Depending on how you look at it, the economic outlook is getting cloudier or clearer.
The argument for a cloudy economy is easy to make. Multiple times of day we hear about more Americans testing positive for the novel coronavirus. The worldwide number of positive tests exceeds one million. And unfortunately, it will go higher. We just don’t know by how much.
But there are two parts to this ongoing situation. The first is the real-time science experiment as the world attempts to flatten the curve. The other is the very real economic impact. And the numbers of the economic carnage are coming in faster than any significant evidence of a flattening curve.
The number of unemployed now exceeds six million and will only rise. The government is throwing everything including the kitchen sink at the problem. But it’s an experiment in real-time. We won’t know the results for some time.
But even while we wait for a new normal to return, there are ways for you to profit. There are companies that are keeping our economy going now, and have a business model that sets them up well for success after the pandemic is over.
Quick Links
- Walmart
- Dollar General
- Amazon
- Anheuser Busch InBev
- Home Depot
- Verizon
- PayPal
- Bristol-Myers Squibb
#1 - Walmart (NYSE:WMT)
Grocery stores are becoming the quintessential “essential” business during the coronavirus pandemic. But for a retailer like Walmart (NYSE:WMT), the coronavirus is confirming that the company took the right steps in heading off the existential threat posed by Amazon (AMZN).
In recent years, Walmart has made great strides in expanding its e-commerce business, including offering customers the opportunity for curbside and home delivery. And that may be the catalyst the company needs as Americans continue to shelter in place.
A recent survey by the retail intelligence company, Placer.ai, showed that traffic at Walmart, as well as Costco (COST) and Target (TGT) was down in the last week of March for the first time since the initial calls for Americans to begin social distancing. However, ambiguity about exactly how long Americans would need to remain sheltered in place is likely to keep store traffic at decent levels.
This seemed to be confirmed by the research which showed that the drop-off in-store traffic was more pronounced in a hard-hit area like New York. However, in lesser hit areas, the decline was not as pronounced.
And even if consumers opt to stay inside to keep up with more extreme social distancing, Walmart’s efforts in the e-commerce space should serve as a catalyst for WMT stock moving forward. After rising over 20% for the year, WMT shares were essentially flat as of this writing.
About Walmart
Walmart Inc engages in the operation of retail, wholesale, other units, and eCommerce worldwide. The company operates through three segments: Walmart U.S., Walmart International, and Sam's Club. It operates supercenters, supermarkets, hypermarkets, warehouse clubs, cash and carry stores, and discount stores under Walmart and Walmart Neighborhood Market brands; membership-only warehouse clubs; ecommerce websites, such as walmart.com.mx, walmart.ca, flipkart.com, PhonePe and other sites; and mobile commerce applications.
Read More - Current Price
- $92.24
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $93.69 (1.6% Upside)
#2 - Dollar General (NYSE:DG)
Another retailer that is built to weather any crisis is Dollar General (NYSE:DG). Dollar General has been on a building binge as it expanded its brick-and-mortar footprint across the nation. The company has more locations than any other retail chain. This means they have a footprint in smaller areas that are not serviced by the larger chains.
In the last week, I decided to patronize my local Dollar General, not only for the price, but simply because it felt more responsible to travel to a store that was only a few miles away as opposed to the five or so more miles it would have taken to go to my nearest superstore.
That growth may slow down from what the company initially has forecast, but that should not have much effect on the stock. That’s because the company is still well-positioned to thrive through the current pandemic.
The company offers products at low prices, which will turn out to be in high demand as many customers are suddenly finding themselves unemployed. And Dollar General may be able to help out in that regard as well. The company has announced its intention to hire over 50,000 new employees to help meet the expected demand.
After an initial decline in the initial stages of the coronavirus crash, DG stock has turned positive for the year. But with so much uncertainty still surrounding when our national sheltering will occur, Dollar General still appears to have a long runway.
About Dollar General
Dollar General Corporation, a discount retailer, provides various merchandise products in the southern, southwestern, midwestern, and eastern United States. It offers consumable products, including paper and cleaning products, such as paper towels, bath tissues, paper dinnerware, trash and storage bags, disinfectants, and laundry products; packaged food comprising cereals, pasta, canned soups, fruits and vegetables, condiments, spices, sugar, and flour; and perishables that include milk, eggs, bread, refrigerated and frozen food, beer, and wine.
Read More - Current Price
- $76.40
- Consensus Rating
- Hold
- Ratings Breakdown
- 9 Buy Ratings, 13 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $98.27 (28.6% Upside)
#3 - Amazon (NASDAQ:AMZN)
It would be a disservice to leave the retail category without mentioning Amazon (NASDAQ:AMZN). The company has been making an effort to diversify from its e-commerce roots. But the coronavirus pandemic is giving the e-commerce giant the opportunity to remind its consumer base why they invented the e-commerce category.
Consider that, in 2019, e-commerce sales made up approximately 11% of all retail sales. And that was without a national directive to shelter in place. It’s no wonder the company has announced plans to hire 100,000 workers to help meet increased demand.
But investors have other reasons to bet on Amazon delivering strong results during this uncertain time. The company is the leader in cloud computing with Amazon Web Services (AWS). This allows consumers to have access to Amazon Prime Video, the company’s streaming service. And they can also chill out to Amazon Prime Music. And it can all be delivered to them through Alexa, the voice assistant that is becoming a staple in an increasing number of homes.
Even Amazon was not immune to the coronavirus crash. The stock dipped over 10%. However, it has since recovered and is posting a slight gain for the year.
Stock #5 is down about 20% for the year, so the time is right to buy
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $224.92
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 42 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $243.00 (8.0% Upside)
#4 - Anheuser Busch InBev (NYSE:BUD)
The social restrictions being required to combat the coronavirus may seem like a difficult thesis for buying Anheuser Busch InBev (BUD) stock. Bars are closed. Restaurants are closed. Live sporting events are canceled. All of that, plus cancellation of other major events is causing a large decline in demand.
And the stock has been appropriately punished. As of this writing, BUD stock was down nearly 50% for the year. But in the last two weeks, the stock has surged about 20%. And there’s a reason for that as well. It’s unlikely that Americans are going to stop drinking alcohol. A quick stroll through my social media confirms that many consumers are prioritizing their alcohol purchases with about as much frequency as their shipments of toilet paper. However, beer may be in greater supply.
Now there’s no question that, try as they may, consumers are not going to be able to be the little engine that could. But buying BUD stock is not about the rest of 2020. It’s about 2021 and beyond. Because when our national sequestering ends, it will be like the end of prohibition. And at that point, it will be impossible to get shares of this quality company for anywhere near this price. In the meantime, you can enjoy a nice dividend.
About Anheuser-Busch InBev SA/NV
Anheuser-Busch InBev SA/NV produces, distributes, exports, markets, and sells beer and beverages. It offers a portfolio of approximately 500 beer brands, which primarily include Budweiser, Corona, and Stella Artois; Beck's, Hoegaarden, Leffe, and Michelob Ultra; and Aguila, Antarctica, Bud Light, Brahma, Cass, Castle, Castle Lite, Cristal, Harbin, Jupiler, Modelo Especial, Quilmes, Victoria, Sedrin, and Skol brands.
Read More - Current Price
- $50.21
- Consensus Rating
- Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $79.00 (57.3% Upside)
#5 - Home Depot (NYSE:HD)
Home improvement stores such as Home Depot (NYSE:HD) have also been labeled as essential stores during the coronavirus pandemic. While some people are confused at the appeal of a home improvement store right now, it’s not that hard to figure out.
The housing market was strong prior to the coronavirus pandemic. And mortgage rates are still down. There may be less activity in the market as social distancing may cause a delay in home showings. But demand looks to be strong coming out of the crisis. And, as more Americans are stuck at home, indoor and outdoor projects will rise to the top of the “to-do” list.
Both of these trends are strong catalysts for a stock that was already outperforming the broader market prior to the sell-off. But another catalyst for Home Depot that gives it a competitive advantage over a rival such as Lowe’s (LOW)is the investment the company made in e-commerce.
Home Depot as embraced the omnichannel model allowing customers to order online and receive the product where they want including curbside or at their home. This should remove an objection from consumers who may find home improvement not only productive, but therapeutic.
HD stock is down about 20% for the year. And the combination of that share price and a nice dividend make Home Depot a bargain that should pay off handsomely for years to come.
Stock #8 forecasts up to $10 billion in annual sales
About Home Depot
The Home Depot, Inc operates as a home improvement retailer in the United States and internationally. It sells various building materials, home improvement products, lawn and garden products, and décor products, as well as facilities maintenance, repair, and operations products. The company also offers installation services for flooring, water heaters, bath, garage doors, cabinets, cabinet makeovers, countertops, sheds, furnaces and central air systems, and windows.
Read More - Current Price
- $392.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 23 Buy Ratings, 6 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $426.00 (8.5% Upside)
#6 - Verizon (NYSE:VZ)
The case for Verizon (NYSE:VZ) comes down to social distancing and the importance of staying connected. Yes, apps like Face Time and software like Skype and Zoom will prosper. But if those are the lock, Verizon is the key.
There’s no doubt that many Americans will be taking a surgical look at their expenses. But if there’s a lesson from the higher-than-expected iPhone sales of 2019, it’s this. Americans love their smartphones. And truthfully, we’re probably addicted to them. And that means that if there’s one bill that is going to consistently get paid it will be their wireless bill.
Whether it’s an aging parent reaching out to the children and grandchildren, or parents reaching out to their aging parents or their grown kids, the importance of being connected in a more intimate way (seeing faces, hearing voices) will be paramount.
And then there’s the need for more Americans to work from home. That only increases the need to have a reliable phone. Investors are taking note. After getting caught in the coronavirus-induced selloff, the stock is up about 10% and is down only about 10% for 2020. Goldman Sachs telecom analyst, Brett Feldman recently gave Verizon an upgrade while saying the company is, “the most attractive combination of total return and risk owing to its stable wireless business, well-covered dividend (4.6% yield) and strong balance sheet.”
About Verizon Communications
Verizon Communications Inc, through its subsidiaries, engages in the provision of communications, technology, information, and entertainment products and services to consumers, businesses, and governmental entities worldwide. It operates in two segments, Verizon Consumer Group (Consumer) and Verizon Business Group (Business).
Read More - Current Price
- $39.93
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 10 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $46.51 (16.5% Upside)
#7 - PayPal (NASDAQ:PYPL)
If investors are looking for a market sector that is ready to explode, they need to take a peek at the financial technology (fintech) sector. PayPal (NASDAQ:PYPL) is one of the leaders in this emerging space.
PayPal enables digital payments for consumers and businesses worldwide. It also allows for peer-to-peer fund transfer. But PayPal has continued to evolve. Today, businesses can receive debit cards, credit cards, and even small business loans. And this extensive range of options is frequently cheaper than the same options that customers will receive from traditional banks.
This is an important distinction. PayPal is not trying to take the place of Visa (V), Mastercard (MA) or American Express (AXP). It’s at the forefront of an entire category that is disrupting traditional banking in a way that will only be enhanced by the current pandemic.
There are two other catalysts for PayPal. First of all, the gig economy has made it essential for many workers to receive secure and efficient payments. PayPal is often a more convenient option than ACH transfers. Second, PayPal can be an option for a growing segment of Americans that are unbanked. More retailers are accepting PayPal as a form of payment which can allow these customers to participate in the economy.
PayPal stock is down about 15% in 2020, all of that dip has come since the onset of the coronavirus sell-off. But while PYPL stock approximates those of Visa and Mastercard, the company has a different and distinct business model that fits where the economy is going.
About PayPal
PayPal Holdings, Inc operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources, such as bank accounts, PayPal or Venmo account balance, PayPal and Venmo branded credit products comprising its installment products, credit and debit cards, and cryptocurrencies, as well as other stored value products, including gift cards and eligible rewards.
Read More - Current Price
- $87.13
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 21 Buy Ratings, 15 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $88.42 (1.5% Upside)
#8 - Bristol-Myers Squibb (NYSE:BMY)
The last stock to consider is Bristol-Myers Squibb (NYSE:BMY). It’s a bit confusing to see that shares of this drug maker are down over 10%. Bristol-Myers Squibb is the definition of a defensive stock. Individuals are going to get sick from things other than the coronavirus. And unfortunately, cancer and heart diseases are still among the top killers in our society.
But when it comes to oncology and cardiovascular drugs, few companies have a better pipeline than Bristol-Myers Squibb. The company recently completed the purchase of Celgene. This gives it access to the drug Revlimid which is one of the faster-growing, top-selling cancer drugs in the world.
Prior to the deal, Celgene had worked out a deal with generic providers that will keep generic equivalents to Revlimid off the market until at least 2026. With forecasts of up to $10 billion in annual sales, it’s hard not to like BMY stock.
About Bristol-Myers Squibb
Bristol-Myers Squibb Company discovers, develops, licenses, manufactures, markets, distributes, and sells biopharmaceutical products worldwide. It offers products for hematology, oncology, cardiovascular, immunology, fibrotic, and neuroscience diseases. The company's products include Eliquis for reduction in risk of stroke/systemic embolism in non-valvular atrial fibrillation, and for the treatment of DVT/PE; Opdivo for various anti-cancer indications, including bladder, blood, CRC, head and neck, RCC, HCC, lung, melanoma, MPM, stomach and esophageal cancer; Pomalyst/Imnovid for multiple myeloma; Orencia for active rheumatoid arthritis and psoriatic arthritis; and Sprycel for the treatment of Philadelphia chromosome-positive chronic myeloid leukemia.
Read More - Current Price
- $57.33
- Consensus Rating
- Hold
- Ratings Breakdown
- 5 Buy Ratings, 13 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $55.64 (2.9% Downside)
These are confusing and scary times. But it’s important to keep a clear head. We’ve been here before. Maybe not exactly like this, but the market has faced disruptive events in the past. And when you remember that in every occasion the market has come back stronger than before, you have a playbook for dealing with the coronavirus pandemic.
And when this economy comes back, there will be a number of excellent stocks that you will wish you had snatched up at their current discounts of 10%, 20% or even more.
That’s why we’ve put together this presentation of eight stocks that you can count on during this crisis. But these are also long-term stocks that you can keep in your portfolio for the long haul. They have business models that work in any economy.
As you adjust to your current situation remember that one of the biggest myths in investing is “this time it’s different”. It’s not. The circumstances are unprecedented. But at some point, the American economy will come back. And when it does, you’ll want to make sure you are in the market to maximize your benefit. These eight stocks are a great place to start.
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