Chris Hill: Hey, thanks for watching. We’re
coming to you from Fool Global Headquarters in Alexandria, Virginia. I’m Chris Hill here with
Jason Moser and Ben Ra. Thanks for being here guys! Jason Moser: Thank you! Hill: We’re going to be talking 5G. We’ll be
taking your questions. We’ve got some stocks for investing in 5G. And if you’re looking
for even more stocks, Motley Fool, CEO, Tom Gardner has put together his list,
The Top Stocks for 2020 in a report. It’s available for members of Motley Fool Stock Advisor,
which is our flagship service. So, if you’re already a member go to fool.com/2020,
you can get the report. If you’re not a member of Stock Advisor, you can still go to fool.com/2020
and get details on how to become a member and get that report: Top Stocks for 2020.
Ben, let me start with you. There’s so much talk about 5G, I feel like you can’t watch
a sporting event without a mobile phone company advertising for 5G. Let me start with the basic,
obvious question, what is 5G? Ben Ra: I mean 5G, it’s like nirvana, you know.
It’s what everybody’s talking about at the moment. But I think the best way to
explain it is by looking at the current situation. Right now, you have more people with more
devices using more data. And if I could take an analogy; it’s almost like you have more
people using a single road and that road is getting crowded. So, you have a couple of things
you can do. You can make the road more efficient, make the movement of people more
efficient, or you can just build a bigger road. So, 5G is really about building a bigger road,
it’s finding better spectrum, higher frequency spectrum with higher bandwidth,
so you can carry more data. It’s called millimeter wave technology. So, you’re
looking at spectrum on the order of 50 GHz. So, it’s way up there in terms of frequency.
And the problem with that frequency level is that, the bandwidth is really large but
it’s also very sensitive. So, it can be disrupted by leaves, by rain. So, you have to put a
lot of different small cells everywhere. So, it’s going to carry a lot of infrastructure spending.
And that’s one of the issues with 5G is, how much it’s going to cost. It’s not something
that’s going to appear, like, tomorrow, it’s going to require five, ten years of huge capital
investments on the part of, mainly, the telecoms. Moser: Yeah. I mean you probably are going to be hearing about 6G within the next year.
And they’re not going to really have 5G fully rolled out yet, because it’s been mentioned,
it is something that’s going to take a number of years to actually roll out. That’s just it,
right, it’s the fifth generation of wireless technology, it’s giving
us our data at faster speeds. And when you think about all of the stuff
that we’re doing with our smartphones today; whether it’s entertainment, whether it’s just
our day-to-day living, we are consuming more data than ever before and there are more devices
out there that are being connected to all of these other devices. We talk about the
internet of things, the bottom-line is, you got to make that road bigger,
like Ben said, and that’s the effort with 5G. But I’m serious, I mean if we’re talking about
5G today, it’s going to be 6G soon and then it’s going to be 7G, it’s going to keep
on going until eventually we can just snap our finger and have everything in an instant.
Ra: The cable companies are already talking about a 10G, and that’s a huge –
Moser: They’re one-uppers, they’re trying to top us here, right? [laughs]
Hill: Exactly Is there any downside to this? I mean, every once in a while, I’ll see something
where people are legitimately concerned about health impacts is that something to be concerned
about or is that just — I don’t want to say conspiracies theory talk, but is that
overblown, I guess is my question? Moser: Probably overblown, but we’ll probably
know more about that in 30 years. I have read through scientific journals to investigate
this more and understand the reality of the situation. We have more cells mounted in more
places to try to shorten the distance for this data to travel. And so, it’s a fair question,
are these radio waves going to affect us, are they going to harm us? And the bottom-line is,
we just don’t really fully know right now. There’s a lot of data out
there and the general consensus is, that, no, it seems like we should
be okay. But we’re talking about 10G at some point here. At some point or another it does
seem like maybe that that power could be something that we’d have to keep a closer eye on.
But I feel like right now, we just — we’re going to have to wait and see.
Ra: I don’t know about the health impacts, but I think if you look at some of the small
base stations, the small cells that are being set up all over the cities, it may not be
very aesthetically pleasing. So, you’re going to find these things popping up in the middle
of the road. And it’s got to be there, because it’s got to be at a certain position based
on the configuration of the buildings. So, it may cause some anger from
the people that are living there. Moser: It reminds me of when I lived in Cairo,
Egypt for a few years — and this was back in the early 2000s. And the Cairo skyline,
at the time, was known for two things: first and foremost, a lot of the buildings were
unfinished; secondly, everybody had satellite and everybody had multiple satellites.
And so, when you saw the skyline, it was just littered with satellite dishes all over the
place. And yes, to your point, you’re going to see a lot of these types of things, unless
they can camouflage them. You see a lot of these towers that are being made to look like
trees now, somewhat better than others, but yeah, it could look a little bit aesthetically
displeasing, I guess, for the untrained eye. Hill: So, let’s get to some of the industries
that this is going to have any impact on. Because obviously, as you said, Ben, you got
the telecoms that are doing the investment, they have a natural interest in that. What
are some other industries that investors should be looking at when thinking about the roll-out
of 5G and who is it going to have a positive impact on? Ra: Well, so I do want to
go back to the telecoms and also the cable companies, because there
is an idea out there that if 5G comes, you have these fast internet speeds delivered
over wireless. What’s going to happen to your cable broadband subscription that you have
at home, will you even need that in the next five, ten years and what does that
mean for the cable companies? I think if you look at the U.S. infrastructure,
there’s a strict division between the companies that own the broadband infrastructure — those
are mainly the cable companies — and then you have the wireless companies, like a
Verizon or a T-Mobile. If you look in Europe, those are basically the same companies. And I think
that’s going to happen over the next few years, where you see a consolidation between the
broadband, the wireline, the fixed broadband and the wireless. Because the capital investments that
have to be made by the telecoms are very significant. And if you look at their balance sheet. If you look at, for example, AT&T, they’re not
in a very good situation in terms of their balance sheet. They have a huge amount of
debt. If you look at how much dividends they pay out. The amount of money that they have
left over for investing into 5G, I would say, max — realistically speaking — it’s $10
billion a year, and then they have that huge debt load and declining TV business as well.
So, all of that means that there has to be some kind of consolidation between those two
sectors; that’ll be very interesting to watch. I am very much a detractor of AT&T’s situation.
So, the winners and the losers are definitely there. And I think a couple of the wireless
players, I think, are in a very difficult situation. Moser: This is his fancy way of
saying he’s bearish on AT&T. Hill: What do you think in terms of other industries?
I know that you’re big for, among other things, the healthcare space, telehealth. You think back to the
Super Bowl, and one of the commercials that really that sort of opened my eyes to 5G and its
impact beyond just phone companies. Verizon had a commercial that was about the impact
5G could have on first responders, that it could have on hospitals and telemedicine.
Moser: Yeah, I mean it really is — it’s almost the better question might be to ask, what
industries will this not impact? Because it does have the potential to impact virtually
every part of our lives. I think just generally speaking, the way this has been communicated
to us is, consumers expect it to be just something that impacts our lives immediately, we’re
going to be able to download information more quickly than ever before and it’s going to
make us — we’re going to be able to move faster, we’re going to be able to do more things.
I think that’s probably a little bit overblown. I think it’ll be a little bit more modest,
the difference that we see. But when you look at the infrastructure plays
here, I mean the internet of things and with more and more devices connecting, it could
be everything from cars talking to each other — as you mentioned — first responders. Things
of that nature, that perhaps help cities function better, help buildings communicate with each
other, right. I mean there are all sorts of different ways this could play out.
Definitely you’re going to see the chip companies. I mean, I’ve talked about Lumentum before
here on this show. And that’s a company that 5G, there are big tailwinds there. Again,
hardware we see — in Apple’s most recent call, a few questions on 5G, they’re not going
to be rolling that 5G capable phone out yet, it’s going to take a little bit of time, but
certainly a lot of hardware companies are going to benefit from this as the
capability becomes available. Hill: I was going to say it seems like,
if you’re in the business of making devices, I think if you’re a company like Apple —
not that Apple needs any help per se. But it seems like Apple
is poised to benefit here. Moser: I think so. And the questions on the
call were based around, when you roll this capability out how much are you going to be
able to raise prices? And Tim cook is very good about saying, you know what, we’re not
going to comment on things that don’t exist yet or at least they don’t exist as far as
we’re telling you. So, it will be interesting to see from the device-maker’s perspective,
what kind of pricing power that affords them. That might be something that really all kind
of boils back down to how we, as consumers, perceive the value of 5G?
Again, I don’t think it’s going to be like, you hit the switch and think the entire world’s
changed, because now it’s 5G. I think it’s going to be a little bit more modest.
And I think that is going to be something that keeps a lid maybe on the pricing that some
of these hardware companies can implement. Ra: I think it’s definitely going to be a
gradual transformation. But the most obvious industries that I think will be affected are
gaming and also the automobile, the self-driving car industry. So, you’re looking at companies
like Alphabet, which are exposed to both. I mean, the cloud gaming possibility, I think,
is huge. The projections for the number of gamers that are going to be playing these
streaming services is pretty staggering. So, companies like Microsoft and
Alphabet are definitely poised to benefit. Moser: Yeah. And immersive technology, right.
We talk about AR and VR and mixed reality all the time. That is in line with Ben’s
gaming example there. We’re seeing immersive technology really start to gain some traction.
And one of the biggest drawbacks or one of the biggest barriers or hurdles that they
needed to clear has been the latency, which is just the delay in that transfer of data.
And 5G should, in theory, bring that latency down. Again, though, it’s going to result in a lot
more devices connecting to each other. And we have to keep that in mind.
It’s going to be interesting to see, relatively speaking, how much bigger this road gets,
considering all of the devices that will be coming online. It just might not
be as profound as we are hoping. Hill: Yeah. Alright, we’re going to be getting
to your questions in just a moment, but first, be prepared to take a couple of notes, because
we’ve got a couple of stocks to add to your watchlist, if you’re looking to invest in
the 5G revolution. And, Ben, let me start with you, safe to assume that AT&T, Verizon,
those stocks are not on your watchlist for 5G? Ra: Verizon, possibly.
AT&T, I think is in a very difficult situation.
Hill: Why is that? Ra: Well, first of all, they made a terrible
acquisition with DirecTV, so they are in the traditional TV business. And when you’re AT&T
and you’re investing in 5G, you’re actually helping the development of, say, a Netflix
or cloud gaming. All of that is competition for the DirecTV, the traditional TV business.
So, this is as if one part of their company is competing against the other. Every dollar
that they invest into 5G actually, in a way, helps the competition and weakens their TV
business and they have a ton of debt. Hill: Okay. That’s about — what do you
have for a watchlist stock though? Ra: So, my stock is rather boring. I would
actually choose Comcast. And it’s more of a consolidation play, where I see the broadband
and the wireless consolidating. I would even say that whatever monopoly position that they
have locally would probably get stronger with that kind of consolidation. And I think going
forward they’ll have some considerable pricing power. Hill: Do you think
Comcast will take some of those additional profits and invest them
in customer service? If history is any guide — Moser: Probably should.
Ra: I’ve never had a bad experience with Comcast. Moser: Well, neither have I, I don’t use it
though. [laughs] I’ve seen the responses on Twitter, it just isn’t nice.
Hill: [laughs] Jason, what about you? Moser: Yeah, I’m going to with Teradyne,
I added this to the watchlist of our augmented reality service here, late last year. Teradyne
is in the business of automating repetitive manual tasks as well as electronic testing.
I think the company put it best on the website when they say, “It’s a good bet that every
device you use has been touched and enhanced by Teradyne during its assembly or test. These
devices are reshaping markets where innovation is assumed and failure is not an option.”
And so, again, as we see more devices coming online, Teradyne plays a big role in the testing
of those devices and the components that make up those devices as well as the
infrastructure that’s being built out. And we talked about this big, expensive buildout.
Teradyne is a part of testing that, making sure it all works. And so, to me, there is
a big opportunity there because this is going to be something that stretches out over a
long period of time. You can’t go through a Teradyne call without hearing them talk
about 5G at least a few times. And then, a little bit of a bonus pick. I’ve talked
about Cerence before. And you mentioned something about automated cars, self-driving
cars and cars are going to be connecting and talking to each other more. And Cerence builds
those automotive cognitive assistant solutions. The neat part about the business is it’s
siloed into two parts. They have what are called edge products, and those are actually
the in-car products, but the connected services side of the business — which is really the
cloud part of the business that they work on. As these cars become more connected and we start
being able to do more inside those automobiles, Cerence is playing
a big role in that as well. Hill: Alright, if you’re enjoying the video,
please consider giving us a thumbs up, it helps other people find videos and we like
making videos like this. So, thanks for helping us out. And again, go to fool.com/2020 and get
Tom Gardner’s report, his Top Stocks for 2020. Let’s get to the questions
coming in from viewers. A question from Pacific Spice, who asked,
what are your thoughts on semiconductor companies like Broadcom and how
5G might play a role in their stories? Moser: Well, I think that a lot of those big
types of semiconductor companies, and the one I always go back to is Qualcomm.
They are big companies with a lot of resources and they’re playing a big role in this development.
The flip side is, that’s not a secret, a lot of that stuff has been brought forward into
the share prices today. So, I think they’re wonderful income plays, I wouldn’t look at
them necessarily as stocks where you would recognize some serious capital appreciation,
but they do play their role in this value chain and shouldn’t be ignored.
Hill: Yeah. Another question, is there a moment that will signal to you when 5G has arrived
rather than being a technology that is coming soon? A great question, as investors, we always
love signals whenever we can find them. To the point you made earlier, Ben, I mean this
is not going to be like flipping a switch and all of a sudden 5G is here. But is there
a point at which you feel like you’re going to know, okay, it’s arrived enough, we’re
seeing the impacts not just for the businesses but for us as investors in the stocks?
Ra: Right. I would say sort of that point would be when the cloud gaming, the streaming
services reach a certain tipping point or they reach a certain scale, that would be
one indication. The other, of course, was the connected cars, I think,
that would also be a big indication. Hill: Steve asks, “How might 5G touch REIT
stocks like EQIX [Equinix], a data center, and CCI [Crown Castle], a cell tower, in the
near future?” Real Estate Investment Trusts, built around, whether its datacenter,
cell towers; interesting question? Moser: Yeah. I think that all really depends
on the actual REIT, right. It’s about getting a REIT that’s working in that space. And a
couple that come to mind. I believe these are REITs, if I’m not mistaken. American Tower
in Crown Castle, which are the tower companies that we have under covered here
at The Fool. Those are the two that stand out as a couple of obvious beneficiaries.
But again, I mean I think any time you’re talking about REITs, that really does boil down to
who’s managing that REIT and the opportunities that they find in that real estate space.
Real estate investing is hard, and so the jockey play is really something you
got to take into consideration there. Ra: Yeah. I think one thing we have to
remember is that the existing infrastructure — the cell towers, the fiber that’s already been
laid — is very important to the 5G story. So, 5G is not going to immediately replace
all the infrastructure. It’s going to work together with it. And then at a certain point,
there’s going to be much more independent 5G-related infrastructure in the future.
Hill: One viewer asking. “The way you’re talking about it, it seems like companies
taking advantage of 5G are better placed than the companies building 5G,
do I have that right?” Moser: I think so. Yeah, I mean you can look
at it as the commoditization versus what everybody is going to do with that infrastructure.
We talked about being able to utilize the networks and monetize them over long periods of time.
I mean, you look at something like a utility, an electric company, a water company. Important
roles that they play, right, not always the greatest investments, because they always
have to be loaded down with a lot of debt to continue moving forward and invest in that infrastructure to keep accommodating our growing society, our growing country, and our
growing world. But you see a lot of companies out there doing a lot of great stuff with that
electricity and that water, and I think 5G probably falls into that same category.
Ra: Absolutely. Just look at Netflix, I mean they’re going to benefit pretty significantly
with 5G, but they’re not really laying down a single dollar for the capital investments,
but they’ll benefit even more than the companies Hill: …I was going to say, if nothing else,
they benefit from not having to outlay the cash. Ra: Yes.
Moser: A very good point. Hill: A couple of people asking: “Do you
guys have good examples of where we can look for 5G in action already?” I mentioned
Verizon earlier, they’ve committed to putting 5G into some NFL stadiums, so…
And on a highly localized level that’s one place. Moser: Yeah, I can’t say I have any personal experience with 5G connection at this point,
so I’ve got nothing, I’m sorry. Hill: “Are there any cities
that have 5G now?” Moser: That’s another very good question.
I don’t know specifically, but we can certainly find that answer out.
Hill: Yeah. Dylan, our producer, points out, Verizon is in Chicago and Minneapolis.
So, if you’re in Chicago or Minneapolis, you know, let us know how that’s going?
Moser: A couple of Twitter poles out there, just vote, yes or no, is it worth it or not?
People in those areas just vote. Hill: When it comes to — and this is me asking
this — when it comes to sort of whether it’s the entertainment industry, augmented reality,
VR, that sort of thing or the telecom space, is this the most interesting thing going on
in your mind as an analyst or is there something — whether it works with 5G or is a ripple
effect from that — that you find as, if not more, interesting than 5G itself?
Moser: Just answering for myself, I’m more interested in the companies that are doing
things with the 5G. And so, as viewers and as you all know, I’m knee-deep in immersive
technology here with our services. And so, for me it’s more about these companies that
are using virtual reality and augmented reality, whether on the enterprise or the consumer side.
Certainly, 5G is a tailwind for those businesses as it makes AR and VR and MR more
usable, more user-friendly. So, I would say, that’s probably where my focus is more today
than actually on the 5G network itself. Hill: Ben, what about by you?
Ra: I would say it’s all related. So, when you’re talking about AI, when you’re talking
about cloud computing and 5G, all of that is related. All of that builds on the others.
So, you can’t really talk about one without talking about the others.
Hill: A question from […] — I hope I’m pronouncing that correctly — two questions.
“Is there a stock that intersects AR, VR and 5G?” And follow-up question, “Is there a 5G
stock that pays dividends?” Wow! Looking to get paid. Got to respect the dividend stock.
Ra: Comcast pays. Moser: [laughs] Yeah. I would say, Verizon
and AT&T too, right? I would say, AR, VR, 5G intersecting. There are a lot of great
examples there. Some of the behemoths — Microsoft, Facebook, Alphabet, even Amazon, those are
companies that are utilizing all that technology together today. But we’re going to see a lot
of smaller, more under-the-radar companies coming to the surface here over the next few
years. And that’s what’s really exciting as investors, is looking beyond those obvious
plays and finding the new players in the space that are bringing us opportunities.
Hill: Ben, you mentioned self-driving cars earlier, do you look at 5G as something that
is crucial to the adoption of self-driving cars? It seems like we’ve been talking about
self-driving cars for years now, they’re not ubiquitous in the way that certainly you go
back five years, eight years, there were people saying, “oh, yeah by, 2020, maybe not nationally,
but certainly in certain cities.” How crucial is 5G to all that?
Ra: Well, I think Elon Musk said that, it’s going to happen in 2020; and I’m assuming
it’s going to happen without 5G. So, it depends on, if you’re Tesla or if you’re not. I think
for the general industry, I think it’s a huge driver of that technology. Whether or not
Tesla could achieve it without those kind speeds, the 5G technology, that’s something
to watch out. I wouldn’t underestimate him, I wouldn’t say ‘no,’ but generally speaking
I would say it’s quite important. Hill: A couple of people asking,
“What are your thoughts on Nokia?” Moser: Boy! I’ll tell you; I haven’t looked
at Nokia for a very, very long time — Hill: …not as dominant as it once was? Moser: No, it’s not. It’s not one that’s been
on our radar for a long time. So, I would have to dig back in to really give you an
up-to-date opinion on that one. Ra: I mean, Huawei, is banned here, so with
the ban of Huawei, you’re assuming that it’s going to help Nokia. But I will put that closer
to the Qualcomm, those kinds of companies, that are going to provide the materials.
It’s not always the best investment. Hill: A question from Lauren who asks, “Do you
have any ideas of the most seemingly unrelated industries where 5G could be a tailwind:
logistics, payments, telework?” Great question, sort of some out-of-the-box thinking there.
Moser: Unrelated. I mean, yeah, telework — Hill: … No, seemingly unrelated.
Moser: Seemingly unrelated. I mean, you look at something like Zoom, for example,
the video conferencing company we’re talking about. And as more and more people decide to telecommute,
work-from-home or whatever, 5G, in theory, should help make that easier. Certainly payments,
I mean you should see faster payment acceptance. You should see everything speed up,
in theory, a little bit, if not more. So, I don’t know if there’s going to be one
specifically that I can point out other than those. Ra: The question is really, what industry is not affected by 5G?
Moser: Right. And I was combing through the notes of Rex Moore, when he was out at CES
here in Las Vegas earlier in the year. And he had a really interesting observation.
You know, everywhere you walk around, they had 5G at virtually every booth there.
That was the headline. And on the one hand, he thought, you know what, are we over selling
this, is this overhyped? Because is it really going to impact all of these businesses the
way they say it will? Maybe, maybe not. But you could also see it being perhaps a little
underhyped as well, because we don’t fully understand how far it could reach.
Hill: Well, Lawrence’s question reminds me a little bit of the stock you mentioned,
Ben. Because you think about it, an industry like logistics, which is pretty unsexy —
crucial to our economy — but pretty unsexy, pretty boring. But a business like Comcast, for all
the jokes about customer service, I mean that’s a stock that has rewarded
shareholders for a long time. Ra: It has. And I think it’s really underestimated
by a lot of the market, a lot of investors. I think it definitely has a bad reputation.
But, yeah, I’m a bull on Comcast. Hill: Alright. We’ll wrap up there. Ben Ra,
Jason Moser, thanks for being here guys! Moser: Thank you!
Ra: Thank you! Hill: Thanks everyone for watching.
Thanks for giving us a thumbs up on the video. And, again, go to fool.com/2020 for
Tom Gardner’s Top Stocks for 2020. For everyone here at The Motley Fool, I’m Chris Hill.
Thanks for watching! We’ll see you next time.