March Madness on Wall Street: stocks to watch
Yahoo Finance’s Zack Guzman and Akiko Fujita brings March Madness to the stock market with Ross Gerber, Gerber Kawasaki Wealth & Investment Management CEO & President and Ryan Payne, Payne Capital Management President.
Video Transcript
AKIKO FUJITA: Let's kick off this hour though, with our very own Stock Madness. 16 stocks on the road to the finals. Last week, we had Tesla and Disney advance to the Final Four. Today, we are rounding out the rest of the bracket. And you see our stock pickers there, friendly foes, we can call them, Ryan Payne, Payne Capital Management president, and Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management.
Guys, we are on the right side. Can we call it the west region? The right side of the bracket today. And interesting conversation last week. We were talking about value versus growth kind of being the theme. But the two stocks we're starting with today are really, it seems like it's about the reopening trades, MGM and Carnival. Both stocks up about 20% year to date.
And let's start with MGM. Ross, is that your pick? I'm going to say it's your pick here.
ROSS GERBER: It's one of my top picks right now. And I'm adding to the position, even though we bought it a year ago at, like, $10, $15. And we're adding here at 40 or 38. MGM, everybody's going to Vegas. Room rates are back up to regular rates. You can't even get a room this weekend or next weekend for the Final Four.
The vaccine optimism on the West Coast is huge. And Vegas is the easiest place to go on vacation and have the most amount of fun. So we're very bullish on that on top of the fact that their online gaming, which just reported is the number one online gaming app in the country. People are betting like crazy on sports. They're betting crazy on March Madness. MGM.
RYAN PAYNE: Yeah. Well, Ross, first off, it's the only pick that you actually-- pick that I actually like. Finally you picked a winner. And you love gambling stocks. What is your obsession with gambling? You had them last week.
I like the reopening trade as well. I've been emphasizing this. This is the only pick I have that's not profitable. And that's Carnival Cruises. And I think bottom line is, I have a lot of clients that are Baby Boomers. They love to cruise. And they're all getting vaccinated. And all they can talk about is getting on that next cruise ship, all you can eat buffets. Doesn't get better than that.
And I also think you have right now what I call the spring break Miami effect. If you look at how crazy it's going on in Miami right now, people are just going nuts. I think you can extrapolate that out to the rest of the economy as things reopen, as they are starting to reopen, and we start to take the safeguards off. So I think cruise stocks in general are a good place to be. They have a lot more upside, just because a lot hasn't been priced in. It's still like 43% below its low. So I think that's a great place to put some money right now.
AKIKO FUJITA: Ryan, quick follow on the cruise names though, particularly Carnival. But we have the industry as a whole really pushing the CDC to change some of the timelines in terms of when the sailings can resume. What's your expectation come summer?
RYAN PAYNE: Well, they pushed it back to October. But I think the surprises will be in the positive because one thing we've seen is vaccination rates, if anything, they've been faster, not slower. So I assume at some point that they're going to actually push that up and make it even earlier, which would be a surprise in the positive.
ROSS GERBER: What about so many countries having so many rules to go to and the enormous cost of operation for safety? I mean, these cruise ships are kind of like Petri dishes for disease even before COVID. So how are you going to get off the ship and go to other countries all of the sudden?
RYAN PAYNE: Well, I think the bottom line--
ZACK GUZMAN: Yeah, you could make the case Vegas isn't any cleaner. That's what I would say. I just passed through Vegas--
RYAN PAYNE: Yeah, those casinos.
ROSS GERBER: Oh, come on.
ZACK GUZMAN: It didn't look good.
RYAN PAYNE: Didn't look very sterile, those casinos, Zack.
ROSS GERBER: It's so clean, man. Everything stays in Vegas, you know?
RYAN PAYNE: The virus is contained in Vegas, yeah.
AKIKO FUJITA: I think, Ryan, you've made a compelling case for Carnival. But I do think there's so many factors globally with cruise liners. So in this matchup, I'm going to go with MGM.
ZACK GUZMAN: That is our first winner. And that's no upset there. But we're going to get into an interesting matchup here with Trulieve and Vale. And Trulieve, one of those weed companies. It's been a tough couple of weeks for weed stocks here. We'll start with you, though Ryan, because mining companies don't get a lot of play on this show either. So you kick us off.
RYAN PAYNE: Yeah, I like Vale just because, again, commodity prices are going through the roof. And what's remarkable to me is they're going through the roof. And the reality of it is we're still just starting to get to a point where we're starting to reopen. So I think that play is a longer-term trend.
The dollar as a longer-term trend is starting to weaken. That's great for commodity prices. And again, we're not the only ones printing money right now. We're printing money globally. There's going to be so much demand for goods and services going into the end of the year. Supply chains are messed up.
So for all these reasons, I think we're in a huge boom in commodities. And again, I just love cheap. And if you look at Vale specifically, it's got a 7% dividend. Who doesn't like cash flow, given the fact you get nothing sitting in cash right now? And it trades at four times forward earnings. Now, that's going to blow Ross's mine because he only likes stocks that pay for like 50 years worth of profits.
ROSS GERBER: Well, obviously, you haven't spent a lot of time in Brazil, my friend, because Vale is a mess. And it's a mess of a company. So I like your idea. But we're playing it through Freeport-McMoRan, FCX. Vale, if you see what's happening in Brazil, it's a real, real tough time. And they're also responsible for a lot of deaths and issues too.
But on the other hand, Trulieve is one of the most exciting companies in cannabis. Kim Rivers is the CEO. She's probably one of the best CEOs in cannabis. They dominate the Florida market. So you mentioned Miami as being the like the high point of fun right now, which is probably true. And Florida is going off. But here is a company that has, I think, like 80 or something dispensaries in Florida. And cannabis just got legalized in New York.
This is a booming business right now. It's not even comparable to a crappy old commodity.
[INTERPOSING VOICES]
ZACK GUZMAN: We've got to wait and see what New York is going to look like too, because we heard that deal that it supposedly agreed to. And we've heard that in New York before. So we're still waiting to see what happens there. But you're right. Trulieve, Kim's been on the show many times, talking about growth there. I feel like Ryan's probably going to have a better chance in the other matchup when we're talking commodities and energy. So I'm going to advance Trulieve on this one here, Akiko.
AKIKO FUJITA: It feels like we've got a theme going here, guys, because the next matchup also is sort of cannabis against energy. And we're talking about Terrascend versus Energy Transfer. And Ryan, let's start with you on Energy Transfer. This is a stock that's up nearly 30% year to date. We've had a lot of guests on who've talked about just how much upside they see for some of these energy stocks, especially as things start to reopen. What do you like here?
RYAN PAYNE: Well, I like the fact that pipelines, it's like you just pay a toll when you're looking to basically deliver, whether it's natural gas or oil across these pipelines. And it's a very cash flow-intensive business. It's a very cash flow-- the dividends are amazing. It pays 7.8%. You've got a price to earnings ratio, again, so cheap, single digit, five times forward earnings.
And I just have to think, again, we're probably going to use more oil. We're probably going to use more gas. If you look at the emerging markets, the demand-- no matter what they tell you about electric vehicles and solar, all those things are still decades away from being at peak demand. So I think for the next couple of years, the play is going to be fossil fuels. And this is just a great way to play it. It's a great way to collect a lot of cash flow and own assets that are extremely cheap right now and still well below their highs. They're just coming out of a bear market after, like, years.
ROSS GERBER: Well, Ryan, I know Energy Transfer well. It's one of the worst companies in the world. They are destroying the environment at a huge clip. I'm a green investor. So Energy Transfer's literally like the devil.
But on top of it, it's a bad business. But Terrascend is green. And Terrascend is kind of owned by this guy Jason Wilde, who's an amazing operator. They know what they're doing. They're expanding in all the markets in Pennsylvania, New Jersey especially. Missing cannabis is like missing alcohol in 1933. And it's just like, you know, the best opportunity I've seen for the next decade out there versus oil, which won't even be relevant in a decade. So I think this is a no-brainer.
RYAN PAYNE: Yeah, I know. I love 60 years of profits.
[BUZZER]
ZACK GUZMAN: We had Bill Gross earlier. He was talking a lot about--
RYAN PAYNE: What I'm gathering here, Ross, is we're just going to sit in Vegas. We're going to smoke a lot of weed. And we're just going to--
ROSS GERBER: That's right, man.
RYAN PAYNE: That's the future.
ROSS GERBER: You're absolutely right. In our EV cars, we're going to smoke weed on our way, on our autonomous driving to Vegas. I'm doing it next week.
ZACK GUZMAN: To Ryan's one point, though, if there was one cannabis stock that got hit hard in the last couple of weeks, the selloff, it was Terrascend more so than maybe some of the other competitors. But Akiko, this one's your call.
AKIKO FUJITA: Yeah, I mean, I think you nailed it right there. Terrascend's been under some pressure. Energy, more than anything, I'm going to say I'm going to give this one to Energy or ET because I want to see another matchup between cannabis and energy instead of cannabis versus cannabis.
[INTERPOSING VOICES]
I'm taking energy transfer here. I am curious about the final matchup though. And I'll let you talk about that one, Zack.
ZACK GUZMAN: Well, the final matchup is one that I think we've all been waiting for because it's a couple of different ways to play the tech space and video. We were talking about chips and the chip shortage earlier in the show. But Cisco Systems, one of those legacy tech companies as well.
Ross, you have Nvidia as one of your picks here. Talk to us about why you think now's the time to play chip space.
ROSS GERBER: You know, I gave you a lot of good picks on this game here. So if your viewers are paying attention and build a portfolio around this, I'd really like to compare both in a year and see how we do. But Nvidia is probably one of the best-positioned companies in America today. Everything they're doing is working. And they're profiting from some of the biggest themes in technology today, whether it's crypto, AI, autonomous driving, and most importantly, gaming. Nvidia's dominating. And that's not even talking about it if this ARM deal goes through.
So we're looking at a chip shortage. And here's a company that dominates in chips. I know gamers who are hiding in the back alleys with thousands of dollars in cash just to buy chips from Nvidia on the black market because they want them so bad. So I think the stock goes higher.
RYAN PAYNE: Again, way to play something that's been priced in for a very long time now. Let's just buy the winners of the last decade as opposed to the winners of the next decade. And that's why--
ROSS GERBER: Come on, you have the winners from the '80s. You have the winners from, like, five decades ago.
RYAN PAYNE: What goes around comes around. Come on, brother.
And that's why I like Cisco because if you're going to buy tech, you got to buy old school tech, not new school tech. And all those software stocks and stocks, essentially, that Ross likes here are basically in the cloud. And the cloud is backed by routers, switches, all these old, boring things, hardware. And Cisco is going to benefit as its capital expenditure goes up at the end of this year into next year.
So I think again, buying something cheap, 16 times forward earnings. You got almost a 3% dividend, getting paid while you wait. You've got to go old school tech versus new school tech, Cisco.
ZACK GUZMAN: Well, Ross, to your point, there are a lot of good picks in this tournament, which is why we're profiling these picks. But it's also tricky to pick winners. And in this one, I suppose if we are going to be talking about the value trade here, I'm going to give it up-- we haven't had very many upsets in this bracket. So I'm going to advance Cisco Systems just because I do like what I heard. I do like what I heard. But Akiko, I think that means that we have a matchup here between Ross's own picks in the top of the bracket.
AKIKO FUJITA: Yeah, I mean, Ross, you were talking about cannabis and Vegas. This is either a dream matchup or sort of a terrifying thought. But MGM and Trulieve, which one are you going to pick? These are both your stocks in this matchup. Just MGM get the upper hand, especially because there's more upside with now capacity in Vegas at 50%, potentially increasing even more down the line?
ROSS GERBER: Right. And that's the one difference. So I am buying both of these stocks currently. But I would argue on the short term, Vegas has a big pop coming because what we're seeing in room rates and what we're seeing with March Madness betting is huge. And that's like right now, where Trulieve is really a longer-term play of just consistent growth.
We expect a big pop in MGM's business over the next six months. So I'm going to pick MGM. And it's also just a safer investment as far as a bigger, well-established company.
AKIKO FUJITA: Ryan, I put you in the uncomfortable position again of picking one of Ross's stocks.
ROSS GERBER: Yeah, you got to pick a growth stock, buddy.
RYAN PAYNE: Well, first off, I mean, this is like-- I just have to argue with you just to argue with you. So I'll have to go with Trulieve, even though I think, again, that cannabis-- all this good news is priced in for years to come. But if it's between smoking weed and gambling, I think Americans just love their weed. And now that we're having legalization across America, we're just going to celebrate. And Trulieve is going to benefit even more than going to casinos and gambling. I guess that's the only thesis I can--
ROSS GERBER: I can't argue against you, Ryan. That was your best argument, buddy.
AKIKO FUJITA: I mean, it seems like we've got both of you agreeing on Trulieve. So that seems to-- I mean, you made that decision easy for me. We'll advance Trulieve.
RYAN PAYNE: Yeah. Where's my weed pen now? I'm going to celebrate.
ZACK GUZMAN: I didn't expect that to be coming here. But now we've got the opposite here in Ryan's picks going up against each other, right? We've got Cisco Systems and Energy Transfer. Talk to me about which one you want to pick here because it's going to be going up against Ross' pick in the next round. So I might even just let you choose here.
RYAN PAYNE: Who's going first?
ZACK GUZMAN: You can. Talk to me about which one you want here.
RYAN PAYNE: All right. As it should be, as it should be. No, definitely, Energy Partners is 100% the place to be. I mean, I think the most sensitive to global demand is going to be oil. And I just think oil is going up much further from here. It's so dirt cheap. You're getting paid so well.
The pipelines just got demolished over the course of the last couple of years. They just restructured their cost. Their cash flow is so attractive. I mean, if you could buy anything right now, if we could blindly just buy anything, it would be Energy Partners. And then we can come back a year from now, and we can basically applaud all my great picks. And I'll try not to rub it in, Ross, because I'm a gentleman.
ROSS GERBER: Well, you know, Ryan, I'm going to have to tell you, you haven't read the news about Biden's new Clean Energy Bill. But it's his goal to put these companies out of business. I don't know if you know that.
So companies like Energy Transfer are going to have serious environmental reviews under EPA. And if you remember Dapple, they actually abused the Native American population horribly. And that should come back and haunt them at some point under the Biden administration as well. So ET's got risks that are very specific to how bad of a business they run.
Cisco, on the other hand, falls into my category of interesting stocks like Intel that could make a nice rebound because they have the depth of their business. They have very strong management in theory. And they've got great financials to grow their businesses if they're smart. So I kind of like Cisco, actually, as a pick.
ZACK GUZMAN: It's weird to hear you kind of compliment each other.
RYAN PAYNE: Insightful.
AKIKO FUJITA: The last two rounds, you're right, they've been complimentary. I think you've convinced me, Ross. I think we're going to have to give this one to Cisco, largely because it does seem like the regulatory headwinds are really forming for the energy sector as a whole. While we might see a short-term pop because of the reopenings, it feels like--
RYAN PAYNE: It only limits supply, guys. Only limits supply. Pushes prices higher.
ROSS GERBER: There's plenty of oil. There's plenty of oil, Ryan. There's so much oil, they don't know what to do with it. They just stopped pumping it.
ZACK GUZMAN: I think, Akiko, we've got to cut these guys off. These guys here-- these guys have delivered us-- actually, in all seriousness, we've got to thank you guys for coming on here because I did enjoy the way that we've battled in this bracket to get down to our Final Four, which now actually has some interesting picks, Disney and Tesla and Trulieve and Cisco. We got a little streaming, got a little EVs, got a little weed, and some old school legacy tech there as well.
We'll be breaking it down next week in our Final Four edition of Stock Madness. But for now, I want to thank you both for coming on here, Ross Gerber and Ryan Payne. Thanks again for another exciting round of Stock Madness here on "Yahoo Finance Live."
