- April 28, 2020
- Blog , The Trusted Navigator - Bernhard Koepp
A Day in the Life of Social Distancing – YouTube Video & Transcript
In this video, Bernhard Koepp, CEO of C.J. Lawrence, describes a typical day in the life of social distancing to illustrate what companies are open for business during the economic shutdown and will emerge stronger after the crisis.
Companies mentioned during this video broadcast include: Microsoft, Adobe, Amazon, PayPal, Costco, American Tower Corp, Qualcomm, CVS, Home Depot, Walmart, Nexterra, Apple, Disney, Netflix, Regeneron, Roche, Johnson & Johnson, Abbott, Thermo Fisher, Becton Dickinson, L3Harris.
Video Transcript
Bernhard Koepp:
Yeah, hi there. It’s Bernhard Koepp at C.J. Lawrence, coming back to you from the home office. Well, it’s day 38 now in social distancing. So a lot of the questions we’ve been getting is what are we doing in the portfolio. What are the sectors that we’re concentrating in, or the stocks that we’re concentrating in, to position ourselves for the future. So the best way, I think, to illustrate this is to kind of give you a sense of what a typical day looks like for myself, for example. So what’s the typical day of a portfolio manager, like myself, at home in the home office, and what are we doing.
Bernhard Koepp:
So we wake up in the morning, we get our hand sanitizer, we get all cleaned up. I bought my hand sanitizer at Amazon Prime. So that’s one of the stocks we own. I log into my computer, which is connected to my office. That’s Microsoft 365. So basically the way I’m coming to you and connecting to my colleagues at work is through Microsoft. The next thing I do is I typically check my social media feeds, Facebook, even things like in Messenger and WhatsApp, to see what the latest news is with the different news feeds that I have in my system.
Bernhard Koepp:
So the next thing is, this video, for instance, it’s being edited on Adobe. So that’s another interesting company which is in the category of software as a service. So basically anything in the digital economy has to come through something that was created in Adobe. So it’s really the interface of the internet, or of websites that Adobe creates. So this YouTube video, obviously, is posted within Google’s YouTube. So if we keep going through the day, what I typically do next is I go to my JPMorgan app, my JPMorgan Chase app, and I see if I paid all my bills. During this social distancing phase and being at home and quarantined, what I’ve done with all of my bill paying is I basically set up everything to be paid directly out of my JPMorgan account. So that is the banks that are really in the forefront of innovation when it comes to digital payments have done this already, even before all this virus occurred.
Bernhard Koepp:
So PayPal is another one of these companies. So when I go to Amazon or I go to websites that are not connected to Amazon Prime, typically the way you’re going to pay with your credit card is through PayPal. So the great thing with PayPal is it allows you to use credit cards like Visa or Mastercard to process your payment online. So the next thing we hear a lot because of all this activity in the cloud is that cyber security and hacking is really important. So companies like Palo Alto are one of the big companies that help corporations really be secure.
Bernhard Koepp:
At this point, I’ve gone through half of my day, I’m going crazy, I really want to get out. So I grab my Apple phone and I Googled where’s the nearest Starbucks so I can at least go through a drive-through. And where we’re going shopping these days in our area is typically Costco. It’s amazing how Costco has organized shopping. Our Costco out here on Long Island basically lets only about 20 people in at a time. People stand in line outside. So I was standing outside with my face mask, watching my iPhone. Luckily, one of the things that occurred to me is thank God we have broadband and we have good cell phone towers. So one of the things we like a lot in this environment are the cell phone towers. That’s American Tower and Crown Castle. And the thing that allows your iPhone to connect with these towers is really the modems that are in your smartphones. So those modems tend to be manufactured and designed by Qualcomm.
Bernhard Koepp:
So going through this even further, I had to go to my local CVS to get some of my medication. CVS has been in the forefront really of creating what they call a MinuteClinic. This is an app-based service where you can connect to your pharmacist, and a doctor actually, that’s on demand at CVS to talk about all sorts of things. In this environment, where we are going to go through testing and making testing more available to the population, these types of clinics that are run by the pharmacies are going to be much, much more important.
Bernhard Koepp:
So the next thing is, one of the things, we finally have face masks for the whole family now, but one of the things we found was you could go to Home Depot and get construction-type material face masks and all sorts of things like that at Home Depot. Home Depot was one of those stores that was deemed essential and is open. So a lot of the contractors and people like that and do-it-yourselfers have been able to go to Home Depot. We drove by Walmart. Walmart is also one of those companies that’s seeing a lot more demand these days, even the in-store traffic at Walmart is 20% higher. I’m not talking about e-commerce. Of course, e-commerce has just exploded at places like Amazon and so forth. But the in-store traffic at Walmart is up 20% just in the last month, which is huge.
Bernhard Koepp:
So then the other part of this is if you think about cell phone towers and broadband, all that, what’s really important is power, and that’s backup power. So one of the companies we’ve been involved with is NextEra. NextEra started actually as just it was a regular utility company in Florida, but now it does everything from backup power for commercial use. So a lot of the cell phone towers, for instance, that you see around the country have backup power.
Bernhard Koepp:
So, of course, the day comes to an end, we go through our working day. The next thing we think about, oh my God, what are we going to do tonight. Streaming videos is the main thing we can do, obviously, staying at home. Amazon Prime, if you’re an Amazon Prime member, you can get movies for free through your Amazon movie Prime membership. You have Apple TV, obviously, as well. Netflix is, of course, a big player in here, and also Disney. I mean, Disney just launched its Disney Plus membership and they just actually announced that the membership there hit 50 million. Netflix just had their numbers out. Netflix now, it had added 15 million new members just in the last quarter. The estimate for new membership was 7 million, so it was double what they thought. Netflix will have 200 million members by the end of the year easily, if you can see. Then that compares to Disney at about 50 million and so forth. So Netflix has a massive lead in streaming. So thank God for that, that we have that at home.
Bernhard Koepp:
The other activity for our children, Xbox. Xbox is owned by Microsoft. That’s another, gaming is a big go-to device during these times. So that’s owned by Microsoft. Then, obviously, the thing we watch at night is we always watch the news and we hear what’s going on from the White House. One of the things that has been interesting to watch is how many times our good healthcare companies and biotech companies are mentioned by our policy makers. By the time this crisis is over, companies like Regeneron, Roche, Thermo Fisher are going to be household names.
Bernhard Koepp:
So just to go through some of those. Regeneron is the company that’s working on the vaccine. We’ve been involved with that company since a year ago. The CEO of Regeneron stated a couple of weeks ago that they expect to have a vaccine in August. I mean, you hear a lot of conflicting information on the timing of when we should see a vaccine. There are all sorts of studies going on. But I think if we listen to Regeneron, they have a really good track record when it comes to developing vaccines. If you think about what they did a few years back on the Ebola crisis, they were the ones that actually came up with a vaccine for Ebola, and that was a lot quicker than expected, so I wouldn’t be surprised that we see some very good information coming out of Regeneron sometime in the early summer. The current trial for their vaccine is in phase two. Phase one is with about 40 humans. Phase two has about 400 humans typically. So we will see results of that quite soon.
Bernhard Koepp:
J&J, Johnson & Johnson is another company that’s also doing trials for vaccines. And then if you look at the testing companies, Roche, which is a Swiss pharmaceutical company that owns Genentech, they got approval for a test kit. And of course, Abbott Labs, which is a company we hear from the White House briefing now almost every day. Abbott Labs is the company that developed the 15 minute test. This is the key to testing. I mean, our family friends just got tested last week. The process was, it took forever. It took four days to get an appointment, and then when we finally got tested with a swab up into the nose, it took another three or four days actually to get the results. The Abbott Labs test is really a game changer. If we can get a result in 15 minutes, then we can really test people in volume and then make sure they can come back to work.
Bernhard Koepp:
So Thermo Fisher has also test kits, and Thermo Fisher owns a company that it bought a few years back called Life Tech. This company does a lot of the genomic sequencing, which is the DNA and RNA testing that is done to actually figure out what these viruses are, or in cancer-related things, they do DNA-type sequencing. This is all very exciting work. So it’s really interesting to see how all the immunology companies are where the spotlight is really on them to find a cure here.
Bernhard Koepp:
Then on the devices side, Abbott Labs and these companies produce devices as well to test blood and the oxygen levels in blood. Becton Dickinson is a company that we own also. Becton Dickinson is the company that does everything from ventilators to basically anything you would find in a lab. So companies like that have stepped up production, which is very promising. So we’re hearing less and less that ventilators are a problem, it seems. Now that the number of cases have peaked in places like New York, we’re seeing ventilators a lot less of a problem. We’ve heard from the president that the military has gotten involved. And when we went for our testing here at the local Stony Brook University out on Long Island, it was clear the logistics of the testing were being managed by the military, or probably the National Guard out here. So one of the companies that is in the forefront of logistics and communications within, it’s really the company that’s digitizing the military, if you want to call it that, it’s L3Harris. It’s a very good company that is really helping the military to transform.
Bernhard Koepp:
So that little story, just basically I touched 80% of the companies that we own in the portfolio today, and that was really going into the crisis. So we didn’t just buy these companies today. But all of the companies I mentioned in that little story, which is basically a day in the life of sitting here, self-quarantining, and working from home, 80% of these companies I’ve touched, which is quite remarkable. Which shows you that not everything in the economy is shut down. There is a huge part of the economy, which is the digital economy, that’s actually working quite well.
Bernhard Koepp:
So just to summarize the five themes that I covered. Number one, is cloud computing. That’s the public cloud. That’s the Microsofts and so forth. Then you have the hybrid cloud. That’s the applications that go into the cloud. The main companies involved with that are companies like Red Hat. Think of hybrid cloud computing as the applications that go into the public cloud. So those are the things that actually make you do certain things in the cloud. Then the next part of cloud computing is, of course, cyber security. That’s the Palo Altos and so forth. Then you have software as a service. That’s the Autodesks, or the Adobes, where you can download from the internet the software tools that make you create the websites and things that we’re using today on an everyday basis.
Bernhard Koepp:
Then number two, the second part of this, is communications and broadband. We’re all starving for more broadband. It’s clear, even talking to my neighbors here, everybody’s having the same battle at home. Now that everybody’s online, you see outages in broadband a lot. So the 5G rollout in mobile will be very important. That’s chips, modems, cell phone towers. There’s going to be a lot of investment going in that to make this better. Social media is obviously a big part of this, and backup power.
Bernhard Koepp:
The third part is healthcare. I mentioned all the biotech companies, and the diagnostic companies, and the medical devices, and really the virtual medical services, like the MinuteClinics at CVS, that are going to be so much more important after this crisis is over. Number four is the retail part of this, what we call the omni-channel. Omni-channel is really the convergence of e-commerce and bricks and mortar. So the best example of that is Amazon with its acquisition of Whole Foods. So they’re bringing together the best of e-commerce and bricks and mortar. In today’s economy, even before the COVID-19 virus, if you want to survive, you have to have both. You have to have a very good scalable and efficient, cost-effective e-commerce platform, and you need a point of contact or distribution with the clients that can either pick up the goods and services that you’re providing. So you need both. So the big players there are obviously Amazon, Costco, even Home Depot is very much both on e-commerce and on the pickup side. So that’s something we’re watching very closely.
Bernhard Koepp:
The last part of this, which is a little bit more obscure, is fintech. So that’s the payment side. That’s the PayPals and the credit card companies. But even if you think about the banks, I mean, the big banks like JPMorgan, Bank of America, they’ve invested a lot of money to try to make sure that payments are easy, they are online, and basically not analog anymore, but digital. So that’s a lot of focus of companies today in the financial service business.
Bernhard Koepp:
So that’s really a summary of everything we’re doing. If you’re positioned in these themes and these sectors, you’re probably doing quite well in the portfolio. So that’s something we continue to focus on. So stay well, stay home, keep distancing. And hopefully, this will be over soon and we’ll be back in the physical economy. Take care. Bye-bye.