there that would be seen as headwinds to growth here in the near term, at least, and plenty of talk about recession 2023, a lot of people would argue that we already are in recession. It’s nice to see the light at the end of the tunnel, even if it’s just a very brief glimmer. It does speak to also the fact that the volatility that we see during these stretches is real. But it also speaks to why you don’t want to trade in and out of these markets. Basically, I mean, history tells us that essentially over half of the S&P 500‘s best days occur during bear markets. I know that people feel like, “Well, that doesn’t make any sense. It’s a bear market.” Well, what it speaks to, I think is really the psychology at play, in the volatility at play. It is something that exists. It’s not an opinion, it’s a fact and so it really does speak to why we encourage folks to stay the course and not try to time getting in and out of the market. Because it’s impossible to do sustainably well.
Chris Hill: Let’s move on to the war on cash, which if today’s news is any indication, cash is not going quietly, or I should say, non-digital payments not going quietly. JPMorgan Chase is launching a platform that it created for the rental market, specifically for property owners and managers. The point of the platform is to automate the collection of rent payments. The stat that blew my mind, Jason, was 78% of people are still paying their monthly rent with checks and money orders. I haven’t rented a place in a long time. I would not have guessed it was that high.
Jason Moser: Yeah. I’m with you. It feels like that number should be lower. I’m with you. I mean, I haven’t rented a place in quite some time. But I mean, the fact remains that that data is out there and you’ve gotten more than 100 million Americans that pay a combined $500 billion annually in rent, according to JPMorgan’s research. It absolutely makes sense that they would want to do this. I totally get it. It’s also worth noting. I mean, they are not the only ones pursuing this space. When you and I were talking about this earlier this morning, the first thing that came to my mind reminding me a lot of a company that I had followed for a while several years back called RealPage. RealPage is a provider of on-demand software solutions for the rental housing industry. Their software is built for the owners and the managers of these rental properties to basically manage the entire process from start to finish. We’re talking marketing, pricing, screening, leasing.
Accounting, purchasing, payments, anything you can imagine. That’s what this platform is built for. RealPage, I always thought was actually a pretty, a pretty interesting opportunity in the public market because of the opportunity that it was pursuing. It turns out, I wasn’t the only one, Chris, and Thoma Bravo acquired RealPage last year in an all-cash transaction that valued the company at an enterprise value of around $10 billion. Which, at the time I started following RealPage — I mean, it was just a little small cap getting its feet underneath it. So you remember Thoma Bravo also acquired Ellie Mae not all that long ago. That was that big mortgage opportunity. The mortgage software that Ellie Mae has just distributed all over. I thought it was a really shrewd acquisition on Thoma Bravo’s part that made a lot of sense to me and it makes a lot of sense to me that JPMorgan would want to do this ultimately trying to drive that digital experience.
I mean, I can’t imagine as a landlord something more frustrating than having to deal with getting paper checks in the mail? I mean, that to me has just got to be — it sounds like it would be one of the most frustrating things in the world. When you’re a renter, sending that check and make sure it gets to your landlord on time, and then you got to wait for that check to clear. It’s just this constant balancing act and it seems like it would be so much better managed on a digital platform and given the opportunity that we’ve seen developing in the space over the last several years, going back to that RealPage example, I absolutely understand what JPMorgan would want to get into this given the exposure that they have to lending to all of these property managers and owners. I mean, they have so much outstanding in mortgages with this space. I mean, this would be a very complementary opportunity to expand the economic value they can capture in that market.
Chris Hill: Last thing before we move on in terms of the overall business of JPMorgan Chase, what does this tell you? Because this seems like something that the bank has put a lot of thought into, a lot of research into and presumably a lot of money in terms of a technology investment?
Jason Moser: Yeah. I mean, a lot of money is right. I’m glad you brought that up because it is something that a lot of these big banks could be accused of maybe letting technology pass them by. We’ve seen so many of these fintech businesses that have built up and scaled in such a short period of time. The big banks, I think, could be seen as maybe dragging their feet a little bit. Jamie Dimon has just committed, JPMorgan is spending more than $12 billion a year on technology here in the coming years. If that sounds like a lot of money. I mean, it is. We’ve spent a good portion of last week dragging Meta and Mark Zuckerberg through the mud questioning how they can justify investing so much in the metaverse.
The difference here at least is that fintech technology is a bit more of a proven entity. I’m sure that some of that spending will absolutely result in acquisitions. But I mean, I think it is something really to keep an eye on in regard to this bank. Because I mean, I do appreciate that Dimon feels like they need to do that. But that is a lot of money. Shareholders are going to need to make sure they hold this team accountable. If they end up spending that capital, if they spent that level of money, they need to hold management accountable to make sure they’re actually realizing a return on that investment. Because it is a lot of money and there are a lot of companies out there that can just keep on doing what they’re doing. JPMorgan is still going to have to continue to play catch up to some degree. Not just JPMorgan, but the bigger banks in general.
Chris Hill: As we typically get on a Monday morning, there were a bunch of Wall Street analysts’ upgrades and downgrades coming out this morning. The one that caught my attention, I think a lot of people’s attention was Wells Fargo issued a downgrade of Hanesbrands. Now Hanesbrands is the apparel maker, namesake brand Hanes, but also other brands like Playtex and Champion. This analyst’s — this was a double downgrade.They cut Hanesbrands from overweight to underweight. Part of the note was just being very direct about the amount of debt this company has. Essentially saying, we don’t think management can handle this. I guess my first question is, which to you is more damning? The fact that they were just blunt about the fact like, yeah, we don’t think you guys can handle the debt that you’ve taken on or the fact that it’s a double downgrade, which I don’t remember the last time I saw one of these.
Jason Moser: Yeah. I don’t know. We were kicking that around. I don’t know that I can recall seeing a double downgrade or at least it phrased that way. It really catches one’s attention and pretty quickly. I feel like it’s something from Arrested Development. When they had the ratings there, there was like buy, sell, and then there was like Bluth or something like that. It just doesn’t seem very good. I don’t know that I share…
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