Ian Wyatt | Travel, Real Estate, Ecommerce & More: How Industries Will Change Post-COVID (June 2020 Update)

Ian Wyatt  16:48  

Yeah, so from a real estate standpoint, the data that I’ve seen related to residential is that the markets are quite strong. You know, we essentially had, you know, nobody was conducting purchases or sales of homes for two months, the buyers didn’t go away, they’re all now looking for homes now. And the same with the sellers, they couldn’t sell. And now they’re now they are if they want to. And so, you know, I think that there’s some pent up demand and the market was already really tight to begin with the fact that the Fed has now lowered interest rates, again, makes buying a home more attractive now than just about any time in history. And, you know, I think we’re also starting to see a few shifts as a result of COVID-19, including, you know, younger people who have never owned a home wanting to enter the market and buy a home for the first time. I think we’re also starting to see some shifts of people moving out of cities and into the suburbs where they have more space. So I think it’s leading some changes there. From an investor’s standpoint, though, you know, most of the real estate investments that I would consider our what we call real estate investment trusts, also known as Rietz and these are publicly traded company That invest in, you know, they can invest in apartment buildings, they can invest in hotels, they can invest in retail space, they can rent an office space. And, you know, I think that those types of businesses may start to represent some decent bargains at these levels. You know, one in particular that I was looking at recently was called Vornado. They’re a big real estate investment trust with office space. They’re a big, big player in the New York market and, you know, their stock is down, you know, 4040 42% year to date. So, you know, when you see a stock trading at a 42% discount to where it was at the beginning of the year, and you say, Well, I don’t think New York real estate just dropped in value by 40%. Clearly, there are going to be some challenges. As you know, tenants defer rent payments, or, you know, decide to not renew their lease or go out of business. But one of the things I was thinking about related to offer This piece in particular was, you know, some companies are going to close their offices and go 100% remote, other companies are going to go out of business, but those that do have office space are going to need more of it. And the reason is because with social distancing in the office space, you know, all of these companies, which have for years been shrinking the amount of square foot footage needed per person, all of a sudden, you can’t be elbow to elbow with your coworker, you can’t put 20 people in a room that’s, you know, 400 square feet, you just can’t do that and meet the guidelines for social distancing. So at least for the next couple of years, I think it’s going to lead to, you know, the companies that need office space and need people in the office, they’re going to need more of the space. And obviously, other companies are going to be getting rid of space. So I don’t know exactly how that falls out. But when I see a real estate investment trust rating at 40 50% below its value just six months ago. I don’t think the price of the real estate has dropped by 40 or 50%. And so there may be some bargains there and those companies also tend to pay Pretty decent dividends for investors along the way.

John Corcoran  20:03  

Now, six months ago, any discussion about real estate, especially office space would have to bring in work, which was in the news a lot in late 2019. More generally with CO working, how do you see that industry being affected by the changes in real estate?

Ian Wyatt  20:22  

Well, I think I think it presents some real challenges. You know, I think on the one hand, you know, people, like a lot of people like working from offices, right. And the whole reason why co-working spaces started in the first place was because you had people who said, I work remotely whether I’m an independent contractor or work for a company and work outside of the area where they have an office who said, I don’t want to sit in my house all the time. I don’t like being alone with my, you know, spouse and our dog all day long. I want to get out of the house and you know, it’s like Step up above like working in Starbucks. And so I think that that’s going to continue. I mean, people want to be around other people. And people don’t want to be stuck in their home all the time. And that’s why I think we see you know, now, when I go out, you know, a lot of people are out and about doing things even though there’s, you know, the risk of Coronavirus, people are sick of being stuck at home. So, I think that longer term, you know, co-working spaces are going to like any other office space and businesses have to figure out how to adapt their business to the new normal. And, you know, the new normal is probably at least a year and a half or two years, because even once we have a vaccine for COVID-19 is still going to be probably another year before we vaccinated everybody. So you know, even if there’s a vaccine in January of 2021, it’s probably not until 2022. When we can say, Oh, yeah, we can do all those things that we did to like socially distance and have, you know, plastic up in the grocery stores and all those things. We can get rid of all that we’re silly, a couple years away from at least a year and a half. So I think it’s gonna be a challenging business, though, in the near term, because, you know, the companies that are running those co-working spaces did well by putting a lot of people in a small area. And by definition, you can’t fight the Coronavirus having lots of people in a small space.

John Corcoran  22:18  

Yeah, I want to ask you about companies that have benefited from last year. But before we get to that, I want to ask you about one more industry that’s been really impacted, which is travel, travel and hospitality. What are some of your thoughts on the travel and hospitality industry? Now, you know, in 2020?

Ian Wyatt  22:38  

Yeah, you know, I think that the travel industry is certainly been completely destroyed in the near term by this when you look at number of passengers being screened by the TSA number of people going through, you know, big airports like London Heathrow or Chicago O’Hare, you know, the passenger accounts are down over 90%. So it’s clearly very different. difficult time. I was on a call with my employees today. And one of my team members said, you know, you can get a ticket to Paris for a 300 bucks round trip from Burlington, normally that ticket might cost you 1200 bucks. And I said to her, I said, you couldn’t pay me $300 to take the flight. So I wouldn’t do it if you paid me. And, you know, I again, I’m, I’m a young guy, I’m healthy, you have no underlying health conditions, but I’m not that interested in getting on a flight or staying in a hotel. And you know, one of the things to remember is that so much of the US economy is discretionary income. And the people who have the most money in this country and have not only money and time are older people, it’s people over the age of 55. And most people who I talked with who are over the age of 55 are not that excited about the prospect of flying across the country, let alone getting on a cruise ship. live alone. flying to Europe. You know, I was talking with my parents just this weekend, and they said, you know, they were planning on taking a trip to Vietnam next year, that’s not happening. We were planning on going to France in the middle of this year, that’s not happening. And so, you know, plans for older people I think will be delayed in terms of travel. And they represent a big, big portion of not only the market for travel, but also things like restaurants. And a lot of them aren’t just aren’t going to be comfortable going out, especially if they have an underlying health condition. But even so, I mean, I think people who are in their 70s and in good health are hesitant to do some of those things. And so I think that the travel industry itself as a business is going to be really feeling the pain at least until we have a vaccine or some sort of proven therapy that assures that if you get COVID-19 you’re unlikely to die. And you know if even if we have some sort of treatment that wasn’t a wasn’t a vaccine didn’t prevent it. But you said okay, I might get sick. But I’m not gonna die, then I think I think people will start changing their behaviors, but we don’t have that either right now. So I think that what we’ve seen in the stock prices is, you know, again, travel companies got, you know, really beaten up. And I think there was some concern that companies would actually be going out of business. But again, the federal government with bailouts, as well as the fed with providing liquidity, the market has essentially said, we’re not gonna let anybody fail, right. That’s the government’s view right now, when we talk about Congress, as well as the Federal Reserve. Their view is we want to make everybody whole, you know, small business, we want to make you whole we’re gonna provide the payroll protection plan, employees, we want to help you be whole through the payroll protection plan, you get unemployed, we’re gonna make you whole because we’re gonna make sure that your unemployment benefits are bigger than they ever were before and you make more money than he did pre COVID. So the same is true with the travel companies. They’re saying, look, we’re not going to let American Airlines go bankrupt. You know, and so I think that you know, the stocks have obviously rallied off the lows. People who decided to buy it at the exact bottom probably have done pretty well. But again, you know, from an investment standpoint, it’s hard. It’s really hard to analyze and value companies where the revenues have fallen by 90%. And they’re losing billions of dollars a week. How do you value that company? I think it’s really just a speculation. And, you know, I think what we’ve also seen is that there’ve been a lot of people who’ve been stuck at home and all of a sudden, you know, the number of new brokerage accounts has ballooned, right. A lot of people are opening brokerage accounts, saying Norwegian Cruise Lines $4 a share. It used to be 30. Yeah, I’ll buy it. You know, and I think that’s been a very nonchalant attitude towards investing, especially with new investors jumping into the market, and trying to take a ride on some stocks that have been beaten up and you know, and it may have worked right, but then there are other people who I see who are doing the same thing with a company like hurts and hurts is on the brink of bankruptcy. Well You know, it first goes bankrupt by definition, the equity is worth zero. So it may look cheap, it may be down 98% from the highs, maybe fall another hundred percent. You know, so I think it’s an industry that I’m pretty cautious about. You know, there are other industries that I’m more optimistic about. So for example, one that is sort of tangentially related to this, instead of the airlines, you know, one company that I like is called Live Nation. Live Nation is an event promoter. So they run they own Yeah,

John Corcoran  27:33  

they do. They do concerts. I’m really curious why you’re excited about them, because I would think that would be another one. Just last night, I was talking to my wife about that. I was saying I felt I feel bad for concert venues.

Ian Wyatt  27:45  

Yeah, I think that they’ll come back. You know, in 2021 and 2022. I think, again, I think the market to me is what the market is saying overall is we don’t care about what’s happening now. Things are gonna get back. I think that people’s desires to go you know, get in their car and drive half an hour an hour and go to a concert. I think people are going to become more comfortable with that before they’re going to be comfortable flying from, you know, Burlington, Vermont to Florida and getting on a cruise ship with people and living in close quarters for a week. And I think additionally, I think the business travel business has changed overnight. And I don’t think it’s going to come right back. Because I think CEOs and people managing businesses are going to say to their employees, if you’re not comfortable traveling, you don’t have to travel. I think you’re gonna have employees say, I like you know, I see my you know, I have a family member. So I like to see that I don’t want to have any exposure. So I don’t want to be on an airplane. And meanwhile, businesses have figured out how to do business without travel lo and behold, lots of businesses are doing quite fine with everybody working from home. Nobody gets on a plane flying across the country to have a meeting staying in a hotel for three days doing the work. wining and dining. And so I think companies also are going to say, Well, wait. So we were able to win the business and meet with our clients and do all this stuff, without all the expense of the travel for three months. So now why wait? Why are we gonna do it? And I’m not saying that all business travel is going to cease. I’m just saying that I think it’s going to be a gradual Move back. Whereas I think once you know, even once there is a vaccine or a therapy that solves the issue of COVID businesses, I think we’ll still be traveling quite a bit less than they did pre COVID. And I don’t think that’s the case. Once we know that there’s a therapy once we know there’s a vaccine, you and I are gonna go out to a concert, right? Like, we’re not gonna worry about that anymore. We’re not gonna you know, so I think that that business may come back sooner. And so, you know, that’s, that’s why I like that company. And I think I think it’s one that again, has been pretty beaten up. So you know, in this market, I’m looking for companies that you know aren’t trading. I’m not interested in buying stocks that are 9% below their all time highs. I’m interested in buying stocks that are 30% 40% below. They’re all time highs, where I say if I imagine the world in, you know, mid a year from now, if I think about what the world looks like, looks like a year from now, or a year and a half from now or two years from now, is this business back at where it was pre COVID levels? And if the answer’s yes, and I’m buying it for, you know, 60 or 70 cents on the dollar, I think I think that can be attractive.

John Corcoran  30:21  

Yeah, that’s a great point. What about e-commerce? In many ways, the last few months have been a boon for e-commerce. You know, some of the companies like Amazon and Walmart have been hiring like crazy just to keep up with the demand. How’s this? Uh, what’s your? What are your views and thoughts on the e-commerce industry? Yeah, I mean, I think that,

Ian Wyatt  30:42  

you know, ecommerce was already 20% growth. And you know, Amazon was growing at 20 sales at 20% a year and has for years and years. I think that this likely forces other players to adapt to e-commerce in a bigger way than before with No, pickup, you know, in, you know curbside pickup as well as home delivery. You see it with small businesses with restaurants having to adapt quickly and upgrade their website quickly to be able to, you know, accommodate that. Yeah, you know, and I think you know, the grocery channel is one that’s long, that has been ripe for moving to ecommerce, but consumers have been hesitant to do it. Probably more out of habit than anything. But this has certainly forced them to adapt and, you know, Whole Foods, for example, is having a booming business and there are other retailers that are in the food business that are doing quite well, as you said, small businesses have adapted. And, you know, I think that there may be some positives that come out of this as it relates to how businesses operate. And, you know, I was talking with my wife the other day and at our vet, their new policy ever since this started was, you know, there’s still open to you know, take care of your animals, but you know, Make an appointment, you drive up, you call them, they get your pet out of the car. And then they call you when they’re done and they put the dog or cat back in your car. And so

John Corcoran  32:09  

it sounds pretty good actually.

Ian Wyatt  32:10  

Yeah, I’m thinking, you know, it used to be that I’d go sit in the waiting room with my dog barking at the cat for 20 minutes, and then send an appointment and wait for that. And then you know, the whole thing and do something now I’m like, wait, I can just drop the pet off. They call me and tell me I can do some errands, we’ll if it’s happening or take some calls for work. And it’s proven in quality. So, you know, I think that there may be some things like that, where it’s a better experience. And you know, the same is true with yoga. You know, I mean, my parents like to do yoga, they just always go to the yoga studio. Well, lo and behold, the yoga studio figured out how to do the classes over zoom. And the parents were saying, Well, I don’t drive 15 minutes an hour and 15 minutes back and you know, sort of a nice change. So yeah, I think there may be some adaptations that happen as well.

John Corcoran  32:58  

Like I want to ask you, you know you for your Young kids, I have four young kids. We’ve got our kids home. For many months now, our kids have actually just started a summer camp, which has been amazing as you can imagine, right? But you know, one of the big realizations insights, I think was that, how having the kids at home in many ways, it’s such a perfect storm, you have all these working parents, all of a sudden have to be at home with their kids, and also teaching them and how hard that was. So I want to ask you about that. But also, I just want to ask you about is there anything else that we haven’t talked about so far? That has been that has just opened your eyes or, or surprised you? or, or, you know, are you looking at the market the world in any different way? You know, in terms of things we need to be aware of going forward? Because we didn’t it wasn’t a possibility before that this could happen. And now all of a sudden, we’re like, Okay, this is a world where if our kids are stuck at home, how do we adapt and how does that affect the market? How’re those Companies? How does that affect our economy? So I just wanted to ask about that.

Ian Wyatt  34:04  

Yeah, I mean, I think that there in my mind, there’s still a fair amount of uncertainty about how this ends, you know, I think some people have a pretty optimistic view that we’ve been through the bad part and are just going to be getting better from here. And life is going to be returned to normal. And you have other people at the other end of the spectrum who say, there’s going to be a second wave that’s worse than the first and get ready for, you know, lockdown. 2.0 comes October. And so, you know, I’m optimistic as an entrepreneur and as a person generally, I’m hopeful that, you know, there isn’t a second wave and that life returns to normal and that we quickly have a vaccine or drug therapy that will reduce the fatality rate and make it safe for us to get back to life as normal. I mean, I’ve enjoyed the last three months, being at home with my family more and time, you know, I said, you know, we’ve done more hikes around our 30 acre property in Vermont, in the last three months than we did in the last 12 years that we’ve lived there. So, and it’s been great. So, you know, I think, though that, you know, the world is changing, I think that we see. See that as a result of this current situation, I’m deeply concerned about the fact that there are 30 million people who are unemployed and that and that unemployment has had a greater impact on lower income Americans, much more than higher income Americans. And so this pandemic is not only hurting them financially through job losses in insecurity, but also that if you look at poor people, and especially minorities, they also tend to have a fatality rate that can be up to twice as much as white people. So I’m deeply concerned about those issues. And the growing wealth divide that this is going to create. And I know some people listening to this will say, hey, Ian, you know, don’t worry, the people who, you know, lost their jobs are getting extra money from the government. And you know, that, you know, in some cases making more money than they were before. But I think that, you know, overlooks the fact that that is temporary, you know, the extra money from the government is temporary, whether it’s extended or not as temporary. And ultimately, people don’t want to be stuck at home collecting a paycheck from the government. They want to be working and productive members of society by and large. And so, you know, I’m concerned about what this looks like. And concerned about sort of what is the longer-term response structurally to changes in America, you know, coming out of the Great Depression, we had the New Deal. I wonder if there’s going to be a new New Deal coming out of this Coronavirus crisis, as we think about how to get 2930 million Americans back to work. And how do we really help, you know, help, you know, end this huge wealth divide, which clearly, you know, isn’t good for society. So

John Corcoran  37:11  

yeah, well, we’ll end on that point in this was really insightful. Thank you for taking the time to share all your insights here. remind everyone where they can go and learn more about you, learn more about your newsletter and all that.

Ian Wyatt  37:24  

Yeah, so my website is www.dailyprofit.com from there you can access previous episodes of The Daily profit show, as well as sign up for our free daily email newsletter, which is 100% free. Just enter your email address on the website and we’ll send you a daily email with our top investment ideas, information on top sectors that we’re looking at for growth opportunities moving forward. So thanks again for the interview. I really enjoyed our conversation today. Great. Thanks again.

Intro  37:53  

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