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In this episode, Motley Fool analyst Asit Sharma and host Mary Long delve into several pressing topics, including:
- Companies poised to celebrate on April 2.
- Causes behind the recent market “freakout.”
- The bankruptcy filing of 23andMe.
Subsequently, Motley Fool contributor Travis Hoium joins host Ricky Mulvey to analyze MGM Resorts and the company’s foray into online sports betting.
How do you manage the distractions caused by market fluctuations? Share your strategies with us!
This video was recorded on March 24, 2025.
Mary Long: We’re back with another episode of Motley Fool Monday. Today, we have Asit Sharma with us. Thanks for joining me, Asit.
Asit Sharma: Thanks for having me, Mary. It’s great to be here again.
Mary Long: To kick off, we’re discussing the ever-evolving tariff landscape. In just over a week, on April 2, the US plans to implement reciprocal tariffs against specific countries. This ongoing tariff debate, notably with Canada and Mexico, has created a whirlwind of uncertainty in the markets lately. As a result, stock prices have generally trended downward since these tariffs were first announced. There’s speculation that the tariffs might be scaled back as we approach Liberation Day, which has generated some hope. Do you see any companies benefitting from this upcoming April 2 deadline?
Asit Sharma: Potentially, yes. Steel producers might see a celebration. UBS has recently upgraded the prospects for steel producers, likely due to market pressures stemming from competition. However, industries linked to steel, such as roofing, may face increased costs. So, while there are a few companies that might rejoice on Liberation Day, the list is relatively short.
Mary Long: As for the rest, uncertainty looms. Some recent reports suggest that the Biden administration may narrow the scope of the tariffs, focusing on a small group of countries with persistent trade imbalances. However, specifics about the scope and timeline are still unclear. Given this uncertainty, what’s your advice for individual investors?
Asit Sharma: I believe it’s crucial to recognize that tariffs and the uncertainty they bring will continue to be a part of the investing landscape. Learning to cope with this situation requires a broader understanding of different industries and their potential impacts without becoming overly reactive to fleeting news.
Mary Long: The S&P, Dow, and NASDAQ have seen a rise lately, and many financial analysts attribute this to news about the tariffs potentially being less severe than initially feared. However, Bloomberg opinion columnist Nir Kaissar posits that the recent volatility is more closely related to the performance of big tech stocks than to tariffs. He argues that substantial declines in high-profile tech stocks have driven market downturns. Asit, what are your thoughts on Kaissar’s viewpoint?
Asit Sharma: It’s an interesting perspective. The market relies heavily on tech giants, and fluctuations in their stock can have significant ripple effects across the index. Investors may be concerned about profit margins and future growth potential amidst heavy investments in technology. Doubt surrounding long-term returns on these tech investments is understandable.
Mary Long: You mentioned concerns regarding tech valuations. While Tesla’s valuation is astronomically high, other big tech stocks have more moderate P/E ratios. Are these valuations reasonable?
Asit Sharma: While they might appear premium, larger tech firms often have multiple strategies to enhance shareholder value, like share buybacks and dividends. Although they are investing heavily now, if these ventures pay off in the future, their current prices may prove justifiable.
Mary Long: Now, shifting gears to 23andMe— this well-known genetic testing company recently filed for Chapter 11 bankruptcy, dropping drastically in value from an initial $6 billion to about $50 million. What do you think went wrong?
Asit Sharma: The crux of the issue lies in their business model. 23andMe offered a one-time product that didn’t create ongoing revenue streams. Though they attempted to pivot by exploring therapeutic avenues, those initiatives didn’t yield the expected results, ultimately leading to their downfall.
Mary Long: In the spirit of exploring market behavior, our Foolish fun section highlighted strategies readers use to tune out market noise. One insightful response emphasized the importance of maintaining a consistent investment process. Asit, how do you personally manage market distractions?
Asit Sharma: I believe in thorough research and understanding the businesses I invest in. This solid foundation helps mitigate the influence of short-term market fluctuations.
Mary Long: I challenge our listeners: do you have strategies that outperform CMF Boiler Pete’s advice? Share your insights!
Moving to another important topic, Travis Hoium speaks with Ricky Mulvey about MGM Resorts and its strategic entry into the online sports betting market. The American Gaming Association reports that Americans are set to wager $3 billion during March Madness, making this a prime opportunity to discuss MGM’s efforts.
Travis Hoium: BetMGM extends MGM’s brand, and while it currently isn’t their primary revenue driver, it’s been growing significantly. The potential for profitability is looking positive as they expect to break even by the end of 2025.
Ricky Mulvey: In Las Vegas, MGM’s core operations account for half of their business. However, recent trends in visitor behavior and overall gaming revenues raise questions. How do these factors influence MGM?
Travis Hoium: While there are natural fluctuations in visitor interest in Las Vegas, innovations like the F1 race indicate potential for high profitability as the landscape continues to evolve. The demand for meeting spaces makes Las Vegas a crucial hub that remains valuable long-term.
Ricky Mulvey: MGM is also focusing on significant development projects overseas, notably in Japan. What’s the latest news regarding this venture?
Travis Hoium: Japan represents a monumental opportunity. With a projected $10 billion investment, MGM’s resort could potentially become one of the most lucrative globally, capitalizing on both wealth and population density.
Ricky Mulvey: Let’s briefly touch on MGM’s capital allocation strategy. Since 2021, the company has significantly reduced its share count. What does this indicate for potential investors?
Travis Hoium: The aggressive buyback strategy suggests that management sees significant value in their stock, particularly as they prioritize capital investments. The approach underscores their commitment to shareholder value without risking dividends.
Ricky Mulvey: With MGM Resorts trading below investment grade, should investors exhibit caution?
Travis Hoium: While a junk rating may signal risk, MGM’s consistent cash flow mitigates concerns for me. Its ongoing profitability and strategic positioning provide a solid rational basis for investing.
Ricky Mulvey: Finally, why do you favor MGM over other gaming stocks?
Travis Hoium: MGM’s valuation combined with its diverse business model and geographic advantages positions it well for future growth without the premium inherent in other gaming companies.
Mary Long: As always, those involved with the program may have financial interests in the stocks discussed. Listeners should conduct their own research before making investment decisions. Thank you for listening, and we’ll see you next time.
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