tv Barrons Roundtable FOX Business May 29, 2020 11:30pm-12:00am EDT
a fair and well-informed political discussion? that's it for this week. be sure to follow me on twitter, facebook and instagram, and i'll be back next week with more journal atnterviews right here large." thank you for joining us. ♪ ♪ >> "barron's roundtable" sponsored by: ♪ ♪ jack: welcome to "barron's roundtable" where we prepare you for the week ahead. i'm jack otter. we begin with what we think are the three most important things investors should be thinking about right now. renewed concerns over tensions with china and regulating big ten. president trump signing an executive order targeting social media companies after a tiff with twitter. what happens next? stocks from airlines, cruise lines and hotels climbing as meshes think about traveling again. -- americans think about traveling again. and professional sports may return soon.
bowling is set to resume next week, what it means for advertising, spending and jobs. on my colleagues, ben levisohn, carlton english and jack howe. ben, the market had a good week, and it seemed kind of placid on the surface but down below there was actually some really interesting cross-currents. >> that's right. and i think the first thing that the market had to deal with this week was the specter of renewed china/u.s. tensions. hong kong sort of lingered there in the background, but it's never been one where the other side seemed to be willing to act. i think we saw china pass a new security law for the city, and when trump said that he would respond to that on thursday, it actually caused the market to go from positive to negative. on friday he made an announcement, it wasn't as bad as the market thought, so the market rallied back. but it's really something that the market is going to, i think, start to focus on. how much can tensions between the u.s. and china escalate, and
how much -- [inaudible] does the u.s. want to make out of hong kong. jack: so i don't want another worst case is scenario, but what's a bad case scenario? what's a bad case for the market if tensions do, in fact, continue to increase? >> i think the thing we have to remember about hong kong is it's a financial hub. if we start to see problems there would be first in the currency market. if you see problems with -- [inaudible] for china's currency, it could spill over into with other asset classes around the globe. and the other reason the banking system, because banks have relationships with each other. if all of a sudden hong kong's banks aren't allowed -- [inaudible] buzz with the outside world, really worst case scenario that could cause major problems too. jack: so the other issue is tech. big tech has obviously become more and more dominant in the market, in the economy, and a lot of people have been wondering what could with knock them down a peg. does this declaration by trump maybe start us down that road? >> i think it reminds us --
[audio difficulty] during this coronavirus period, seem to be part of the solution to what's going on. and the relationship between tech and the president seem to be okay. but with twitter putting a fact check on a couple tweets by the president, the president responding with an executive order calling for more regulation, it e really reminds us that big tech might have been -- [inaudible] quite so much, but it's still there. so i think we have to worry about it a little bit because tech such an important part of the s&p 500. the big five tech companies are 20% of the the dex -- index. if they start to fall, that's a huge problem. jack: yeah. it's really fascinating because so many people are gunning for big tech in a different way, some people concerned about antitrust that they're too big, and others that come at it
exactly the opposite direction of trump who say, look, you've got these massive platforms, people weaponize misinformation with no liability. luckily, carlton is looking at the other half of the economy. early this week particularly those really beaten-down stocks that were seen as the worst victims of the coronavirus pandemic started to come back. so barron's looked at the best of breed that will benefit once traveling begins again. >> absolutely. that's the thing, you know, the itch for summer travel hasn't gone away, it's just going to hook a lot different. you know, barron's reported, myself included, we've talked to a lot of people, and the key it's going to be strive to versus fly -- drive to versus fly to. i think families are going to be more comfortable driving to places and having more control over the situation. what does all that driving mean? increased demand for gas, gas lean, oil. so we were looking at marathon petroleum, number one refiner by capacity also planning to sell
its speedway division this year giving the stock another potential boost. two other plays in the energy space would be valero energy and phillips 66 both on that balance strength and the strength of their dividends. that's what we're looking at when it comes to energy. on airlines it gets a little bit trickier. the other thing is business and international travel aren't going to come back right away, so we're looking at southwest airlines. 80% of its travelers tend to be the more leisure travelers. areas that have reopened, you know, such as florida and texas, you know, those are kind of the prime areas for southwest. so that's why that one also looking pretty strong to us. jack: and even vegas may be coming back. jack howe, i'm really excited for the first fitch to be thrown -- pitch to be thrown at citi field, but instead you tell me bowling will be the first sport to come back, if we can call it a sport. >> whoa, whoa, whoa -- jack: whoa!
look at that. >> the pba strike derby. now, jack, it's an exhibition event, not regular tournament bowling. but, you know, golf had an exhibition event a week ago. it got the biggest television audience on cable ever for a golf event. this bowling event, this is a prelude to the reopening of pro sports. in july you could have basketball, hockey, maybe baseball, right? you're looking at football in september, jack. jack: i hope so. >> nascar, that's been open since mid may. i'm ready for the return of pro sports, jack. jack: you are clearly ready. what does this mean for the economy? >> look, more sports on tv, it's great for advertising. advertising helps spend, and spending helps jobs. there's no mom and pop football staid ups out there, but -- stadiums, but when we talk about bowling, there's this whole bowling renaissance going on. i want to give a shout-out to
tommy at oak mountain lanes who i talked to this week outside birmingham, alabama. opened up after 63 days closed because he saw a line out in the apartment, social distance, he said it's going very well. jack: i think you'll be at one of those places this weekend. coming up, the ceo of the storage company box on how
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what box does in addition to storing documents? a lot of people have heard of dropbox, that's a little bit more of business to consumers that your operation. >> yeah. we started box this 2005 to solve basically one big problem which is helping businesses be able to securely share and collaborate and access their most important files from anywhere. if you are an organization like nasa or general electric or morgan stanley and you have mission critical business processes that deal with lots of data and files, we are the platform that those organizations use to be able to manage their information. so we're in about nearly 70% of the fortune 500 and about 100,000 companies globally use our product to be able to simplify how they work. jack: so, obviously, you are benefiting from us all working at home, but i want to ask you're an entrepreneur. over time do we, without the ability to collaborate in person, do you expect that people becomeless innovative? --
become less innovative? >> actually, i just think we have to change how we think about the innovation process. so i think, you know, the sort of stereotypical, you know, thing that we think of when you're building a product you jump on a whiteboard and you ideate in realtime or you jump into a conference room and come up with great ideas which is, frankly, how it does work in most organizations today. but that actually ends up artificially constraining who can participate in that ideation and creativity process, where in the organization people can come from, what kinds of people can participate. so we've actually been really end couraged by watching how our work is changing and our innovation is changing where we might have a slack channel that has 100 people and it's coming up with ideas for a particular project and, obviously, that would be impossible to do in a physical meeting or in a normal physical environment. so i think what we're going to see is a shift in how we think
about innovation and think about that creative process. it's not necessarily better or worse, it's just different: and when you think about it as a different way to get work done, i think we're going to see a lot of creativity, a lot of innovation comet. but that being said, we fundamentally believe there's going to be offices in the future, people are still going to come into the office. we just want to help companies be able to move to the cloud so they can remain secure and fundamentally be able to work from anywhere, introduce more flexibility in how they work whether it's from home or at the office. jack: it'll be fascinating if, certainly, the commute becomes a privilege and the office becomes a perk. i want to ask you about innovation because we're hearing from a lot of people that, hey, over the past eight weeks we moved digitally to where we thought we'd be in 2024, the head of the morgan stanley brokerage operation told me exactly that. so if 2021 is going to be 2024, what does 2022 look like? give us a peek into the future
from your eyes. >> yeah. well, it's -- at this rate it's very hard to predict, you know, how quickly things are actually changing because of the speeds. we've never seen this fast of an acceleration of technology ripple through an economy, ripple through businesses. usually when a new technology gets introduced to the market, it can take five or ten years for organizations to adopt those tools. so when the iphone came out, it took many, many years for most businesses to have mobile offerings. when cloud computing came out, it took at least a decade for organizations like banks and federal governments to be adopting those technologies. now we're seeing this dramatic compression in technology that's rolling through the entire flow, every supply chain, every customer experience has to move to the digital interfaces and cloud platforms. so i think, you know, it's probably more how work itself is going to change as a result of us all being on this modern cloud infrastructure. does wiz move faster -- business
move faster, can we be more inclusive in who can participate in the digital economy, are we able to see transformation in all these industries that previously weren't moving very quickly, hospitals being able to deliver telemedicine experiences, government agencies being able to digitize their work with their constituents. so i think we're -- i think the second order effects of us all modernizing technology rapt rapidly is where we'll see a lot of exciting and, i think, optimistic outcomes as a result of this. but it is moving faster than we could have ever anticipated. jack: can you just tell me real quick, it used to be over one-time sales was an expensive stock, you're at three times and you're cheap in your sector. do we need to worry that tech's getting overvalued? >> i don't think i can pull it off in 20 seconds, but these markets have the potential of having 2-3 billion people globally using these technologies to be able to do their work whether it's zoom or okta or sales force or service
now. so i think the markets are far larger than we've ever imagined. so if the whole world moves to digital, they're going to need these modern tools and platforms to run their businesses, and i think it's what makes these markets very attractive and very large. no predictions at what companies should be trading at right now. jack: fair new. aaron, thank you so much. >> thank you. jack: coming up, how the ipo market is comingggg i was born in '37... it was a very struggling period of time. up and down. depression to exuberance. and you could name many, many cycles like that over the years. my generation, having come through so many wars and so many things... persistence. it's the heartbeat of this country.
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offerings looked like it might finally be recovering from the wework debacle, why are issues coming to light now? >> yes, there are signs of life, and it looks like we're going to have a hot summer of ipos. and the reason is that the existing companies that have gone public recently have traded very well. you can see the outperformance of the ipo index and e e tfs that track these indices, both u.s. and international. when the already public companies outperform, it sets the statement for issuance. it's kind of like when ipo returns are the fuel that drive issuing. also volatility. that's the other thing we need to have reduced volatility. and if you look at the vix which was up in the 80s in mid march, it's now below 30, and that's a very important element to price ipos, that we have less volatility in the market.
jack: so if all these companieses want to sell shares, should i be worried about taking the other side of the trade? are they thinking maybe the market's going to fall, they want to get in while the getting's good? >> sure. there's not a limit to it, but on the other side we have an institutional ipo market, there's smart investors out there, and they know that there's fear in the market. the smart investors are looking at all these new companies coming out now because they're going to be priced better, and they're going to be more fundamentally strong than as we get locker in the cycle. -- longer in the cycle. so this is the right time to be looking at the ipos that come out of this near term. >> what are the most interesting companies going prick in the future? >> -- public in the future? >> the most exciting is next week, and that's warner music group. that company is growing because of its streaming revenue if, the record label companies are benefiting from that. it's one of the top record
labels, and the numbers look pretty good. i think investors are going to receive that ipo well. they're expecting, like, 10% growth and steady business. also the largest european ipo which just priced today in europe is called jd can e pete's, and that's the second largest roaster, coffee roaster globally after nestle's, and that company is a moderate grower but very profitable. it'll pay a $2.5% -- 2.5% dividend yield. it's a consumer staple that's very nice in this market. but there is a very hot ipo that we think investors are really going to want to focus on, and that is in the software space, there's a company called zoom info. not to be confused with zoom video. it's an extremely fast-growing,
50% plus growing company. they are involved in a regeneration platform that's really popular and has tremendously strong and large cash flow margins. so you don't see many companies that look like this. i think, as i said, the early ones that come out of these downturns tend to be the most fundamentally strong and attractively valued companies for investors. so this one, zoom info, is worth keeping an eye on. >> i'm just wondering, at the end of 2019 a lot of people were thinking companies would want to go public before the election campaign accelerates. is that still true, that companies are going to want to go public before september, october, when the campaign really ramps up? >> yes, because of the election ahead, that is why we think we're going to have a hot summer of ipo issuance. the ipo market tends to go a little bit quiet during election years because there's risk associated with the market at that time.
so that is why we think companies are going to focus and since there's so many companies, private companies are locked in as private companies that haven't come out, we think it'll be more of a buyer's market than a seller's market. we'll have a lot of choices. and as long as the valuation discipline stays there, should be a good time for ipo investors. jack: thank you so much, kathleen. up next, round table members give their investment ideas for the coming week. looks like they picked the wrong getaway driver. they're going to be paying for this for a long time. they will, but with accident forgiveness allstate won't raise your rates just because of an accident, even if it's your fault. cut! sonny. was that good? line! the desert never lies. isn't that what i said? no you were talking about allstate and insurance. i just... when i... let's try again. everybody back to one. accident forgiveness from allstate. click or call for a quote today.
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it's for summer vacation, put pup a big tent in the backyard. i'm pretty excited about it. aye seen a report here that says recreational tent sale are up 30%. i mean, tents have been booming. campfire equipment up 42%, hammock sales have doubled. this is a leading indicator, people have cabin fever right now. here's my theory. disney says they're going to open disney world beginning on july 11th. now, it starts with backyard camping out with the raccoons and skunks, but before long people are going to be ready to get back out there. i know there's all kinds of rules, i don't care if they replace mickey mouse with masky mouse, i think families are going to be ready for vacations soon. jack: i certainly am, i will tell you that, and it may not be in a tent. carlton is also looking at vacations, and she really thinks there will be a behavioral change, and she's found a beneficiary. >> yeah. for those who don't want to be with raccoons or skunks, we're
looking add extended stay america, basically, a hotel chain that has kitchens in room, goes with that kind of drive-to mental dethat vacationers -- mentality that vacationers will have but still gets people out of the house in another low decision. jackie: and, ben, quanta sounds like an australian airline, but it has nothing to do with that. >> no, it basically repairs generators for utilities and fixes pipelines, and it's projects like that. with value stocks finally doing well, ubs put out the report about stocks that were laggards -- [audio difficulty] and this one has started to. it's got some very consistent revenue in this maintenance kind of contract -- [inaudible] it's looking really interesting right now. jack: yeah. those kind of companies are interesting even if the underlying resource doesn't do well. somebody is going to need their help, so they make money. ben, carlton, jack, thank you,
great ideas. don't forget to follow us on twitter @barron's online. wear your masks, be healthy, and we'll see you next weektonight". ♪ ♪ lou: good evening, everybody. breaking news at this hour, president trump has today terminated america's relationship with the world health organization as he had threatened to do if the agency did not begin immediate reforms. among the reforms the president sought, that the w.h.o. distance itself from the chinese communist party. the president accusing the w.h.o. of being under the control of the chinese communist party. and also break over this past hour, senators chuck grassley and ron johnson releasing the transcripts of phone conversations between former trump