The coronavirus crash has not discriminated in its victims. Large-cap, mid-cap, and small-cap stocks have all been dropping. No sector has been spared either. And while the market flipped from a bear market to a bull market in just three days, there’s still plenty of volatility to cause cautious investors to keep a healthy social distance from many stocks.
The pandemic that is forcing most of us to stay in our homes as much as possible (and if you’re not, please do) is unique for most of us. Demand hasn’t organically diminished. It’s been artificially suppressed. And that means that while it’s fair to say our economy will certainly experience a new normal, there will be a recovery.
And when it comes, many of the companies that were strong before the pandemic broke will continue to show their strength. Investors who are investing in these companies today will be the ones that experience the greatest gains when the recovery happens.
Quick Links
- AT&T
- Johnson & Johnson
- Teva Pharmaceuticals
- CVS
- McDonald's
- Disney
- Apple
- The Trade Desk
#1 - AT&T (NYSE:T)
AT&T (NYSE:T) has been a stock that investors have loved to hate. Certainly, the company looks like it was behind the curve with its acquisition of DirecTV at a time when many Americans were looking to cut the cord. And analysts are expressing their displeasure at the company suspending plans for a $4 million stock buyback program.
But shares of AT&T look drastically oversold amidst the ongoing pandemic fears. The stock is down nearly 28% in 2020. However, the company is still showing strength in its core telecom business. And in select markets, the company has the opportunity to provide consumers with bundled mobile and home internet service.
AT&T has two additional catalysts in 2020. The first is the launch of the company’s own streaming service, HBO Max. The service already has 10 million subscribers with immediate access. And as consumers look for different ways to pass the time, it creates a window of opportunity for AT&T.
Plus, the company still is expecting growth from the continuing roll-out of 5G technology. Some of this infrastructure may be delayed until the pandemic restrictions lift. But while 5G may be delayed it won’t be denied. And when the economy finds its feet, AT&T will be in a position to capitalize.
Stock #5 is trading down 35% for the year and now on sale!
About AT&T
AT&T Inc provides telecommunications and technology services worldwide. The company operates through two segments, Communications and Latin America. The Communications segment offers wireless voice and data communications services; and sells handsets, wireless data cards, wireless computing devices, carrying cases/protective covers, and wireless chargers through its own company-owned stores, agents, and third-party retail stores.
Read More - Current Price
- $22.75
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $25.53 (12.2% Upside)
#2 - Johnson & Johnson (NYSE:JNJ)
It’s hard to think that a company that has a Covid-19 vaccine candidate would find its stock down for 2020. But as stated in the introduction, the coronavirus is not discriminating when it comes to stocks. Johnson & Johnson (NYSE:JNJ) stock is down over 10%. However, compared to the S&P 500, JNJ has a “less bad” feel to it.
Johnson & Johnson is working with the Biomedical Advanced Research and Development Authority to develop a Covid-19 vaccine. The company expects to begin clinical trials in November. While that doesn’t do much for revenue expectations in 2020, it can be a major catalyst for 2021.
To be fair, JNJ is fighting a couple of different lawsuits which is causing some negative headlines. And despite its size, it is not immune to the residual effects of the coronavirus. For Johnson & Johnson that includes supply chain disruptions and a hard-to-quantify revenue loss as more consumers choose, or are forced to postpone minor or elective health-related procedures and surgeries.
However, Johnson & Johnson came into the current pandemic with a strong balance sheet that included only $18 billion of net debt. The company should not only be able to weather any virus-related headwinds but come out strong on the other side.
The savvy investor knows that you have to answer the door when opportunity knocks, keep reading
About Johnson & Johnson
Johnson & Johnson, together with its subsidiaries, researches, develops, manufactures, and sells various products in the healthcare field worldwide. The company's Innovative Medicine segment offers products for various therapeutic areas, such as immunology, including rheumatoid arthritis, psoriatic arthritis, inflammatory bowel disease, and psoriasis; infectious diseases comprising HIV/AIDS; neuroscience, consisting of mood disorders, neurodegenerative disorders, and schizophrenia; oncology, such as prostate cancer, hematologic malignancies, lung cancer, and bladder cancer; cardiovascular and metabolism, including thrombosis, diabetes, and macular degeneration; and pulmonary hypertension comprising pulmonary arterial hypertension through retailers, wholesalers, distributors, hospitals, and healthcare professionals for prescription use.
Read More - Current Price
- $144.47
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 7 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $174.73 (20.9% Upside)
#3 - Teva Pharmaceuticals (NYSE:TEVA)
Sticking in the pharmaceutical sector, we have Teva Pharmaceuticals (NYSE:TEVA). For the first three months of 2020, the stock is down less than 15%. However, since reaching a high of $13.45 on February 19, the stock has plunged nearly 40%. So why has the stock been punished?
On the one hand, it’s not hard to see why. The company has had legal issues, replaced its CEO and cancelled its dividend. But other than that, how did you like the play Mrs. Lincoln?
Well in the case of Teva, new CEO Kare Schultz has been a stabilizing force. And the company’s balance sheet is reflecting that. Through a series of initiatives, the company has reduced its net debt by approximately $8 billion. All of this gives TEVA stock the feel of one that has plunged too far too fast. And anytime investors hear those words, the stock is worth a look.
And if investors need to see a catalyst, Teva may have one of those as well. The company has played a role in the race to provide treatment for those infected by the coronavirus, donating more than 6 million doses of the drug hydroxychloroquine through wholesalers. Although it will take some time to determine if the drug will be an effective treatment for the virus, initial results are promising. That could be a short-term catalyst for the stock until a vaccine is ready.
About Teva Pharmaceutical Industries
Teva Pharmaceutical Industries Limited develops, manufactures, markets, and distributes generic medicines, specialty medicines, and biopharmaceutical products in North America, Europe, Israel, and internationally. It offers generic medicines in various dosage forms, such as tablets, capsules, injectables, inhalants, liquids, transdermal patches, ointments, and creams; sterile products, hormones, high-potency drugs, and cytotoxic substances in parenteral and solid dosage forms; and generic products with medical devices and combination products.
Read More - Current Price
- $22.09
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $20.88 (5.5% Downside)
#4 - CVS (NYSE:CVS)
Pharmacy chains like CVS (NYSE:CVS) are also feeling the effects of the coronavirus. On the one hand, it would seem that companies like CVS and rivals such as Walgreens (NASDAQ:WBA) would stand to benefit from elevated demand during the crisis. However, social distancing is a variable that is hard for these companies to forecast. Drug stores are not set up as e-commerce enterprises. Developing a curbside pickup or home delivery infrastructure on the fly is not something that these companies are set up to do.
But if we consider that to be a problem that will impact all pharmacy chains, what is there to like about CVS stock. To begin with, 2020 should be the first year CVS begins to realize cost synergies from its acquisition of Aetna in 2018.
CVS is also forecasting 1,500 HealthHUB health clinics to open nationwide by the end of 2021. These clinics will have the ability to provide simple health screenings and services. This model has been proven to drive more customers to the store. And when they’re there they tend to buy more prescriptions and more front-end products. CVS stock is down approximately 25% which is at a discount to the broader market.
Savvy investors know that you have to answer the door when opportunity knocks...
About CVS Health
CVS Health Corporation provides health solutions in the United States. It operates through Health Care Benefits, Health Services, and Pharmacy & Consumer Wellness segments. The Health Care Benefits segment offers traditional, voluntary, and consumer-directed health insurance products and related services.
Read More - Current Price
- $44.36
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $70.50 (58.9% Upside)
#5 - McDonald's (NYSE:MCD)
One dichotomy of the current economy is the need for companies like McDonald’s (NYSE:MCD) to perform its role as an essential business. There’s no question that those who are still driving to work need options to grab food quickly and safely. But the golden arches are looking different today. The company has suspended eat-in dining until the restrictions have passed.
And the company is also instituting new policies to help ensure the safety of its workforce and customers. Employees are required to answer a four-part questionnaire before starting their shift. If they can’t answer “no” to all the questions, they will be sent home and cannot return until cleared by a doctor.
The company will also be performing temperature checks as soon as stores begin to receive the equipment (probably the week of April 5). McDonald’s is also streamlining its menu to ensure that customers can get their food quickly.
And all of this is, in my opinion, just noise. McDonald’s has not lost business because of a food safety crisis. The company was not in financial trouble before the pandemic. It’s hard to see a scenario in which McDonald’s will not be just fine when the pandemic is over. I would anticipate some drop-off in sales as customers flock to restaurants that they have been kept away from. But in the long run, McDonald’s is an institution, and shares are selling at an attractive price.
About McDonald's
McDonald's Corporation operates and franchises restaurants under the McDonald's brand in the United States and internationally. It offers food and beverages, including hamburgers and cheeseburgers, various chicken sandwiches, fries, shakes, desserts, sundaes, cookies, pies, soft drinks, coffee, and other beverages; and full or limited breakfast, as well as sells various other products during limited-time promotions.
Read More - Current Price
- $292.68
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $320.65 (9.6% Upside)
#6 - Disney (NYSE:DIS)
Disney (NYSE:DIS) has heavy exposure to the coronavirus. Its theme parks are shut down for an indefinite period of time. The company has closed all of its Disney Stores as the nation and the world go through a quarantine period. And the House of Mouse also seems to have reached its peak in terms of subscribers to its new Disney+ streaming service.
That’s a lot to weigh on a stock. But with the stock trading down 35% for the year, it’s fair to say that the bad news has been more than priced into the company’s stock.
In figurative terms, I’m buying all the Walt Disney stock that other investors are selling. The company has always been able to benefit from the diversity of its assets. When theme parks were down, studio revenue was up. And towards the end of last year, it seemed that the company was firing on all cylinders.
But a month changes a lot of things. Critics of the company have been looking to dance on Disney’s grave for over thirty years. It hasn’t worked yet, and I don’t see it happening now. There will be a vaccine for the coronavirus. And when that occurs, customers will return to one of the most family-friendly destinations in the world.
It’s Time to Work Your Plan #7 Will Surprise You
About Walt Disney
The Walt Disney Company operates as an entertainment company worldwide. It operates through three segments: Entertainment, Sports, and Experiences. The company produces and distributes film and television video streaming content under the ABC Television Network, Disney, Freeform, FX, Fox, National Geographic, and Star brand television channels, as well as ABC television stations and A+E television networks; and produces original content under the ABC Signature, Disney Branded Television, FX Productions, Lucasfilm, Marvel, National Geographic Studios, Pixar, Searchlight Pictures, Twentieth Century Studios, 20th Television, and Walt Disney Pictures banners.
Read More - Current Price
- $112.03
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 19 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $123.58 (10.3% Upside)
#7 - Apple (NASDAQ:AAPL)
Another company that I love right now is Apple (NASDAQ:AAPL). The company’s supply chain took a direct hit when its factories in Wuhan, China were closed due to the virus. Those factories are back on line, but the company has recently said they are forecasting the possibility of soft demand for its new iPhone scheduled to be released later this year.
Like other companies, Apple stores are being closed as the world rides out this quarantine period. Not surprisingly all of this activity has knocked the stock down 17% in 2020 with virtually that entire loss happening in March.
But Apple is every bit the cult stock that Tesla is, but Apple has a more affordable product and a longer track record for investors to believe in. The pandemic hasn’t infected Apple’s devices, just the opportunity to buy them. This is a company that has consistently been doubted, and consistently defies the naysayers. I see no reason why this time is any different.
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
- $254.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 11 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $236.78 (7.0% Downside)
#8 - The Trade Desk (NASDAQ:TTD)
One stock that should be benefiting from the coronavirus but is not is The Trade Desk (NASDAQ:TTD). The company operates a cloud-based platform that delivers targeted, data-driven ads. It’s the opposite of traditional advertising. But unfortunately, new media is being judged by the same metrics as traditional advertising. And with the expectation that corporations will cut spending on ads while customers are quarantined, TTD stock has plummeted nearly 50% in 2020.
And this means that investors see the company’s projection of 30.5% growth in 2020 to be unattainable. And they’re probably right. But this is about looking for stocks that have a long-term gain. And right now, the Trade Desk looks to be a great value.
But The Trade Desk looks to be adding to its market share to prepare for the eventual rebound in spending. And even during this time when consumers are sheltering in place, there is still e-commerce happening. Businesses that are looking to take advantage of this will likely use The Trade Desk’s data-enhanced ads to optimize their spend.
About Trade Desk
The Trade Desk, Inc operates as a technology company in the United States and internationally. The company offers a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels, including video, display, audio, digital-out-of-home, native, and social on various devices, such as computers, mobile devices, televisions, and streaming devices.
Read More - Current Price
- $125.01
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $127.07 (1.6% Upside)
In times like these, keeping some cash on the sidelines is a prudent thing to do. But that cash will only do its best work if you’re willing to put it to work when opportunity knocks. And right now, even in the chaos and uncertainty of the coronavirus, there are some buying opportunities. Many quality stocks have simply been oversold.
Looking for beaten-down stocks doesn’t mean shopping in the penny stock section of the market. Many stocks that are trading at less than $5 are doing so because of the risk they carry. A common definition is that a beaten-down stock is trading at a discount to the broader market. However with the current market volatility that can be too variable of a target.
What you want to look for are companies that display solid fundamentals with strong catalysts that look to provide revenue growth. Good companies don’t suddenly become bad. And that’s the case with the companies in this presentation. These are quality companies that are currently trading well below what can be considered a fair market price.
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