Now is time to focus on the eventual recovery
The coronavirus crisis has effectively reset the board.
While both the economy and stock market will someday return to their
earlier-year strength, neither will look the same. That means some of the best
stocks to buy right now might look much different from top picks just a few
quick months ago.
The market might very well have another leg down. It's far
too early to say we're out of the woods given that most of America is under
quarantine and we have yet to see what first-quarter earnings and
second-quarter guidance looks like. But we're getting late in the game for a
truly defensive posture. That's closing the barn door after the horse has
already bolted. While a few protective picks might be in order, now is the time
to start planning for the next bull market.
Even professional bears are seeing the light at the end of
the tunnel.
"I'm selectively buying in my personal accounts,"
says John Del Vecchio, co-manager of the AdvisorShares Ranger Equity Bear ETF
(HDGE). "There were plenty of companies that went into this crisis on life
support, kept alive by cheap debt. You're going to see a lot of these companies
fail. But at the same time, a lot of high-quality blue chips are on sale right
now at prices we may never see again in our lifetimes."
Many companies will be gutted. It might take years for
airlines to return to pre-crisis passenger numbers, and they might go through
bankruptcy or a government conservatorship in the meantime. Likewise, retailers
and restaurants might be dealing with the fallout from lockdowns for months or
years, as will their banks and landlords.
However, some of Wall Street's best stocks could come out of
this with relatively minor scratches. Many have massive stores of cash that
will help them weather short-term profit drops. Some might actually benefit
from a coming recession by picking up market share when its competitors
fold. Many of these beneficiaries are
tech stocks, but certainly not all. Plenty are in the gritty, old-fashioned real
economy.
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