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Speaker 1: Welcome to the Bloomberg Penl Podcast. I'm Paul swing you

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Speaker 1: along with my co host Lisa Brahma Waits. Each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor, find a Bloomberg Penl podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. Right now, we want to shift

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Speaker 1: the conversation, Paul, to what is going on in what

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Speaker 1: has become the epicenter in some places of the crisis,

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Speaker 1: which is nursing homes and health care centers for immuno

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Speaker 1: compromised individuals. And there's no one better for us to

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Speaker 1: speak to than Shelley's son, chief executive officer and founder

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Speaker 1: of bright Star Care, which is a national private duty

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Speaker 1: home care and medical staffing franchise. So with a national

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Speaker 1: look at some of those more vulnerable individuals, Shelley, can

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Speaker 1: you give us a sense of how big of an

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Speaker 1: issue the coronavirus and its spread has been for you

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Speaker 1: and your staff. Thank you so much. I think for us,

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Speaker 1: we we came into the crisis with all of our

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Speaker 1: locations joint Commission accredited, so you know, hand hygiene and

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Speaker 1: safety protocols were um paramount to our day to day activities. UM.

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Speaker 1: So we have had relatively minimal, you know, less than

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Speaker 1: five percent impact of our caregiving staff and our clients.

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Speaker 1: But it's certainly something with the vulnerable population, the most

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Speaker 1: at risk population that we take care of every day,

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Speaker 1: that we've tried to make sure that we've taken what

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Speaker 1: was a higher standard before and elevated it. We began

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Speaker 1: looking at PPE orders back March seventh, you know, back

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Speaker 1: the floor. You know, it was really you know, starting

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Speaker 1: to affect um our business and we were seeing any

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Speaker 1: positive cases at all. UM we were in a four

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Speaker 1: week que to get p P and e P pe

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Speaker 1: U ordered. We've made available to every frontline worker in

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Speaker 1: masks because we believe it is essential when they're going

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Speaker 1: in and out of a client's home. There's no way

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Speaker 1: and you're providing personal care or skilled care in the

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Speaker 1: home that you can be uh six ft apart and

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Speaker 1: do that type of care. So making sure that we

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Speaker 1: contain UM the virus and not have it spread to

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Speaker 1: our most vulnerable, keeping people at home, allowing them to

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Speaker 1: recuperate if they get it at home and not further

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Speaker 1: over tax our hospital systems. UM. It's how we've really

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Speaker 1: tried to lean in and be part of the crisis.

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Speaker 1: I think generally what we've seen across the industry is

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Speaker 1: where you have much more people coming and going or

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Speaker 1: clustering of people. So you've seen nursing homes much harder

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Speaker 1: hit UM. And in the homes we had to really

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Speaker 1: you know, draw a fineline on those where we had

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Speaker 1: UM deployed PPE early UM. But some of the hospice

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Speaker 1: and Medicare home health that might be coming in and

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Speaker 1: out of the same home or not UH, so we

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Speaker 1: required if they were going to that we were educating

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Speaker 1: a family on what those UM employees of other agencies

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Speaker 1: should have if they're coming in out of the same home.

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Speaker 1: So we kept the clients safe, but also our workers

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Speaker 1: UM that would be coming in and out of that environment.

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Speaker 1: Because the cases that we did see early we're from

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Speaker 1: a hospice worker, Medicare home health worker that UH tested

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Speaker 1: positive and then we know that our worker had been

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Speaker 1: exposed and most of those cases our worker did not

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Speaker 1: contract UM. But we increased our standards for the home

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Speaker 1: for our caregiver, but also the partners in the care

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Speaker 1: continuum that we were alongside up on a daily basis. So, Shelly,

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Speaker 1: have you in the home healthcare space seen a surge

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Speaker 1: in demand? As you know, this coronavirus puts people in hospital,

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Speaker 1: but but then maybe they come out of hospital, or

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Speaker 1: maybe people choose home healthcare versus going into what it

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Speaker 1: seems to be a much higher risk UH nursing home

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Speaker 1: or or ty type of environment. Yeah, I think you've

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Speaker 1: seen an interesting trend over six weeks. So I think

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Speaker 1: we're starting to see a surge and referrals were at

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Speaker 1: all time high the last ten days in terms of

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Speaker 1: referrals UM and inquiries for care UH compared to the

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Speaker 1: three or four months prior. So I think you're starting

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Speaker 1: to see people come through hospital stays, get ready for

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Speaker 1: discharge and want to go into a home environment and

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Speaker 1: have that care continuing them to rebuild their um UM,

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Speaker 1: their ability to ward off anything else UM and and

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Speaker 1: safely transitioned to the home. UH. During the early stages

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Speaker 1: of the crisis, we UM saw you know, quite a

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Speaker 1: few of our clients and we've been tracking it. We've

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Speaker 1: had over we service about fifteen to twenty thousand families

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Speaker 1: UM in forty states. We had about three hundred four

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Speaker 1: hundred clients across the country kind of early stage mid

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Speaker 1: March stop care. UM. We've seen about ten to fifteen

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Speaker 1: percent of those sents come back because we're tracking that

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Speaker 1: as well. UM, where I think people thought it might

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Speaker 1: be a two to four week uh scenario and now

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Speaker 1: as we look at that and it's more months, maybe

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Speaker 1: over a year UM in terms of vaccination and completely

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Speaker 1: being able to kind of return safely out to that

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Speaker 1: environment for the most at risk population. UH. So I

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Speaker 1: think what we saw as original drop off, somebody's starting

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Speaker 1: to recover. Shelley, your company has over twenty caregivers and

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Speaker 1: four thousand nurses, and you're in one area of the

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Speaker 1: economy that may be a bright spot for hiring right

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Speaker 1: now of it an unprecedented surge of layoffs, and I'm

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Speaker 1: wondering how easy it is for you to find individuals

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Speaker 1: to higher at this time and just in general as

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Speaker 1: the President seeks to limit some of the immigration going forward. Yeah,

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Speaker 1: I think it's a great question. I think, um, you know,

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Speaker 1: up until we were able to deploy Ppe, which happened

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Speaker 1: last UH last week m beginning UM of the week,

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Speaker 1: we were able to start to ploint Ppe. I think

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Speaker 1: now it's becoming easier for us to be able to

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Speaker 1: give the message that we're able to keep our caregivers

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Speaker 1: safe as well as encouraging to come to or back

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Speaker 1: to the workforce. But I think that was I think

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Speaker 1: that's still a difficult call. Even though there are jobs available,

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Speaker 1: many don't have child care for their children. Uh schools

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Speaker 1: are closed. Most of our caregivers across the country are

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Speaker 1: working moms, oftentimes single moms. Uh so having the desire

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Speaker 1: to want to serve and take care of our mos vulnerable,

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Speaker 1: but at the same time having your own children to

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Speaker 1: deal with and a round four, there's some you know,

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Speaker 1: language being introduced in terms of heroes fund um. I

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Speaker 1: think that's absolutely critical that we're thinking about our frontline

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Speaker 1: healthcare workers. Right now, that language is limited to only

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Speaker 1: those that are building the federal, state, local, or tribal governments,

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Speaker 1: and we think that that needs to be expanded to

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Speaker 1: anyone who's keeping the at risk population from over taxing

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Speaker 1: a health system and keeping them safe and reducing the

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Speaker 1: number of at risk. And so we'll be looking for

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Speaker 1: that in our engagement with our members of Congress for

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Speaker 1: round four just quickly here, Shelley, I'm wondering, are you

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Speaker 1: finding that you're having to increase the salaries of individuals

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Speaker 1: in order to entice that that now we would absolutely

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Speaker 1: and we have done that and then rolled out that

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Speaker 1: capability to our franchisees probably about three weeks ago, to

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Speaker 1: be adding kind of an incentive type of pay. I

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Speaker 1: think we've called it kind of a safe, safe safety

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Speaker 1: pay uh for our caregivers to encourage them to come

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Speaker 1: back when they we do know that they're at home.

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Speaker 1: Costs are higher in terms of having to arrange for

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Speaker 1: child care that schools are not able to provide today,

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Speaker 1: and wanting to be cognizant of that. UM And even

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Speaker 1: though you know, the industry kind of banded together and

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Speaker 1: was successful in getting an exemption for f f C

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Speaker 1: R A at the same time that Saturday night, we

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Speaker 1: you know, did you know, declare victory with our franchisees.

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Speaker 1: The immediate communication from me to the franchisease UM was

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Speaker 1: just because we don't have to pay, it doesn't mean

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Speaker 1: we shouldn't if any of our caregivers are symptomatic, um,

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Speaker 1: you know, not feeling well or have contracted the virus.

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Speaker 1: We should still make sure they're not having to worry

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Speaker 1: about where their next meal is going to come from

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Speaker 1: and how their families are going to be taken care of.

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Speaker 1: So we have stood stood by that position as a

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Speaker 1: brand and at the local level buy our franchisees as well.

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Speaker 1: So I think we're trying to balance the right things.

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Speaker 1: We have a vulnerable population. We need to be able

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Speaker 1: to take care of an f f c R A

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Speaker 1: exemption was criticals were also being able to do that,

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Speaker 1: but at the same time, we want to make sure

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Speaker 1: our workers are well protected and we can recruit the

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Speaker 1: numbers necessary. That's going to become a challenge as more

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Speaker 1: people want to pivot and stay at home. Uh, So

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Speaker 1: we're looking for any and all ideas to do that.

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Speaker 1: Shelly Son, thank you so much for joining us. Shelley's

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Speaker 1: the CEO and founder bright starcare talking about the in

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Speaker 1: home care market, which is facing unprecedented demands the population

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Speaker 1: deals with the coronavirus. But very interesting to get her

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Speaker 1: perspective on in home healthcare. This is Bloomberg. Paul, there's

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Speaker 1: a story that caught my attention in the past week. Disney,

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Speaker 1: a company that you have tracked for years, stopped paying

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Speaker 1: a hundred thousand workers, which is roughly half its workforce,

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Speaker 1: laying them off even as it protects executive own as

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Speaker 1: schemes and a one and a half billion dollar dividend

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Speaker 1: payment due in July. This has raised a lot of

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Speaker 1: ire among a lot of people, particularly with respect to

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Speaker 1: executive compensation, but also the dividend payment. Should they continue

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Speaker 1: to pay a dividend as they lay off tens of

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Speaker 1: thousands of workers to go on the public role? This

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Speaker 1: is a question in the forefront of many minds, both

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Speaker 1: investment minds as well as political ones, and John Tobin

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Speaker 1: has been thinking about it as well. He joins us

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Speaker 1: now portfolio manager of Epic Investment Partners. And you believe

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Speaker 1: that the companies should still maintain their dividends despite some

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Speaker 1: of the catastrophic hits to earnings as well as the

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Speaker 1: layoffs that we're seeing that are now numbering into the millions.

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Speaker 1: Why well, at least I think I'd probbably take a

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Speaker 1: more nuanced approach to answering that question. I think our

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Speaker 1: view is the way I had expressed it is, we

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Speaker 1: expect companies to continue to follow sound capital allocation practices

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Speaker 1: and policy and I think we need to look at

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Speaker 1: this question. We're on a company by company, situation by

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Speaker 1: situation basis. If a company is doing reasonably well and

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Speaker 1: maintaining its revenues, earnings, and cash flows, even in this

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Speaker 1: episode that we're working our way through, it has a

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Speaker 1: commitment to pay dividends that it has promised to investors.

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Speaker 1: And that dividend, by the way, is a flow of

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Speaker 1: income two investors, so it doesn't go out into the

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Speaker 1: void somewhere. Real people are getting that real dividend payment.

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Speaker 1: So to cut off the dividend payment is a source

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Speaker 1: of income in many cases too many investors and many

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Speaker 1: retirees who depend on that source of income. So it's

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Speaker 1: not as simple as it seems to be. Gee, times

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Speaker 1: are really tough. How can companies justify paying dividends in

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Speaker 1: this episode? And I think it's a it's a much

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Speaker 1: more complex problem in question than just that. So interesting,

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Speaker 1: how do you feel about I mean, there's also some

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Speaker 1: discussion about companies john that are receiving I guess some

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Speaker 1: of this uh fiscal stimulus. Uh. And then also you know,

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Speaker 1: should there be I guess conditions there to that stimulus

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Speaker 1: in terms of executive compensation? Or dividends. Um, how do

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Speaker 1: you think companies are approaching that and investors? Well, and

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Speaker 1: I think that's a perfectly reasonable approach. If your business

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Speaker 1: is so fundamentally challenged in this episode that you need

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Speaker 1: to apply for government aid, it's not at all unreasonable

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Speaker 1: that as a condition for receiving that aid, that you agree,

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Speaker 1: at least for a period of time, perhaps for the

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Speaker 1: period of time during which you're receiving the aid, to

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Speaker 1: halt dividend payments to shareholders, to halt share repurchase programs,

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Speaker 1: and to adjust the executive compensation levels. That's not unreasonable.

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Speaker 1: What is unreasonable, I would argue, is a mandate or

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Speaker 1: a directive to a company that says, regardless of whether

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Speaker 1: you apply or need aid, and regardless of whether your

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Speaker 1: business judgment tells you that you're generating enough revenues, are

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Speaker 1: and cash flow to maintain your promises to your shareholders,

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Speaker 1: you should stop anyway. I think that's problematic. That's fair,

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Speaker 1: and I think that people are looking at companies that

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Speaker 1: are laying off significant swaths of their employees as candidates

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Speaker 1: for potentially cutting their dividends. I guess this push pull

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Speaker 1: that you talk about maintaining your promise to your shareholders

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Speaker 1: and trying to edifire balance shade at a time of

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Speaker 1: unprecedented distress. That these two that these two issues are

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Speaker 1: are really in stark contrast. I'm curious, from your perspective,

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Speaker 1: do you think that shareholders will take a more active

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Speaker 1: approach in rewarding companies that act perhaps in a more

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Speaker 1: socially responsible I use that word. I hate using it

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Speaker 1: because it could mean anything to anyone, but in a

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Speaker 1: way that reflects something that that feels right, whatever that

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Speaker 1: means to them. Well, that's an interesting question, and I

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Speaker 1: suppose that there will be that sentiment out there that

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Speaker 1: people will look at a company and say, do I

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Speaker 1: like this company? They did the right thing, whatever that

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Speaker 1: actually means. But I would also say, from you know,

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Speaker 1: from my perspective as a portfolio manager on a strategy

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Speaker 1: that invests in companies, that we look for companies that

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Speaker 1: have sustainable, growing cash flows, that support sustainable, growing shareholder distributions,

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Speaker 1: and we expect those companies to invest in the business

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Speaker 1: and grow. We expect those companies to make a decision,

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Speaker 1: a capital allocation decision. Can I invest to earnermate a

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Speaker 1: return about my cost of capital and to the extent

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Speaker 1: that I cannot, then I should return night capital to

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Speaker 1: the owners of the business. And those are the kinds

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Speaker 1: of companies that were looking for so for me, and

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Speaker 1: I think from a sound corporate governance and corporate finance

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Speaker 1: standpoint that that should be the driving principle for these

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Speaker 1: corporate management teams and rather than doing the right thing

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Speaker 1: and cutting dividends just because of the the bad optics

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Speaker 1: of paying dividends. So, John, what are some of the

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Speaker 1: sectors or companies that you guys are looking at now?

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Speaker 1: Given again, just this tremendous dislocation that we've seen in

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Speaker 1: the economies and in the markets. We've got some more

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Speaker 1: jobless claims today. That just confirms how rough things are

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Speaker 1: out there. How are you navigating it? Well, it's it's

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Speaker 1: tough to navigate, to be sure. It's it's an unprecedented

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Speaker 1: situation that we're in. And our approach as we managed

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Speaker 1: the portfolio is to try to look really, really carefully

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Speaker 1: at each and every position that we have, an assess

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Speaker 1: the company's ongoing cash flow sustainability in this environment, sort

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Speaker 1: of weed out the ones that we think are weaker

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Speaker 1: and that we need to remove from the portfolio. But

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Speaker 1: I will tell you here we are in early days

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Speaker 1: of quarterly earnings, and we've already seen I think a

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Speaker 1: few companies maybe surprise the market with the degree of

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Speaker 1: resilience that they have in their underlying businesses. So, for example,

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Speaker 1: over the past week, Johnson and Johnson reported earnings and

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Speaker 1: raised their dividend. Procter and Gambell reported earning, maintained guidance

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Speaker 1: and raise the dividend. Travelers the insurance company reported recently

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Speaker 1: raised the dividend. Lockheed Martin reported and their results were

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Speaker 1: quite good. So across the economy, across multiple sectors, we're

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Speaker 1: actually seeing companies that are navigating themselves through this difficult

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Speaker 1: episode and maybe doing better than then you might expect.

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Speaker 1: And John, thanks so much for joining us to really

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Speaker 1: appreciate your thoughts and perspectives. John Toman he is portfolio

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Speaker 1: manager and senior research analysts for APOC Investment Partners UH

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Speaker 1: they have about eighteen billion under management. So some really

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Speaker 1: interesting thoughts there, Lisa, as it relates to dividends and

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Speaker 1: in some scenarios, John arguing that companies as proper asset

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Speaker 1: allocation should continue paying dividends, but clearly there's some some

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Speaker 1: issues there as it relates to fiscal stimulus. It's an

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Speaker 1: important point because people, real people get those dividends and

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Speaker 1: use them for income. But there's a question of what

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Speaker 1: it means to get government aid when you lay off

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Speaker 1: tens of thousands of workers and send them to the

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Speaker 1: public rules. And I think that this is going to

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Speaker 1: be a debate in the front and center for a

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Speaker 1: long time to come. Let's talk markets right here, and

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Speaker 1: there's nobody, nobody better to do that with than our

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Speaker 1: good friend Barry Ridholtz. He's a Bloomberg opinion columnists and

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Speaker 1: host of Masters in Business on Bloomberg Radio. Is also

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Speaker 1: the founder, chairman and chief investment officer of rid Holts

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Speaker 1: Wealth Management. So he wears a lot of hats. So, Barry,

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Speaker 1: as we take a look at this little snap back

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Speaker 1: in the green here today, how do you square that

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Speaker 1: with you know, another very sobering jobless claims number of

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Speaker 1: four point four million. Yeah, everybody looks at the weekly

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Speaker 1: jobless numbers as if it's breaking news and and the

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Speaker 1: reality is that really is an amalgam of all fifty states.

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Speaker 1: The data they released released during the prior seven days.

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Speaker 1: By the time the BLS releases his state. By the

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Speaker 1: time the federal government releases the national data, anyone who

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Speaker 1: wanted to assemble that from by a state by state

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Speaker 1: basis could have done it. So it's kind of old news.

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Speaker 1: I know that sounds silly because everybody waits with bated breath,

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Speaker 1: but you can really reverse engineer that pretty easily a

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Speaker 1: couple of days earlier. Plus, is anybody surprised by this

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Speaker 1: data at all? We've We've watched twenty two million people

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Speaker 1: file for unemployment for the previous month. Nothing has changed.

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Speaker 1: We're still under lockdown. People are still having a hard

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Speaker 1: time getting through to their state unemployment office, so we

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Speaker 1: know the numbers are probably undercounted because of that challenge.

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Speaker 1: As long as we're under lockdown, maybe the starts to

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Speaker 1: flatten out to four or three or two million a week.

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Speaker 1: But you know, we're somewhere between twenty and of the

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Speaker 1: people who had a paying, full time job in March

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Speaker 1: no longer to do, and that's a huge number with

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Speaker 1: enormous economic ramification. Yeah, I was just looking at a

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Speaker 1: Pew survey that shows it about stept forty of US

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Speaker 1: adults say that someone in their household has lost a

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Speaker 1: job or taken a pay cut to the outbreak. I'm

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Speaker 1: just trying to extrapolate this out as we pair this

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Speaker 1: dismal data with the optimism and markets as to what

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Speaker 1: exactly people are looking to. Is this a bet on

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Speaker 1: the Federal Reserve and US government that they will pump

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Speaker 1: enough money into markets to inflate asset prices and perhaps

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Speaker 1: give a little bit of a lifeline to enough of

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Speaker 1: the population to enable a recovery in fairly short order.

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Speaker 1: I think it's a couple of different factors depending on

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Speaker 1: your time frame. If you're a short term trader, you

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Speaker 1: look at the market that falls that create in in

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Speaker 1: four weeks, that creates a tremendously oversold condition. Once the

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Speaker 1: rubber band gets too stretched too far in one direction,

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Speaker 1: We've seen it time and again, it tends to snap back,

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Speaker 1: at least part way. On a temporary basis, No markets

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Speaker 1: go on a straight line. Every bull market is has

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Speaker 1: counter trends, down trends that punctuated, just like every bear

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Speaker 1: market has these vicious rallies that that move in the

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Speaker 1: opposite direction. So so that's just a short term basis.

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Speaker 1: The longer term perspective is we don't think this is

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Speaker 1: gonna last forever. We do see signs that we are

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Speaker 1: either at or near the peak, if if not past it.

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Speaker 1: For from New York. Other states are still on the upswing.

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Speaker 1: But you know, there's a little bit of light at

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Speaker 1: the end of the tunnel. We just don't know if

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Speaker 1: it's daylight or an oncoming train, which is why we

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Speaker 1: haven't recovered fully. So it's an interesting barrier, like you

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Speaker 1: probably put me into more cautious stance as it relates

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Speaker 1: to the duration of these lockdowns and quarrant keens and

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Speaker 1: potentially reopening the um you know, the economy, if you will. UM.

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Speaker 1: So with that backdrop, is this a market that might

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Speaker 1: be just bouncing along for number of months and or

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Speaker 1: quarters until we really get that definitive view of Okay,

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Speaker 1: we've got the testing, or we've got some antibodies or

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Speaker 1: what there's we're closer to that vaccine. Is this something

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Speaker 1: that just says this is going to hold this market

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Speaker 1: and check well, you know, nobody knows if it's late

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Speaker 1: twenty or twenty one or early twenty two that you

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Speaker 1: could check off all the boxes. Here, here's the full testing,

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Speaker 1: here's the contact tracing, here's the antibody um uh protocol

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Speaker 1: that will allow people who don't have it to at

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Speaker 1: least develop some form of immunity. Whether it's full or partial,

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Speaker 1: we don't know. We don't know about the protocols, the

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Speaker 1: therapies that turn this from a potentially fatal disease UH

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Speaker 1: to a manageable disease. Look look at things like AIDS.

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Speaker 1: You never get curtive AIDS, but it be ums um

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Speaker 1: there's a therapeutic that manages it. So whether that's six

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Speaker 1: months or a year or two years, the market doesn't say, Okay,

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Speaker 1: this is the economy is going to halt and we're

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Speaker 1: going to go to zero. It's trying to balance between

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Speaker 1: the short term drop of earnings and revenue and what

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Speaker 1: were the forecasts for hundred and seventy five dollars on

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Speaker 1: the SMP, maybe that drops to pick a number, a

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Speaker 1: hundred bucks. Uh. We're all spit bowling when we're trying

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Speaker 1: to come up with revenue and profit projections for but

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Speaker 1: I think we're all pretty confident that by certainly those

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Speaker 1: numbers come back. Now now there's a longer debate to

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Speaker 1: be had about profit margins and leverage and how freely

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Speaker 1: UH and inexpensively, capital has been h and debt has

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Speaker 1: been extended, and what might happen with the corporate tax

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Speaker 1: rate postal election. That's a whole different conversation. In the

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Speaker 1: front and center for investors is trying to figure out

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Speaker 1: what data will look at in order to determine the

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Speaker 1: scope and the length of this pandemic of this issue.

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Speaker 1: And joining us now as someone who has h an

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Speaker 1: interesting take on this, Sam Hendall, president of leven Easterly

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Speaker 1: with three point six billion dollars of assets, also the

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Speaker 1: founder of Data Minor, which is very important as it

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Speaker 1: comes to assessing the current crisis. Sam, As you devise

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Speaker 1: an investment strategy, what data are you looking at? Sure?

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Speaker 1: At least on Paul, how are you? Um, We're really

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Speaker 1: looking at um? You know, UM. Really what we do,

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Speaker 1: we're value investors and the most important thing for us

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Speaker 1: is talking to companies, talking to the management teams and

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Speaker 1: really getting a firm understanding of what's going on in

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Speaker 1: their business. And that's on the micro level. On the

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Speaker 1: macro level, there are a lot of data points that

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Speaker 1: are coming out and you know, I certain they do

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Speaker 1: do use Data Minor UM, a company I found with

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Speaker 1: to my College roomates about eleven years ago. UM, and

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Speaker 1: that company is really on the forefront of UM, getting

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Speaker 1: information from social media and about ten thousand other sources. UM.

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Speaker 1: Right now, we're we're working with a lot of the

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Speaker 1: government agencies who are on the front lines of this.

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Speaker 1: And I'm seeing data on outbreaks ahead of time, so

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Speaker 1: sort of you know, before the testing hits, what people

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Speaker 1: are saying on the ground, UM, and we are using

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Speaker 1: that to sort of determine, you know, and I think

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Speaker 1: it's a very difficult question how long is it gonna

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Speaker 1: take for our for our economy to reopen. So on

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Speaker 1: the investment side, UM, we are really talking to our

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Speaker 1: companies and not trying to you know, not not really

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Speaker 1: trying to to aim and guess what the timing is

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Speaker 1: for things to reopen, but still finding good businesses that

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Speaker 1: are down in value, chief on a free cash law

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Speaker 1: basis and have catalysts to unlock them and some things

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Speaker 1: that might be defensive in this time, but also have

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Speaker 1: some offensive components that we can take advantage of, you know,

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Speaker 1: these companies when the world reopens again. So, Sam, what

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Speaker 1: are some of those sectors that you think have some

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Speaker 1: of those characteristics characteristics? Sure, I mean, the most defensive

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Speaker 1: sector you know, clearly has been consumer staples, healthcare, UM.

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Speaker 1: These there are a lot of companies that are actually

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Speaker 1: doing well in this environment, and it's unusual. The consumer

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Speaker 1: has completely shifted spending. Everyone's staying at home and ordering

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Speaker 1: or ordering food in whether it's grocery or even some delivery.

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Speaker 1: And they're spending money on telecom, they're spending on the

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Speaker 1: on their wireless bills, they're spending on cable and entertainment,

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Speaker 1: but a lot of the other consumer discretionary has gone

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Speaker 1: out the window. And we're really looking at trying to

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Speaker 1: find a combination of defensive defensive sectors and defensive defensive

434
00:24:45,760 --> 00:24:48,560
Speaker 1: stocks within those sectors, but also looking at, you know,

435
00:24:48,600 --> 00:24:51,119
Speaker 1: stocks that have been very hard hit by this, whose

436
00:24:51,119 --> 00:24:54,800
Speaker 1: businesses is impaired in the near term, but who has

437
00:24:54,840 --> 00:24:58,320
Speaker 1: a strong balance sheet and can survive this and has

438
00:24:58,359 --> 00:25:01,320
Speaker 1: a very strong business coming other crisis. So it's a

439
00:25:01,359 --> 00:25:05,199
Speaker 1: combo of really positioning our portfolio to take advantage of

440
00:25:05,240 --> 00:25:07,920
Speaker 1: the companies that are succeeding in this environment, and then

441
00:25:07,960 --> 00:25:10,919
Speaker 1: companies that we think will be the best to bounce

442
00:25:10,920 --> 00:25:14,600
Speaker 1: back UM once things go back to work. I've heard

443
00:25:14,600 --> 00:25:16,159
Speaker 1: a lot of people say that there are going to

444
00:25:16,200 --> 00:25:18,720
Speaker 1: be a lot of opportunities emerging from this crisis, and

445
00:25:18,760 --> 00:25:22,560
Speaker 1: we certainly see a rapidly increasing pace of credit funds

446
00:25:22,600 --> 00:25:25,120
Speaker 1: being raised by the likes of Oak Tree and Fortress.

447
00:25:25,160 --> 00:25:28,240
Speaker 1: I'm trying to understand, though, how you get to a

448
00:25:28,280 --> 00:25:30,680
Speaker 1: place where you can take advantage of these opportunities. Did

449
00:25:30,720 --> 00:25:33,200
Speaker 1: you have excess cash going into this? Are you selling

450
00:25:33,240 --> 00:25:35,840
Speaker 1: existing positions that you think are just going to be

451
00:25:35,840 --> 00:25:39,080
Speaker 1: out of money for a long period of time. Yeah, well,

452
00:25:39,119 --> 00:25:42,600
Speaker 1: we we've certainly shifted our portfolio in a significant way. UM.

453
00:25:42,840 --> 00:25:46,200
Speaker 1: We we really didn't have much exposure to travel names

454
00:25:46,400 --> 00:25:48,920
Speaker 1: or um, you know, the cruise lines or airlines or

455
00:25:48,960 --> 00:25:51,600
Speaker 1: anything like that. Um. But you had a period in

456
00:25:51,920 --> 00:25:54,560
Speaker 1: really mid March, mid to late March which was a

457
00:25:54,600 --> 00:25:58,200
Speaker 1: tremendous amount of chaos and people were selling stocks and

458
00:25:58,240 --> 00:26:01,159
Speaker 1: it was really I I joked, the the computers are

459
00:26:01,200 --> 00:26:04,280
Speaker 1: selling and so you have all this quantitative and algorithmic selling.

460
00:26:04,840 --> 00:26:06,760
Speaker 1: And you know, for people like us who are talking

461
00:26:06,800 --> 00:26:10,240
Speaker 1: to the management teams and understanding the companies, UM, it's

462
00:26:10,280 --> 00:26:12,520
Speaker 1: you know, it's great that when when we talked to

463
00:26:12,560 --> 00:26:15,720
Speaker 1: a company who stock is down, um, and this is

464
00:26:15,800 --> 00:26:18,760
Speaker 1: the case with with Tyson Foods. Have a conversation with

465
00:26:18,840 --> 00:26:20,600
Speaker 1: them and they said, yeah, you know, our business is

466
00:26:20,600 --> 00:26:23,800
Speaker 1: doing great. Um, We're not selling to the prepared food markets,

467
00:26:23,840 --> 00:26:27,080
Speaker 1: but we're selling UM. We we've shifted those supply chains

468
00:26:27,280 --> 00:26:29,480
Speaker 1: and we are you know, selling a lot into the

469
00:26:29,480 --> 00:26:32,480
Speaker 1: grocery store and we can't sell enough chicken to people, um,

470
00:26:32,560 --> 00:26:34,960
Speaker 1: and we can take advantage of that during these you know,

471
00:26:35,080 --> 00:26:38,919
Speaker 1: during these challenging times. So, Sam, I guess one of

472
00:26:38,920 --> 00:26:41,480
Speaker 1: the questions is just from stepping back and looking at

473
00:26:41,520 --> 00:26:45,200
Speaker 1: the markets that had that big plus move peaked trough

474
00:26:45,240 --> 00:26:47,720
Speaker 1: there in that March period that you were just referencing,

475
00:26:47,760 --> 00:26:49,720
Speaker 1: but since then we've had you know, almost a fifty

476
00:26:50,119 --> 00:26:53,000
Speaker 1: retracement back up. How do you how are you viewing

477
00:26:53,000 --> 00:26:55,760
Speaker 1: the market overall? Do you think there's risk that we

478
00:26:55,840 --> 00:27:01,600
Speaker 1: retest loads um in the context of a longer bear market. Yeah,

479
00:27:01,640 --> 00:27:04,280
Speaker 1: I do think that, you know, this is a this

480
00:27:04,359 --> 00:27:07,280
Speaker 1: is not a blip. UM. The the the the change

481
00:27:07,280 --> 00:27:10,840
Speaker 1: in the economy right now and the uncertainty around what's

482
00:27:10,840 --> 00:27:16,160
Speaker 1: happening and the ability for companies to to resume normal operations. UM,

483
00:27:16,200 --> 00:27:18,720
Speaker 1: it's very challenging to figure out. So I don't think

484
00:27:18,760 --> 00:27:22,040
Speaker 1: this is a blip. I think this is you know, similar,

485
00:27:22,160 --> 00:27:24,159
Speaker 1: and it's a very different type of crisis than the

486
00:27:24,160 --> 00:27:26,840
Speaker 1: global financial crisis in two thousand and eight. UM. But

487
00:27:26,960 --> 00:27:29,600
Speaker 1: we are following that playbook here. UM. We're trying to

488
00:27:29,680 --> 00:27:32,800
Speaker 1: hit singles. We're not trying to call the bottom UM

489
00:27:32,880 --> 00:27:36,480
Speaker 1: at leaving Easterly. We're certainly are. Our Our mission is

490
00:27:36,520 --> 00:27:39,080
Speaker 1: to know our companies and we have a concentrated portfolio

491
00:27:39,160 --> 00:27:42,080
Speaker 1: about thirty five to forty names UM that we know

492
00:27:42,240 --> 00:27:45,120
Speaker 1: very well and we know their management teams, and we're

493
00:27:45,359 --> 00:27:49,120
Speaker 1: really looking to UM take advantage of some of these dislocations.

494
00:27:49,119 --> 00:27:51,040
Speaker 1: And my view on the markets, I do think the

495
00:27:51,080 --> 00:27:54,280
Speaker 1: market may have snapped that you know this the the

496
00:27:54,359 --> 00:27:58,840
Speaker 1: sell off was you know, UM without regard to specific companies,

497
00:27:59,240 --> 00:28:02,200
Speaker 1: and now we're seeinging you know some I guess order

498
00:28:02,200 --> 00:28:04,239
Speaker 1: in the chaos where you're seeing the companies that are

499
00:28:04,240 --> 00:28:06,919
Speaker 1: doing a little better start to outperform. That have you

500
00:28:06,960 --> 00:28:09,720
Speaker 1: know that that that have a little bit more of

501
00:28:09,720 --> 00:28:12,640
Speaker 1: of a clear path. But it's still a very uncertain

502
00:28:12,680 --> 00:28:15,359
Speaker 1: time and we're just trying to keep a clear head

503
00:28:15,520 --> 00:28:18,480
Speaker 1: and UM follow our playbook from O. Eight and No. Nine,

504
00:28:18,760 --> 00:28:21,280
Speaker 1: buying those good companies with good balance sheets that are

505
00:28:21,280 --> 00:28:23,920
Speaker 1: down and out of favor, and um, and we think,

506
00:28:23,960 --> 00:28:27,440
Speaker 1: you know, in a long term, whether coronavirus um, you know,

507
00:28:27,560 --> 00:28:30,879
Speaker 1: comes back in in the fall winter, or we're not

508
00:28:30,920 --> 00:28:33,840
Speaker 1: able to open up the economy for a while, that

509
00:28:33,400 --> 00:28:36,280
Speaker 1: they still have enough ballast to be okay during that

510
00:28:36,359 --> 00:28:39,080
Speaker 1: period and they'll do very well whenever the whenever the

511
00:28:39,120 --> 00:28:42,520
Speaker 1: economy opens. We're speaking with Sam Hendel, president of eleven

512
00:28:42,640 --> 00:28:45,880
Speaker 1: Easterly with three point six billion dollars of assets under management.

513
00:28:45,960 --> 00:28:49,160
Speaker 1: Sam uh, It's it's a very tricky times. So much

514
00:28:49,320 --> 00:28:52,440
Speaker 1: of the economy depends on science and on the medical

515
00:28:52,480 --> 00:28:55,840
Speaker 1: community and the fight against the coronavirus, which has put

516
00:28:55,960 --> 00:28:59,600
Speaker 1: investors in this awkward position of having to moonlight as virologist.

517
00:29:00,000 --> 00:29:03,080
Speaker 1: A virologists they try to bet on when the economy

518
00:29:03,280 --> 00:29:07,400
Speaker 1: may reopen. What specific data points are you looking at

519
00:29:07,560 --> 00:29:11,800
Speaker 1: determine that path, given that even medical professionals basically are

520
00:29:11,800 --> 00:29:15,360
Speaker 1: shrugging your shoulders and saying, we just don't know. Yeah,

521
00:29:15,360 --> 00:29:18,840
Speaker 1: And I'm certainly I think everyone's unfortunately moonlighting as a

522
00:29:19,000 --> 00:29:22,640
Speaker 1: as a as as a late night viroologist here. Um,

523
00:29:22,680 --> 00:29:25,000
Speaker 1: but um, you know, we're we're we're we're not trying again,

524
00:29:25,040 --> 00:29:27,160
Speaker 1: we're not trying to call that bottom. But the data

525
00:29:27,200 --> 00:29:29,920
Speaker 1: points I'm looking at, we're looking at a number of

526
00:29:29,960 --> 00:29:33,640
Speaker 1: cases per day hospitalizations, UM. And you see the trend

527
00:29:33,640 --> 00:29:37,520
Speaker 1: line the US has has flattened the curve. UM you're seeing.

528
00:29:37,520 --> 00:29:40,520
Speaker 1: You know, today in New York we have fewer hospitalizations

529
00:29:40,520 --> 00:29:43,400
Speaker 1: than we have yesterday. That's a big positive. And so

530
00:29:43,680 --> 00:29:45,840
Speaker 1: I do view that as a you know, a cautious

531
00:29:45,960 --> 00:29:49,000
Speaker 1: yellow light for maybe being a little more offensive in

532
00:29:49,040 --> 00:29:52,120
Speaker 1: our portfolio. That being said, UM, some of the data

533
00:29:52,160 --> 00:29:55,800
Speaker 1: I'm seeing from from my source at Data Minor, UM,

534
00:29:56,000 --> 00:29:58,920
Speaker 1: I see, you know, really about ten to twelve days

535
00:29:58,960 --> 00:30:01,960
Speaker 1: before the caseload. It's I can see hotspots around the

536
00:30:01,960 --> 00:30:05,080
Speaker 1: country and around the globe. UM. I'm very concerned about

537
00:30:05,080 --> 00:30:08,720
Speaker 1: the South. UM in the US. UM. India could be

538
00:30:08,800 --> 00:30:12,720
Speaker 1: a dramatic humanitarian disaster that we just don't know about yet.

539
00:30:13,160 --> 00:30:16,080
Speaker 1: And you know, some countries in Europe and South Korea

540
00:30:16,080 --> 00:30:19,200
Speaker 1: in particular, have done a great job on testing. We

541
00:30:19,240 --> 00:30:21,120
Speaker 1: haven't done a great job here and we just don't

542
00:30:21,160 --> 00:30:23,880
Speaker 1: have enough tests. And so you know, I think it's

543
00:30:24,000 --> 00:30:26,800
Speaker 1: very challenging for the economy to reopen. And when we're

544
00:30:26,800 --> 00:30:29,560
Speaker 1: flying blind here, and I sort of take the example

545
00:30:29,760 --> 00:30:32,360
Speaker 1: of you know, uh, the meat packing facilities that are

546
00:30:32,360 --> 00:30:34,960
Speaker 1: closed right now. Um, there are three big pork facilities

547
00:30:34,960 --> 00:30:39,080
Speaker 1: that are closed around the country. UM. You know what happens,

548
00:30:39,280 --> 00:30:41,600
Speaker 1: you know, if if we reopened the economy and there's

549
00:30:41,600 --> 00:30:44,240
Speaker 1: a case at a school or at at at at

550
00:30:44,280 --> 00:30:47,040
Speaker 1: a plant facility, what's the path that we take. Are

551
00:30:47,080 --> 00:30:48,959
Speaker 1: we able to test all these employees on a day

552
00:30:49,000 --> 00:30:51,440
Speaker 1: to day basis? And right now we're just not And

553
00:30:51,480 --> 00:30:53,600
Speaker 1: we need to build up that capacity. I think before

554
00:30:53,640 --> 00:30:56,880
Speaker 1: we can really get things moving in a faster way.

555
00:30:56,920 --> 00:31:00,320
Speaker 1: But I think we will open slowly. UM. But I'm

556
00:31:00,360 --> 00:31:03,040
Speaker 1: you know, I'm still cautious about the ability, um to

557
00:31:03,160 --> 00:31:05,080
Speaker 1: do it in a in a way where we have

558
00:31:05,360 --> 00:31:08,880
Speaker 1: procedures in place. I think individual companies are starting to

559
00:31:08,920 --> 00:31:12,680
Speaker 1: put that, you know, are starting to put together plans, um,

560
00:31:12,720 --> 00:31:15,040
Speaker 1: but we probably need a little more on the nationwide

561
00:31:15,040 --> 00:31:17,760
Speaker 1: basis on testing. Hey, Sam, thanks so much for joining us.

562
00:31:17,760 --> 00:31:21,280
Speaker 1: We really appreciate your thoughts there. Sam Hendel, president of

563
00:31:21,400 --> 00:31:25,360
Speaker 1: Levin Easterly joining us on the phone. We appreciate his thoughts.

564
00:31:27,080 --> 00:31:29,320
Speaker 1: Thanks for listening to the Bloomberg P and L podcast.

565
00:31:29,480 --> 00:31:32,120
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

566
00:31:32,160 --> 00:31:35,280
Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on

567
00:31:35,280 --> 00:31:37,880
Speaker 1: Twitter at pt Sweeney. I'm Lisa abram Boy. It's I'm

568
00:31:37,880 --> 00:31:40,720
Speaker 1: on Twitter at Lisa A. Bram Woit's One before the Podcast.

569
00:31:40,800 --> 00:31:43,360
Speaker 1: You can always catch us worldwide on Bloomberg Radio