Chris Hill: Let’s talk stocks. Ron, whether it’s an industry or a specific stock,
what do you think is poised for upside this year? Ron Gross: An industry I’m
looking at, it’s a sector/ industry. I’m not ready to call the big r-word yet,
recession. I’m not freaking people out yet. Hill: You are a little bit, by saying that. Gross: I think it’s important to have some
allocation to some defensive stocks in the environment that we may be approaching. So, when I think of companies in those sectors,
I would say some utilities might be a good bet right here. Some of the discounters,
in fact, discount retailers. Costco, Dollar Tree, Walmart would be some
nice stocks, defensive stocks to have as we enter an economy that might
not be as robust as it has been. Hill: What about you, Jason? Jason Moser: I don’t want to time when a recession
might hit, because really, that’s bad for everybody, but I do think we are entering
a period where banks are going to have some opportunities to boost their earnings a little
bit as interest rates continue to nudge upward. In particular, I’m looking more at small banks,
and one we’ve talked about before, Ameris Bancorp. This stock has a tremendous
risk-reward scenario playing out here. The stock is now
trading around 15X earnings. They recently announced this merger with
Fidelity Bank in Georgia. It’s about a $750 million deal. Given that Ameris is about a $1.5 billion
company, you can see, it means a lot. The market rightly sold the stock off.
There’s some skepticism there. That’s rolling in a big acquisition.
But they’re two very similar cultures. It gives Ameris tremendous exposure
to the valuable Atlanta market. It’s also going to help grow that asset and
deposit base, particularly in a period where a lot of these banks are competing
for getting those deposit bases. So, to me, this could play out like the McCormick thing.
Remember when McCormick acquired RB Foods? The market thought, “Whoa, this is a big one
to digest here,” and they held off for a couple of quarters to see how things worked out.
Lo and behold, it worked out pretty well. The stock recovered nicely. I think we could be looking at the same thing
here with Ameris if they execute this acquisition well. Hill: Ron, if defensive stocks have you interested,
what’s at the other end of the spectrum? What are you avoiding this year?
Gross: Specifically, I have one stock in mind. I come back to it often. It’s Fitbit. I’ve really never been excited and probably
will never be excited about this one. They entered the smartwatch market in 2018.
I give it to them, they’ve done pretty well. But this is a formidably competitive market,
with the likes of Apple, for one, right there behind them. You even have some Chinese upstarts
that could be a problem, as well. I don’t see Fitbit being the company that
is constantly able to innovate, either take market share or defend market share.
I’d be really careful about this one. Hill: What about you, Jason? Moser: Zillow. I’ve changed my tone on this
company over the past year. I used to be excited
about the potential there. I feel like they’ve failed to
convince me of the sustainability here. They’re yet to become
meaningfully profitable at all. Now, in this most recent quarter, they put
in their shareholder letter that Zillow Group has entered a period
of transformational innovation. To me, that’s code for, “We’re not
going to be profitable any time soon.” For a company like this, a company that’s
been around for a while in such a big market opportunity as our housing market,
they should not be entering this period. They should be coming out of this period. I think that’s what they were
trying to do over these past few years. This instant offers business,
it’s not up their alley. Buying homes and renovating
them and selling them, it’s not scalable. There are a lot of people
out there doing it. I don’t know that they have
any real advantage there. Good will now represents essentially half
of the total assets on the balance sheet. It’s not a bad company. I’m just
disappointed in the way they’ve executed. They still have a ways to go before
they get to meaningful profitability. Hill: One of the things that ties these two
businesses together, Fitbit and Zillow, is the word “optionality” has been used in
connection to both of these businesses. They were seen as, “They have
options, in terms of where they can go.” Optionality is something we like to see as
investors, but Ron, it almost seems like optionality works better if you’ve got
one dependable cash cow in your portfolio. Gross: You nailed it.
Optionality is great for additional upside. Maybe you can’t even see the different options that a
company might have three to five years down the road. But if they don’t have that profitable cash
flow producing segment of the company, then you’re relying on all of the value of that
company being in the optionality category, and that’s just too much risk for me.