Anyone who pretends they know when the economy will reopen is not telling you the truth. And more importantly, what reopening the economy is going to look like is anybody’s guess. For certain we’re not going to be seeing anything that resembles business as usual. And more likely than not, this will not be the “V-shaped” recovery that some analysts are predicting.
Restaurants may be open, but seating capacity is likely to be limited as social distancing will remain the custom. Live sports may return, but it’s not unreasonable to expect that games will be played without fans, or at least with very few fans in attendance.
And there are other considerations as well. Workers will be allowed to go back to work, but after discovering the time value of working from home will they want to. And maybe equally as important, will employers want them to come into the office?
These are fascinating scenarios that will define the post-virus, pre-vaccine economy. But as an investor, you know that there are stocks you can buy right now that will be ready to flourish when the economy reopens.
On this list, we’re not looking at theme parks or airlines. They will come around, but slowly. Instead, we’ve picked seven stocks in different sectors that stand to benefit as the economy finds its new normal.
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- Gilead Sciences
- Abbott Labs
- D.R. Horton
- Deere
- APPLE
- Starbucks
- Eldorado Resorts
#1 - Gilead Sciences (NASDAQ:GILD)
Gilead Sciences (GILD) There are two strategies to battle the novel coronavirus pandemic. The first is a vaccine. However a vaccine won’t be available until the end of 2020, at best. The other strategy is to find a drug or a combination of drugs that can help to manage the life-threatening symptoms.
That’s where Gilead Sciences (NASDAQ:GILD) comes into play. The company has been making headlines for its drug remdesivir. The drug is currently showing promise in treating severely ill COVID-19 patients (COVID-19 is the disease caused by the coronavirus). Early data shows remdesivir improved the clinical outcomes for 68% of 53 hospitalized patients.
However, as J.P. Morgan analyst Cory Kasimov warned, “The results need to be kept in context. It’s difficult, if not impossible, to make any firm conclusions from an uncontrolled data set with a small sample size.”
Still, with no approved treatments for COVID-19, there is hope for remdesivir. The drug is currently being evaluated in at least 11 clinical trials in the U.S. and abroad. And here’s what to watch for. Gilead is set to release its findings from two Phase 3 trials in May. If those results confirm the potential for remdesivir as a treatment for COVID-19, you can expect Gilead shares to continue to climb. For the year, the stock is up over 15%.
About Gilead Sciences
Gilead Sciences, Inc, a biopharmaceutical company, discovers, develops, and commercializes medicines in the areas of unmet medical need in the United States, Europe, and internationally. The company provides Biktarvy, Genvoya, Descovy, Odefsey, Truvada, Complera/ Eviplera, Stribild, Sunlencs, and Atripla products for the treatment of HIV/AIDS; Veklury, an injection for intravenous use, for the treatment of COVID-19; and Epclusa, Harvoni, Vemlidy, and Viread for the treatment of viral hepatitis.
Read More - Current Price
- $90.19
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 12 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $95.41 (5.8% Upside)
#2 - Abbott Labs (NYSE:ABT)
Abbott Labs (ABT) -While the world waits for a coronavirus vaccine, the strategy for reopening the economy is centered around testing. More specifically, we need a simple blood test that will identify individuals who have recovered from the virus. By recovered, it means they were exposed to the novel coronavirus even if they were asymptomatic. The thinking is that those individuals will have developed at least some kind of immune response.
Abbott Laboratories (NYSE:ABT) is at the forefront of this initiative. The company has come up with a point-of-care coronavirus test that received emergency use authorization (EUA) from the U.S. Food and Drug Administration. The test is the fastest of its kind to date. It can provide a positive result in as soon as five minutes, and a negative results in 13 minutes. The test is considered a point-of-care test because it is conducted from a device that is approximately the size of a toaster allowing it to be used in a variety of locations.
The testing will need to be conducted both before and throughout the reopening of the economy. But that’s not the only driver for Abbott Labs. The company’s core business is about the manufacturing of medical devices. These are used in procedures that are being postponed due to the sheltering at home policies that are in place in much of the nation. Once patients are allowed to reschedule these procedures, they will regardless of the status of the economy.
ABT stock is basically flat for the year, but it is off its low and up nearly 40% in the last three weeks.
About Abbott Laboratories
Abbott Laboratories, together with its subsidiaries, discovers, develops, manufactures, and sells health care products worldwide. It operates in four segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices. The company provides generic pharmaceuticals for the treatment of pancreatic exocrine insufficiency, irritable bowel syndrome or biliary spasm, intrahepatic cholestasis or depressive symptoms, gynecological disorder, hormone replacement therapy, dyslipidemia, hypertension, hypothyroidism, Ménière's disease and vestibular vertigo, pain, fever, inflammation, and migraine, as well as provides anti-infective clarithromycin, influenza vaccine, and products to regulate physiological rhythm of the colon.
Read More - Current Price
- $117.76
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $130.07 (10.5% Upside)
#3 - D.R. Horton (NYSE:DHI)
D.R. Horton (DHI) There are growing questions as to whether D.R. Horton (NYSE:DHI) and other companies in the homebuilding sector will be able to make the smooth recovery that many experts were initially forecasting. The good news is that the Federal Reserve has taken interest rates down to their great recession levels. This was going to be a catalyst that would move DHI stock higher.
Many homebuyers did not bite when the Federal Reserve began to lower interest rates in July 2019. However, as rates continued to plunge for the rest of the year, many renters decided it was time.
D.R. Horton had a healthy inventory of over 30,000 homes as fiscal 2020 began. And new sales orders were up 19% on a year-over-year basis. However the mitigation efforts that are happening throughout the country have slowed the process.
Hopefully the borrowers have already had their new constructions approved, because it’s about to get tougher to buy a home. One of the nation’s leading banks, J.P. Morgan Chase (JPM) has announced it will be tightening its lending standards. In addition to requiring that prospective borrowers have a credit score over 700, they will be asking for at least 20% of the home’s purchase price as a down payment. That will be beyond the ability for many homeowners which may have the effect of working at counter purposes with the lower interest rates.
About D.R. Horton
D.R. Horton, Inc operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. It engages in the acquisition and development of land; and construction and sale of residential homes in 118 markets across 33 states under the names of D.R.
Read More - Current Price
- $163.51
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $185.87 (13.7% Upside)
#4 - Deere (NYSE:DE)
Deere (DE) Deere (NYSE:DE) is being ravaged by the coronavirus. At one point, DE stock was down almost 40% for the year. The stock has been part of the recent rally but remains down over 20% for the year.
In addition to removing its previous guidance for 2020, the heavy equipment manufacturer is being forced to shut down some operations as demand erodes in the wake of the virus. Deere has a solid balance sheet with about $8 billion in excess liquidity. J.P. Morgan analyst Ann Duignan upgraded DE stock to a hold and gave the stock a price target of $140. That would essentially mean the stock will be flat from its current price.
However, a recent article in Forbes highlighted that the company had similar fortunes during the financial crisis. When the market began its rebound, DE stock advanced at a pace that was twice the rate of the broader market.
Could it happen again? Investors should certainly pay attention to China. The country has begun to lift the national mitigation regulations even in Wuhan, the epicenter of the virus. Deere makes a substantial number of direct sales in China. If that demand begins to return, it could be a harbinger of renewed demand in the United States once the economy reopens.
Stock #7 is the ultimate risk-reward play
About Deere & Company
Deere & Company engages in the manufacture and distribution of various equipment worldwide. The company operates through four segments: Production and Precision Agriculture, Small Agriculture and Turf, Construction and Forestry, and Financial Services. The Production and Precision Agriculture segment provides large and medium tractors, combines, cotton pickers and strippers, sugarcane harvesters and loaders, harvesting front-end equipment, pull-behind scrapers, and tillage and seeding equipment, as well as application equipment, including sprayers and nutrient management, and soil preparation machinery for grain growers.
Read More - Current Price
- $446.65
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 13 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $431.61 (3.4% Downside)
#5 - APPLE (NASDAQ:AAPL)
Apple (AAPL) Predicting the end of Apple (NASDAQ:AAPL) and being wrong has become a rinse-lather-repeat moment for the market. Still, the Apple bears were at it again. With the company having to shut down all of their factories and Apple stores in China due to spread of the novel coronavirus, many analysts were lamenting the company’s ability to deliver their new iPhones on time for 2020 delivery.
However, what a difference a month makes. The company’s factories are up and running, all their Apple stores in China have reopened. And investors can be assured that Apple will probably be one of the first stores to reopen in the United States.
But the story of Apple is more than the iPhone. The company is doing strong business in its services division. And the company came into the pandemic with one of the strongest balance sheets in the sector with $99 billion in the bank.
“Apple investors should rest easy,” said Loup Ventures Managing Partner Gene Munster. The analyst is forecasting Apple to have 12% revenue growth in the company’s fiscal 2021, after a 5% decline this year. Furthermore, Munster forecast that the company’s GAAP earnings per share (EPS) will increase 32%. That would also be an improvement over a 4% decline in EPS in fiscal 2020.
About Apple
Apple Inc designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
Read More - Current Price
- $229.87
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $235.25 (2.3% Upside)
#6 - Starbucks (NASDAQ:SBUX)
Starbucks (SBUX) Having a Starbucks (NASDAQ:SBUX) on nearly every corner hasn’t been much of an advantage during our period of national mitigation. Although the company’s dining rooms and select stores are closed during the pandemic, the company still is considered an “essential” business and is doing decent business with drive-through, delivery, and curbside pickup.
However, the company will certainly be reporting drastically lower sales in the quarter. But if there’s any business that should see a “V-shaped” recovery, it will be Starbucks. Unless millions of Americans have miraculously broken their caffeine addiction while sheltering in place, demand will return and it will return with strength.
SBUX stock has been a victim of the broad selloff and with a price of around $70 per share, shares seem ridiculously inexpensive. It’s not hard to see revenue and earnings zooming up once Americans feel that it’s safe to go out. And when that happens, the stock should begin to move closer to its 52-week high near $99. That’s nearly 40% higher than its current level.
Buy Starbucks at the current price, enjoy the ride up and collect a nice dividend which the company has increased in each of the last nine years.
About Starbucks
Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items.
Read More - Current Price
- $102.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $102.81 (0.3% Upside)
#7 - Eldorado Resorts (NASDAQ:ERI)
Eldorado Resorts (ERI) Are you ready for some football? If you’re like many Americans, you’re more than ready. But none more than the percentage of global sports fans who enjoy wagering on live sports. Eldorado Resorts (NASDAQ:ERI) by itself would be a less-than-exciting casino play. However, Eldorado is in the process of buying out Caesars Entertainment Corporation. When the $17.3 billion buyout is complete ERI will have access to Caesars network of sports books in 29 casinos in nine U.S. states.
This becomes even more significant when you consider that Caesars is the “official casino partner” of the National Football League. And CZR is also the official supplier of betting odds for both ESPN and Turner Sports.
Eldorado is still a relative newcomer to the casino sector. And because the company leases many of its properties, it’s unclear of how much liquidity they actually have. ERI stock has been among the most volatile that were soaring during the long bull run. But with the stock down 80%, this is the ultimate risk-reward stock.
Admittedly, casinos may be one of the last of the businesses to open up in the U.S. economy. And sports books, particularly through online gambling, make up only a small part of the casino’s revenue. But when live sports, and Fantasy sports leagues start back up, it should provide Eldorado with a nice catalyst that few casinos can match.
About Eldorado Resorts
Eldorado Resorts, Inc operates as a gaming and hospitality company in the United States. It owns and operates Eldorado Resort Casino Reno, a hotel, casino, and entertainment facility; Silver Legacy Resort Casino, a themed hotel and casino; Circus Circus Reno, a hotel-casino and entertainment complex; Eldorado Resort Casino Shreveport, a hotel and tri-level riverboat dockside casino; Mountaineer Casino, Racetrack & Resort, a hotel, casino, entertainment, and live thoroughbred horse racing facility; Presque Isle Downs & Casino, a casino and live thoroughbred horse racing facility; and Eldorado Gaming Scioto Downs, a modern racino.
Read More - Current Price
- $37.60
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
As the calendar moves closer to May 1, the cries for the U.S. economy to reopen are getting louder. Public opinion should not, and ultimately will not, dictate if when the economy begins its slow climb back to health. That should be left to the data that is now starting to come in.
What we know is that however, this recovery occurs, it is unlikely to be the “V-shaped” recovery that some analysts are hoping for. But that doesn’t mean it won’t be a “V-shaped” recovery for some stocks. In this presentation, we’re showing you stocks in a variety of categories. Some of these stocks, such as biotech stocks, are having a good year so far. Other stocks have been highly oversold and even if demand doesn’t come all the way back immediately they should be well-positioned for growth in a post-pandemic world.
And don’t forget, as far as we know at this point, 2020 is still an election year. And that means that many officeholders who are fighting for re-election will be eager to reopen the economy to help them in their respective races.
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