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Motley Fool's Barker on Stocks: Likes Tractor Supply (Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day at Bloomberg
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  Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters.
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  Speaker 1: I'm Charlie Plotta. Move higher today for the SMP five
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  Speaker 1: hundred index up two tens of one percent. Gains by
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  Speaker 1: healthcare and technology shares offsetting disappointing trade data from China.
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  Speaker 1: Prospects for higher US interest rates, dragging commodities lower, Gold
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  Speaker 1: down twenty nine dollars the ounce tumbling two point three
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  Speaker 1: percent to twelve sixty four forty Crude oil down two
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  Speaker 1: point eight percent, dropping a dollar twenty three of barrel
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  Speaker 1: forty three forty three. Right now on West Texas Intermediate ten,
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  Speaker 1: you're up seven thirty seconds, had yield one point seven
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  Speaker 1: five percent. SMP up three to two thousand sixty a
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  Speaker 1: gain of two tenths of one percent. Down, Industrials down
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  Speaker 1: sixteen a drop of point one percent as stack of
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  Speaker 1: twenty one points, a gain of four tenths up one percent.
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  Speaker 1: I'm Charlie Pelleton. That's a bloom Bird Business Flash. Thank you,
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  Speaker 1: Charlie Pellet. Now it's time for the e t F Report.
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  Speaker 1: access the opportunities. Let's turn now to our et F
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  Speaker 1: report and Catherine Cowdery it's the perfect storm for covered
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  Speaker 1: call exchange traded funds. That's a word from Bloomberg Intelligence
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  Speaker 1: analyst Eric bel tunis. We have this environment this year
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  Speaker 1: where the market is kind of flat sideways UM. People
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  Speaker 1: are also concerned about altility UM, and they need income. Still,
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  Speaker 1: remember rates are low. Bell Tuna says, that's where covered
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  Speaker 1: call e t f s come. In his example, the
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  Speaker 1: power Shares SMP five thundered by Right Portfolio, which yields
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  Speaker 1: five point three percent. This thing U basically holds the SMP,
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  Speaker 1: but then it rates call options at the money on
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  Speaker 1: the SMP index. What that effectively means is that if
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  Speaker 1: stocks rise above where they are now, it has to
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  Speaker 1: pay pay somebody the right to buy the stock at
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  Speaker 1: that price. But if it doesn't, then basically the fund
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  Speaker 1: gets to keep the income from selling that call option.
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  Speaker 1: Bell Tuna says this is not an e t F
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  Speaker 1: to buy and hold if an investor believes the SMP
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  Speaker 1: five hundred will rally. Other e t s and this
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  Speaker 1: category include one from Horizons and another that focuses on
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  Speaker 1: the NASDAC, the recon Capital NASTAC one covered call a
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  Speaker 1: t F. That's your Bloomberg at F report. I'm Catherine Calorie.
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  Speaker 1: You're listening to Taking Stock with pim Box and Kathleen
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  Speaker 1: Hayes on Bloomberg Radio. Where do you invest your money
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  Speaker 1: if you are looking at weaker than estimated corporate earnings,
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  Speaker 1: or perhaps you believe that the US dollar is going
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  Speaker 1: to muddle along and not change very much in value
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  Speaker 1: this year, and perhaps oil prices will remain around forty
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  Speaker 1: five dollars barrel. What do you do? Well? One thing
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  Speaker 1: is you call in Bill Barker, his co portfolio manager
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  Speaker 1: for Motley Full Asset Management, and he's based in Alexandria, Virginia,
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  Speaker 1: but he joins us here in our studio. Thank you
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  Speaker 1: very much, real great to see, great to be here.
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  Speaker 1: So give us the strategy. I was reading the list
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  Speaker 1: of some of the companies in the in the fund
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  Speaker 1: t m F g X is the symbol, the Great
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  Speaker 1: America Fund, Correct and Texas Roadhouse Tractor Supply. There's got
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  Speaker 1: to be a theme to all this, and go ahead,
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  Speaker 1: tell us what it is. Well, it's a small and
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  Speaker 1: MidCap based fund, and the theme is American companies and
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  Speaker 1: within the small MidCap space, what has been working particularly
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  Speaker 1: well is companies that are really concentrated on US operations
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  Speaker 1: and and don't have exposure to foreign currencies and don't
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  Speaker 1: have particularly have exposure too of all the oil prices,
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  Speaker 1: but may have exposure on the good side, which is
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  Speaker 1: the story for one of our larger holdings and is
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  Speaker 1: making news today. Drew Industries is up ten percent on
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  Speaker 1: on what has been continuing good news for the RV industry.
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  Speaker 1: Tell people how you discovered Drew Industries. How that came
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  Speaker 1: to be in the portfolio. Well, the Molly Full, as
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  Speaker 1: some people may know, is largely a publishing company, and
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  Speaker 1: I was working on a newsletter. H This is over
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  Speaker 1: eleven years ago. Uh. Tom Gardner was the manager of
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  Speaker 1: the newsletter and had found Drew Industries is just a
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  Speaker 1: a very surprisingly small, undiscovered company that had had done
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  Speaker 1: very well over the preceding ten years and was operating
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  Speaker 1: in a little followed segment that being uh, not even
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  Speaker 1: r vs, but components to RV's the doors, slideouts windows. Uh,
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  Speaker 1: really something that would gather no attention. And at the
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  Speaker 1: time it was a signal fagantly less than one billion
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  Speaker 1: dollar market cap company. Um, so we've been following it
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  Speaker 1: for over a decade and uh happily so. But have
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  Speaker 1: you owned it for that period of time? I mean,
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  Speaker 1: when did you decide? Okay, it's somewhere in some file.
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  Speaker 1: So when we started the mutual fund, the Great America Fund,
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  Speaker 1: we were this was six years ago now, and we
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  Speaker 1: were working with for the most part, ideas and companies
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  Speaker 1: that we had a longstanding knowledge of. And so it
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  Speaker 1: was one of our holdings from day one and we've
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  Speaker 1: added to it, went appropriate and never sold it and
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  Speaker 1: and it's uh, it's just been today. Is is sort
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  Speaker 1: of unusual in you know, a ten percent move for
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  Speaker 1: this company is not not typical. So it announced earnings
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  Speaker 1: this morning, I think earnings per share. We're up over
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  Speaker 1: seventy from last year, which is not the way the
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  Speaker 1: industry grows. The the the actual RV industry is growing
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  Speaker 1: about eleven percent and right now it is and the
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  Speaker 1: company is growing a little bit faster than that around
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  Speaker 1: for this quarter a very good quarter for macro economic
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  Speaker 1: reasons that I think everybody can gas, which is interest
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  Speaker 1: rates are low, UH, jobs are good, the unemployment rate
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  Speaker 1: is low UH, and gas is very affordable. And even
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  Speaker 1: though the average RV owner doesn't drive it as much
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  Speaker 1: as he or she thinks they're going to when they buy, UH,
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  Speaker 1: the the trigger of lower gas does help sales quite
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  Speaker 1: a bit. As far as Drew industry goes, I just
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  Speaker 1: want to note that it's based in Elkhart, Indiana, pays
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  Speaker 1: a dividend of one point seven percent. Stock has advanced
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  Speaker 1: about sixteen percent so far this year. UH. The symbol
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  Speaker 1: is a d W and stock is up five dollars
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  Speaker 1: seven cents trading at seventy dollars fifty nine. Sense go
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  Speaker 1: back to that theme for just a second and maybe
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  Speaker 1: use another holding to then underscored in terms of how
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  Speaker 1: you decide what goes in what goes out, particularly now
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  Speaker 1: as I prefaced all of these external events that may
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  Speaker 1: leave investors confused. Okay, well, what I have found is
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  Speaker 1: that a very standard UH way for me to look
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  Speaker 1: for stocks is things which have a long history of performance.
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  Speaker 1: And may seem a little bit expensive based on current
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  Speaker 1: price to earnings models, not that expensive, but you look
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  Speaker 1: at them and say, well, this company is great. I
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  Speaker 1: just hope it comes back a little bit, and they
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  Speaker 1: don't always do that. And uh an example of that
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  Speaker 1: would be tract Or Supply, which is a company, UH
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  Speaker 1: you may know. UH It's it's a rural lifestyle retailer
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  Speaker 1: and is one of the most phenomenal performing stocks in
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  Speaker 1: the market over the last fifteen twenty years. And it's
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  Speaker 1: still not all that well known. But it does a
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  Speaker 1: number of different things well which I like to see.
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  Speaker 1: One is it is uh growing its store count but
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  Speaker 1: at a rational basis. Right now, it's got about fred
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  Speaker 1: stores but adds about a hundred a year, so it's
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  Speaker 1: growing store count by about six per cents maybe seven
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  Speaker 1: percent a year, and the same store sales come in
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  Speaker 1: low to mid single digits positive almost every quarter. Weather
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  Speaker 1: can affect that, of course on a quarterly basis, but
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  Speaker 1: in the most recent quarter, I think the same store
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  Speaker 1: sales are up about four or five and then it
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  Speaker 1: improves margins as well. So you've got the store count increasing,
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  Speaker 1: you've got the actual sales at each store increasing, a
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  Speaker 1: little bit of a share by back, and a little
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  Speaker 1: bit of margin improvement. You had all those things up together,
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  Speaker 1: it gets about annual growth and earnings per share. So
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  Speaker 1: I'm attracted to that company in particular because it has
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  Speaker 1: no exposure to foreign markets and it's uh. You know,
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  Speaker 1: sometimes you you do well by a week dollars, sometimes
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  Speaker 1: you do well by a strong dollar. But it's hard
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  Speaker 1: to decipher for all companies whether they're relying on currency
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  Speaker 1: weakness UH in reality or as an excuse. And Tractors
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  Speaker 1: Supply really doesn't have have that excuse. In determining what
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  Speaker 1: goes in and what goes out of the portfolio. You
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  Speaker 1: gotta then decide when you're gonna buy, when you're gonna sell.
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  Speaker 1: Uh do You typically look for big down days and
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  Speaker 1: then reassess what's the plan you So it's a it's
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  Speaker 1: a buy and hold strategy. And both of those companies
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  Speaker 1: are that I've talked about are ones that have been
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  Speaker 1: in the portfolio since day one. So we'll add to
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  Speaker 1: them on weakness on occasion, and we have sold things
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  Speaker 1: when they've exceeded our fair evaluation by a comfortable amount.
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  Speaker 1: But for the most part, we're really not trading a lot.
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  Speaker 1: We're trying to keep well. We we we do keep portfolio
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  Speaker 1: turnover at or below, so you know, we're not gun
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  Speaker 1: slingers in terms of trying to time the market. These
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  Speaker 1: are companies that I think have been very good performers
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  Speaker 1: for five seven years and will continue to be. I
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  Speaker 1: note also that Marquel Court is another company in the
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  Speaker 1: portfolio that many people may not be familiar with. Seconds
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  Speaker 1: that seconds on that is would be that, oh, it's
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  Speaker 1: it's a mini Berkshire. That that's the label that it
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  Speaker 1: and numerous other companies have been tagged with. But it's
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  Speaker 1: an insure. It's a great capital allocator. Uh. And that's
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  Speaker 1: another thing that all these companies do, is they allocate capital. Well,
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  Speaker 1: thank you very much for helping us allocate our time. Well,
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  Speaker 1: thank you to you, Bill Barker. He is a co
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  Speaker 1: portfolio manager Motley Fool Asset Management. They're based in Alexandria, Virginia.
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  Speaker 1: The Motley Fool Independence Fund f o O l X
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  Speaker 1: fule X and the America Fun t m f g X.
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  Speaker 1: You're listening to Taking Stock Ontoberg Radio