Travis Hoium: Lou, computers have been really running the market for quite a while. Oil is something we talked about six months ago, and it hasn’t turned out to be a huge deal. Is this a huge deal, or is this just the day-to-day volatility that we always see in the market?
Lou Whiteman: Oil has spiked to levels that are still below June 24th prices, just to give some perspective here. A lot of this is headline writing, and a lot of this is ignore the noise. I don’t think we should overread into anything. With all respect, I would be shocked if investors were really worried that oil will change the Fed’s interest rate.
Travis Hoium: A couple of drops in the stock market, and it seems like the policy decisions turn pretty quick.
Lou Whiteman: Well, I think what’s probably going on is uncertainty, plus that, yes, if Iran is back on, then the already fragile consumer could become further stressed, which is a much bigger deal than interest rate. There is thought processes here. But look, we’re up 9% for the year, Nasdaq is up more than that. We are doing just fine. This is normal; we’re coming into earning season. Look, there’s a real risk that the market will be green by the time anyone hears this podcast, it’s so important not to just overthink any one day. In the early days of Twitter, I made a little bot that just said every day, the market is either up or down, and it just pulled the top headline on Yahoo Entertainment. That’s the reason why. Every day, it said stocks fall on Taylor Swift releasing a new album. That to me made more sense than most of the headlines I see explaining why stocks move on any given day.
Travis Hoium: Lou, I wanted to get your thoughts on a dynamic that I think I see in the market that may or may not be confirmed. We’ll know this in hindsight. But it seems like when I started investing in the ’90s, you can go back to all the way back to the Great Depression, and things were relatively correlated. I learned about this in business school. You maybe want to have some uncorrelated stocks, but a lot of stocks were correlated, and so you would have the market is up. Almost everything is up, and over time, your winners would be the ones that are up a little bit more than your losers. But there wasn’t this massive segment of the market that was inversely correlated, as we would say, with the market.
Now we get to this time where in 2022, when a lot of tech stocks crashed, if you were in industrials or energy, you may not even noticed. Some segments of the market were feeling a ton of pain, and some weren’t feeling anything. Now we get to this year. If you were invested in software stocks, some of the best software companies over the past 10, 20 years, you were just getting crushed early in 2026. But if you were invested in neoclouds, in memory, you’re crushing the market. Hundred percent gains aren’t out of the ordinary there. Now we get to this moment where just in the past couple of weeks, I was looking at Micron and Sandisk, two of the hottest stocks. If you’re invested in those stocks, they’re down 21% and 31% respectively from their highs. That can be really painful. Despite the fact that a lot of stocks are up. Are we in a world where the small segments of the market are going to move in really big ways as these themes or momentum goes in and out? Is that a new dynamic that we’re going to see going forward or is this just where we are in 2026 until we get some bigger move that would be caused by massive growth or recession or something like that?
Lou Whiteman: I think that what has changed is your ability to monitor these things. There’s just so many better tools. I think that what you just described as a normal functioning market. Usually, some things are up them, some things are down. There’s always leaders and laggards. It’s really only in a true recession or true downturn, and 2022 was not a true downturn. But if you go back to 2008 or something like, everything was down. It was just the proportion of how much it was down. Look, to this point, would it surprise you to hear that only two sectors of the market are actually in the red this year, consumer discretionary and communications? In fact, tech is the second-highest performing sector so far this year. Double digits, gains, energy, tech, industrials, real estate, materials, consumer staples. We have so many more tools to monitor these things. We look at these things, and again, we are so focused on the short term. Yes, it is technically true that Micron is in a bear market because it’s down more than 20% from its high. It’s also up 200% year to date.
Travis Hoium: Yes.
Lou Whiteman: I want all of my bear markets to involve 200% gains. That’s after the 20% fall. Again, the lesson, I think is, again, we are somewhat overwhelmed by data. There are just things that we couldn’t notice in 1984, that we can notice now. Also, we are so fixated on today.
Travis Hoium: Rachel, is that the way that you say things? Well, what we’re doing? We’re looking at individual stocks and going, hey, this is where the deals are, not just by the market or the Nasdaq-100. But where are those individual opportunities? That maybe brings a little bit of this volatility.
Rachel Warren: I definitely think that’s part of it. I think it’s also important to remember that the type of stocks that were moving the market, 20 years ago, it’s a very different market today. A lot of those biggest stocks are the ones with extreme valuation multiples, it doesn’t mean there aren’t quality underlying businesses there, it doesn’t mean there aren’t real earnings and cash generation power there. But these tend to be extremely volatile businesses that are driving some of the intraday movements in the market. It doesn’t mean that they can’t be great additions to a long-term portfolio. But these are not the blue chip stocks of yesteryear that used to drive those day-to-day market movements.
I think it’s important to understand where that volatility is coming from. Then, of course, assess individually the stocks that you own, the stocks that you want to buy. Company may be down day-to-day, still up significantly like Micron over the next year. Up to you to decide whether that’s a good addition to your portfolio. But as always, I think there are quality businesses that remain amidst the volatility and understanding where that value adds to your portfolio, I think is really key to look beyond the day-to-day red and green and see what drives you closer to your long-term financial goals.
Travis Hoium: A lot of these things are why we’re long-term investors. Keeping your head on straight is often the hardest thing that we do as investors and just being able to focus on 3, 5, 10 years from now, what is going to be a value buying and just hang on for dear life is often the best thing to do. When we come back, we’re going to talk about some new cheap EVs coming to the market. You’re listening to Motley Fool Hidden Gems Investing.
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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. One of the topics that I think has been fascinating over the past couple of years is what’s going on with the EV market. We have seen over the past few weeks, maybe a month or two, a couple of lower-cost electric vehicles coming to the market. This week, we had Fiat introduce the Topolino. I’m probably saying that in American. I’m sure it sounds different.
Lou Whiteman: Topolino.
Travis Hoium: You’re right, yes. A $14,000, 46-mile range vehicle. Lou, one of my favorite things about this is the image that they have at the top of their page. It doesn’t have a door, it has a rope holding you in the car, I’m sure my kids would love that. But is this the vehicle that may actually prove that there is a lower end for these EVs? Because some of the more expensive ones are doing okay. Do we have a market for a 14, $15,000 electric vehicle?
Lou Whiteman: Do we have a market? Let’s get to that question first, then we’ll get to the Topolino. Because fortunes have been lost, betting that Americans will make practical same choices when it comes to purchasing vehicles. This won’t be different. There’s a reason why this market doesn’t exist. It’s because no one was buying the options they had. In the case of Fiat, this is a golf cart, this is not a vehicle. It’s fine to have a rope instead of a door when you are capped out at 19 miles per hour. It isn’t even road legal, it will come. You can get a kit that makes it road legal and get you up to 25 miles per hour, you’re spending 14 and 15.
Travis Hoium: Then why is Fiat making this? Fiat, by the way, owned by Stellantis. This is a pretty big automaker.
Lou Whiteman: Marketing. I will tell you, I don’t know how it is up there, but down here, there is almost a golf cart per driveway. I really think that they are chasing the country club, take the kids to the pool market here. I really believe that. Maybe you can squint and see a business for Slate, the truck. But them, look, even Honda abandoned the Fit. Why did they do that? It’s one thing to say, Detroit’s just stupid. But Honda’s not stupid. They abandoned the Fit because Americans didn’t want to buy it. The Slate looks intriguing, but you can get entry-level Ford Maverick for 28,145 bucks. Slate says they’re going to be 25 grand. Maverick actually has features, and it’s actually in production, so we know the cost to build. There is a very narrow market for Slate to succeed, if any, and it feels like the easiest way to go here would be Ford can just, I don’t know, knock a few thousand off the Maverick if they see Slate actually generating our profits. The interesting thing here is, I would love for this to be a practical vehicle and a market that exists, but I live in the suburbs, we have kids. This vehicle fits two people, it completely [inaudible].
Travis Hoium: Going 25 miles an hour.
Lou Whiteman: It’s like us buying a moped that the kids can’t even ride on. Rachel, do you have any different view of this? Is there some market for some of these less expensive vehicles in a world where Lou’s right, General Motors, Ford, all of these big companies, they’re making lots of money, but they’re not making money on small vehicles. They’re making money selling giant trucks and SUVs. Guess what? That’s what I see driving around even if there’s just one person.
Rachel Warren: I think that there is a place in the market for a low-cost EV. I just don’t think it looks like either of these offerings that we’re discussing today. I don’t think that the practical utility is there and what we are seeing being brought to market, but I do think that there are consumers that would gravitate towards a practical, accessible, low-cost EV. It doesn’t mean a cheaper version of a Tesla. I think it would be a rewritten definition of what a lot of these vehicles are. We saw how Detroit early EV companies abandoned the entry-level buyers. They moved upmarket to chase a lot of the higher profit margins. Some might say that there’s a benefit to that. Obviously, the vacuum grew wider with the elimination of the federal EV tax credit.
It’s interesting. Fiat’s Topolino, it targets micromobility, like Lou was talking about. It’s very much built for short city trips, gated communities. Maybe you’re going to visit your neighbor on one side of the community to the other. Definitely not built for the highway. Now, Slate, backed by Amazon, their $25,000 electric truck, it has this bare-bones simplicity. They’ve swapped out the dashboard screens for simple phone mount, the manual roll-down windows. What’s interesting about Slate’s model is they claim the base truck will make a profit on Day 1. I think that remains to be seen. But they are basically selling this bare bones frame. Then they have upsells that customers can access through something like almost 200 customizable modular accessories.
Lou Whiteman: That is the point, it’s a blank Slate.
Rachel Warren: It’s basically a blank Slate. No pun intended. I think if and when we see mass adoption of average consumers buying electric vehicles. I don’t think it’s going to be won by adding more luxury technology. I don’t think it’s going to be won by little gadget-centric cars. I think there needs to be basic, affordable transportation that the mass market can access, and I don’t think we’re seeing that yet.
Travis Hoium: Just for disclosure here, it is Jeff Bezos who has invested in Slate. Amazon does not have a stake in Slate. That is a personal investment that Bezos has made. But Amazon invested in Rivian, so they all tie together. Lou.
Lou Whiteman: One thing here, and it’s the bugaboo, is there is a huge engineering challenge. Batteries are really heavy and take a lot of space, which is why it is hard. We’ve seen it done in some ways, but normally, these are the cars with very little range. Again, it’s really hard to get Americans to compromise when they buy vehicles, and even 25 grand is a lot of money. If you’re going to spend 25 grand, hey, you’re not spending 40, but you probably want something that checks all the boxes. It’s just a really hard problem to solve. For all my joking, I’m going to make a bold prediction right now. The Topolino will outsell the Slate. I genuinely believe that. For one, a new Yamaha golf car will run you back 20 grand, so it’s not bad. For two, if you’ve ever been to the villages outside of Orlando or a place like that, everybody has a pimped-out golf cart. They have a Rolls-Royce front seat.
Travis Hoium: Yes, this would fit very well.
Lou Whiteman: This is the market. It has nothing to do with electric vehicle revolutions and stuff like that, but there is actually, I think, a bigger market for this than I would like to admit. I think it will outsell the Slate, but I don’t think either of them is going to solve the U.S. mobility issue.
Travis Hoium: I will say it here, we’ll outsell the Slate if we see 16-year-olds with a rope holding them in driving around town. That’s how you know it’s popular. I don’t know, I think it would be fun when I was younger. But we’ll see how this goes. When we come back, we are going to get to a listener question. You’re listening to Motley Fool Hidden Gems Investing.
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Travis Hoium: Welcome back to Motley Fool Hidden Gems Investing. We want you to be involved in the conversation so you can send your questions to us at podcast@fool.com. One of the questions that we got is from Bruce in Daytona Beach, Florida, wants to know about American Tower, ticker symbol is AMT. Couple of concerns, is the debt manageable? Rachel, I want you to tackle that. Then I want to talk about this satellite technology. Is that going to erode or disrupt the traditional land-based tower business? But what do you think about the debt, Rachel?
Rachel Warren: In terms of the debt, the short answer is yes, I think it’s manageable, and part of that’s because of the unique real estate model here. American Tower, the global Cell Tower, Real Estate Investment Trust or REIT. As of the end of Q1, they carried about $45 billion in debt. That might sound a bit terrifying on paper, but the debt is backed by very sticky multi year leasing contracts with the Telecom Giants. Think Verizon, AT&T, T-Mobile. There’s others. These are not carriers that are going to pack up and leave these partnerships. It does give American Tower a very predictable, high-margin cash flows and profits that quite easily cover their interest payments. That hopefully sheds a little bit of light on how that model works.
Travis Hoium: The other thing they’ve been adding is data centers. Closer to customers, these mini little data centers that just sit at the bottom of the tower. As you look at artificial intelligence, where that goes in the future, that could be another growth avenue for them. Lou, let’s talk a little bit about satellites. We’ve been hearing a lot about satellites, all these use cases, one of the biggest use cases today is telecommunications. Is this going to disrupt American Tower’s business? By that, is it going to disrupt the Verizons and the AT&Ts and the T-Mobiles of the world?
Lou Whiteman: Real quick on the debt, one thing to note is, it’s manageable, but in a higher for longer because they roll so much over. As an investor, it could impact returns and profitability because they’re probably paying more interest than they thought. It’s not going to capsize them. Can satellites capsize? That’s the real question. Look, if American Tower didn’t exist today, I think I could make an argument that you wouldn’t need to spend all that money on infrastructure because of satellites. I don’t know if I’d win that argument. I still don’t have physics on my side.
But look, there’s a lot of costs with building a terrestrial network. The thing is that cost is done, and we have that, and it works. Look, as far as replacing terrestrial with satellite, latency is always going to get in the way. The signal has to travel longer. There’s going to be delays. You can do things with technology, but for when there is a tower nearby, this is never a good option. It is always going to be a supplement to that. Here’s where it could play in again. Maybe there isn’t as much growth. Maybe there isn’t a need to put towers in all the areas where it doesn’t feel like we’re going to ever put towers anyway, these rural areas. But any hope that the bull case is we’re going to have a tower on every acre, on the top of every mountain in Colorado or something, that goes away, so the growth story goes away. But same thing for the Verizons, T-Mobiles. This is a good partner, this is not a replacement. The physics doesn’t work. It’s a harder technology to get right.
Travis Hoium: The other thing to understand is the economics of some of these satellite deals. If you look at AST SpaceMobile, they have revenue share deals with the partners that actually own the spectrum. Verizon owns the spectrum to reach your Verizon phone. AST can’t just come in and replace them. They’ve got to license that spectrum from them.
Lou Whiteman: These satellites are built in a way that you do when you need hundreds and hundreds of them. They have a life, maybe three, five years tops. The capex cycle is going to be unending for them. With American Tower, you don’t really see that, you see some maintenance. Any thought that over time, the cost can come down, I just don’t see it.
Travis Hoium: Great question, though. One of those businesses that I think is important to understand and we’ll see how disruptive satellites can be. I think this is one of those areas where I could see connecting my watch to a satellite in the future, or a vehicle maybe that makes more sense. But not necessarily your phone, at least on a day-to-day basis.
As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don’t buy or sell stocks based solely on what you hear. All personal finance content follows The Motley Fool’s editorial standards. It’s not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show. For Lou Whiteman, Rachel Warren, and Dan Boyd, behind the glass, I’m Travis Hoium. Thanks for listening. We’ll see you here tomorrow.
Lou Whiteman has no position in any of the stocks mentioned. Rachel Warren has positions in Amazon. Travis Hoium has the following options: long December 2027 $20 puts on AST SpaceMobile and long December 2027 $5 puts on Rivian Automotive. The Motley Fool has positions in and recommends AST SpaceMobile, Amazon, American Tower, and Micron Technology. The Motley Fool recommends General Motors, Stellantis, and T-Mobile US. The Motley Fool has a disclosure policy.
Oil Pulls the Market Lower Again was originally published by The Motley Fool
