Seven US Market Coronavirus Resistant Stocks

25th Mar '20 by William Williams

18 comments 1358 reads

Three weeks ago, I was studying Carnival Stock and believed it had major upside potential. If you had bought that day, you would be down 60%. Wow.

Everything changed
We entered a fog bank and no one knows what awaits us on the other side. The effects of coronavirus are so severe that entire US industries are fighting off bankruptcies. Oil, Hotels, Cruises, Airlines, Banks, Automakers, Real Estate Investment Trusts, Insurance Companies. Never in my life would I have guessed Boeing would need a bailout. Investing in these US industries right now is a big gamble. Don’t even bother! There are some fantastic US companies at great prices. After this bear market beating, these 7 stocks are trading at great valuations.

Coca-Cola (NYQ:KO)
A consumer staple with multiple channels for distribution. Bars might not be selling “rum and cokes” but SmartWater was all sold out at my local grocery store. The company has a strong brand with a diverse lineup of products. Don’t assume the company only sells sugary drinks. Coca-Cola is more than that. It has survived every major recession. The balance sheet debt is manageable with the $11B of cash on hand.

Berkshire Hathaway (NYQ:BRK.B)
This company is just like buying a small ETF. There is an insurance conglomerate, utility company, furniture distributor, home construction company, and chocolate manufacturer all wrapped in one. An extremely strong balance sheet. With $100B in cash on the books, Warren Buffet waits for opportunities like this. His company can weather any storm and wait for bargain investments. Let the greatest investor work for YOU.

3M (NYQ:MMM)
A blue-chip company with a healthy dividend. 3M has diversified products in every industry. Some products will be hurt by an economic recession, but others in the healthcare field will be sold out. At the current 17 P/E ratio, you are buying into a company with a great track record and a knack for innovation for a fair price. During the financial crisis, 3M’s revenue was fairly consistent. Hopefully, it will be similar this recession.

Electronic Arts (NSQ:EA)
Lots of teenagers are staying home from school playing video games. Electronic Arts is one of the largest video game companies with amazing franchises like Madden, FIFA, Star Wars, and Battlefield. This company may hit record earnings this quarter while the rest of the…

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William Williams

26th Mar '20

Anyone looking at the US Market here? No?

Investor & Trader

Sure, I do William - I bought into GOOGLE, Carnival and Redrow yesterday - Currently the only positions I hold.

Could see more downside but these are long term entries for me.

I've looked heavily into Carnival, its tough. If you can stomach the downside ahead. The news from this coronavirus is so bad they might have revenue cut in half this year. Which means major losses.

Google is a solid technology company. So safe on the 5 year horizon, even the short term IMO.

I will lookup Redrow today. Haven't heard much about them.

Gromley

William,

Personally I remain very focussed on the UK (and so can't really add any value to your discussions) .

But there are more global investors around and you might just be the one to create 'critical mass' in terms of commentary.So please do stick with it.

timarr

Interesting post William. I'll take a look at the stocks I don't already analyse.

I've held Google since before the crisis and have added Berkshire Hathaway and Facebook since. Also hold Paypal and Apple. If the market downturn continues then Visa, Mastercard and Walt Disney are on the shopping list.

The question at times like these is whether to buy quality product at a discount or less good stuff at a massive discount. The former - which includes most of the above - will end up providing excellent and safe returns. The latter act more as options - if they don't go bust then cruise lines, airlines, retailers etc will offer huge returns, the challenge is to pick the winners and manage the gut wrenching volatility.

Redrow (LON:RDW) I hold - which probably was a mistake, but it's really not going to go bust. But if I was in the market for a UK housebuilder today it'd be Persimmon (LON:PSN), it's got a rock solid balance sheet and will be OK even if we have a proper recession.

GrahamF

Still a lot of uncertainty. For example, Coca-Cola bought Costa and Costa are nearly shut down. That may only be a small impact for them but it’s certainly not all rosy in the garden. How dependent are Alphabet on the cost of digital advertising? If prices collapse because many consumer brands and others are cutting advertising budgets what will the effect on Alphabet be? Kimberly-Clarke toilet rolls may be flying off the shelf to go into the store cupboard at home, so it has just brought sales forward rather than increased sales in a sustainable way.

Rusty2

Yes I'm looking at various companies, Apple, Microsoft, Google, TTD, NOW, V and Mastercard, some I used to own until recently. I sold Carnival (LON:CCL), that has a dual listing, awhile ago, too risky for me at the moment. I will have a look at KMB. I hold some Redrow (LON:RDW) but sold most a while ago, should have sold them all, I remember the last recession, but that is a UK company?

I don't like Facebook or Coke. Amazon should be doing alright with many shops closed, online is the only way to order some items now. EA I don't know, will take a look.

Are not any telecoms companies worth buying in the US? I think these will benefit with working from home. Also Netflix?

Re: Berkshire, are you not better off just buying a S&P 500 tracker, like Warren Buffet say?

Berkshire, are you not better off just buying a S&P 500 tracker, like Warren Buffet say?

In 'normal' times Berkshire will, more or less, track the index while hoarding cash. When markets crash Buffett and Munger will deploy that cash and make out like bandits in the aftermath.

Berkshire is now too big to outperform under normal market conditions, but these are the times that their active management should really make a difference. And even if it doesn't, it won't do any worse than the index. Each way bet at worst.

I don't like Facebook either, but that won't stop me buying it. I want to invest in companies that do things lots of other people want. In fact, if I only invested in what I liked it would be a terribly short list yielding terrible returns :-)

Herbie, good points.

Telecom companies, i was considering AT&T for the US. They have an ok valuation with a decent Price/Earnings ratio. They are obviously the dominant player in US and well positioned for 5G networks.

Netflix is so expensive in my opinion. I'm sure they will do well, however I would rather own other movie studio and production companies for much better prices. Disney is an example that I would purchase before Netflix. Maybe Disney is a bit volatile right now. Still there are other movie producers in US.

Berkshire is my favorite holding. I am a long time stock owner and I go to the annual shareholder meeting in Omaha. It is a big investor conference in the US. Probably the largest in the world with 50,000 people in attendance. I think it is an incredible value at todays valuation. Really incredible. There are other value investors thinking the same.

EA is a video game company. Think playstation or computer games.

Amazon will most likely be a great company to buy. Is it on sale today? Is it a good value? Who knows. Its expensive, but it is one of the biggest companies in the US.

What do you think about Costa? How is the brand? How does Costa coffee compare with other coffee shops in UK?

Good point on Kimberly-Clarke. Sales are being brought forward. Still a fairly resistant business model to this crisis. Consumer staples will be bought in mass no matter what happens.

I think Google is a utility at this point. It can't be replaced in the internet. Advertising revenue will come from whatever industry is booming at the time. Its fairly resilient.

Thanks! I plan to stick to US and other interesting but rare international opportunities.

So true! Value investments vs extraordinary risk/rewards. I have looked into cruises. I posted on another website about Carnival. Compared to the competition, I think Carnival is in a decent financial position. If the industry goes into consolidation, Carnival may buy out rivals.

27th Mar '20

Costa I would say is rather ordinary coffee chain, but never use Costa or Starbucks, of the chains Cafe Nero is reported to be better. Whitbread probably got a good deal but time will tell, this year won’t be good. Probably getting to saturation point for coffee shops in the UK. I prefer independent cafes.

William K

Thanks William. Some very sensible suggestions here. Basically this is the time to think about buying large US companies that have plenty of cash and are likely to be leading the pack 10 years from now. These companies make up about 75% of my portfolio along with US trackers like £EQQQ and £VUSA. My pick out of your 7 companies is Google which looks cheap. I already have a large holding but may well add to it. My other US favourite is Microsoft.

Yes. If we are going on personal taste I would stay well away from Starbucks. To my taste their coffee is rather bitter, possibly too much robusta in the blend. I would take Costa, Cafe Nero or any of the others instead.

But personal taste counts for nothing much for an investment decision. If the public like what they’re being given then that’s all that matters. Certainly, based on current market share Costa are on top in the UK and their business is still quite heavily UK focused. Coke have bought them for the growth opportunity outside the US and I would imagine that rolling out new cafe openings is going to be highly challenging for a while, but with Coke’s muscle behind them they should be well placed to snap up highly attractive sites that have unexpectedly become available.

https://www.businessinsider.com/starbucks-vs-costa-coffee-comparison-2018-9?r=US&IR=T#costa-doesnt-offer-a-mobile-ordering-service-but-you-can-use-its-app-to-find-local-stores-and-collect-loyalty-points-11

john652

• Coca-Cola HBC AG has updated on the Covid-19 situation saying that this ‘is an unprecedented event that will in some way touch everybody on the planet.’ It says ‘trading in January and February was in line with our expectations. During March, trading across our markets has been dependant on the severity of restrictions on mobility. In markets with heavy restrictions, such as Italy as well as central and southern Europe, demand in the 'out of home' channel has been severely affected. In these markets, 'out of home' represents c. 35-40% of sales.’

• Coca-Cola HBC says it is looking at cost-saving measures and reassessing marketing and capex investments. It says ‘it is still too early to quantify the impact that the COVID-19 pandemic will have on our full year 2020 results. Given the uncertainty of the duration and economic impact of this global pandemic, we no longer believe that it is prudent to provide guidance for the current financial year.’

aflash

USA

This is just to illustrate how important it is to be active at this time. Extremely cheap buying opportunities are short lived. We probably have not seen the bottom on the indices but not everything will bottom at the same time.

CCL (Carnaval) : started buying in January but sold next day for a small profit. After five more trades I closed my position last week for an overall loss of 18%. Even that could have been less with the bounce of the last few days. A Technical Analysis advisory service calculated a ‘measured move’ to a low price difficult to conceive at the time. I put in a limit order, it was filled in the depths of market despair and I was out two days later when shorters covered.

Speculation as to the fundamentals of CCL is not my style except to say the large amount of debt to pay for ships that may not be filled to capacity for a few years was a worry.

Then I looked at medical suppliers and came across a subsidiary of MMM (3M) who makes respiratory masks. Other candidates were HON (Honeywell) and MSA (MSA safety). None of them screamed buy.

GOOGL and BRK.B are in my fund portfolios but the large stock price militates against capital expenditure that is unlikely to make my fortune. Everybody knows these companies. Maybe that will make them go up further. Maybe not. They are back to 2017 levels but have doubled since 2015.

If you bought either of them on 23 March then you are up 16%.

I did trade NFLX earlier in the year for an 8% gain. I hold CSCO (Cisco systems) which is up 25% from its low on 16 March yet I am still slightly underwater.

Timing is so important.

The time to buy is when you do NOT want to.

We have seen a bounce from oversold positions.

If you are excited by the prospect of purchase you may overpay.

A long term decline may resume.

Seven US Market Coronavirus Resistant Stocks

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William Williams

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