Are you nervous about the markets? If so, you are not alone in feeling this way. Yes, it is definitely a time of uncertainty, and one could even say chaos. But that does not mean that it is time to do something rash and foolish with your portfolio. Now is the time to consider doing what feels instinctively wrong, and that is buy. But what to buy, you ask? In this post, we will examine a few different things to consider when looking for something to buy in these troubled times.
Before we go any farther, I know what you are thinking. Why should I buy when everything is going down and could go lower? The answer to that is simple. If you liked a company’s stock four weeks ago, chances are you will still like it this week. So, if you liked it then and you like it now, it would make more sense to but the stock now at a much lower price. But look for companies that may have had their hardest hit so far and ones that generally do well in a bear market. Look for companies that tend to remain profitable despite the economy in no small degree. Is it time to buy an airline stock? No, that time is still yet to come as I think they will be hurt further by the spread of COVID 19. But can you buy a consumer play such as Coke? Let’s look at that and see what we can find out with it.
First, both stocks have been hit hard with the recent market’s downward spiral that is a fact. But the airline industry and travel will most likely be hit even harder. Consumer staples have been hit as well, but they tend to do better in these times. And I have liked Coke (KO) for years. It is a good company that has a strong balance sheet and pays a decent dividend to its shareholders. And people buy their products no matter what the economy does in no small degree. So, if I liked KO in January when it was selling at almost $55 a share and a Price to Earnings (PE) of 26.57, both show that KO is relatively attractive at these levels. But let us look at last week’s numbers. KO on Friday closed at $48.47, with a PE of 23.42. That means this company that has done nothing wrong other than being caught in the COVID 19 market turmoil is a company that is on sale. The company’s financial health has not changed, and its outlook remains positive despite the virus spreading. So, unlike the airlines, KO should do much better during this crisis and will recover as well and be back at the pre-crisis level before you know it.
Will KO go lower? Yes, there is a chance everything will continue to decline in its prices. But if you determine that the underlying company is still stable, and its price is declining due to the market panic, this is a buying opportunity. But if the company’s outlook is directly tied to the spread of COVID 19, then those companies may still be worth buying, but maybe not yet as they may still have more to shed from their prices. While I am not telling or even suggesting to time the markets, use some common sense and strategic buying to obtain your positions. Buy on days when the market is going down on companies that are strong despite things. But wait a little while on companies that have more exposure to the effects of COVID 19 like the travel and tourism industry. I think specific sectors will continue to go down for a while longer, as may the markets in general. But regardless, some excellent buying opportunities are being created at present that it would be wise for you to consider.
Now, I am not advising you to go out and buy KO, and I am not advising that at some point, you buy airline stocks. These are merely examples of things to consider in the current market situation. As the famous Warren Buffett saying goes, “Be fearful when others are greedy, and be greedy when others are fearful.” This is a buying opportunity for many well run and financially stable companies that are merely on sale at present. Could that sale get better? Yes, there is that chance, but if you but in blocks, you will be fine and can take advantage of any future price decreases. Very similar to dollar-cost averaging if done correctly.
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