Should we stay away and wait for market consolidation?
The markets entered the bear territory but it isn’t the reason to stop investing. Actually, despite the coronavirus pandemic and oil wars, it is the opposite.
By Gorica Gligorijevic
When the market comes into this situation the logical question that smart investors ask is how to invest when the coronavirus pandemic sends all markets down.
Should we stay away and wait for market consolidation or to act and profit? Let’s change our positions for a sec. Instead of being investors, let’s try to assume how managers of the companies are acting now. Yes, some closed up. But we don’t want to talk about them, we would like to discuss serious, responsible managers with the ability to project future actions related to their business and the companies. Like them who are investigating and planning how to beat the competition, or how to become more competitive after all, the investors should do the same thing. Investing should be a game without ending, renewed all the time. Investors may move their assets from one industry to others but should never stop investing.
So, the question of how to invest when the coronavirus pandemic sends all markets down sounds logical for amateurs. Professionals are looking even now for new and better opportunities.
One reason is to overcome this market down and the other is to find market players that can produce a bigger profit. The market is here and it will never stop working. So, why would we do the opposite?
What can generate gains during the pandemic?
This pandemic influences markets all over the world. Coronavirus outbreak hits almost all countries on the globe and as well their economies.
Global markets had been beaten almost overnight. The main problem, according to some analysts, is investors getting panic in the downturn markets. The events are accelerating sharply, faster than spreadsheets and charts could predict them. Advanced investors shift into funds, options, or some commodities to hedge their investment portfolios. The others with a lack of experience, haven’t time to do that. Also, badly timed and wrongly settled hedges may produce big losses. Moreover, put protection is becoming incredibly expensive. Market makers avoid the opposite side of the trade.
But maybe it is even worse for those who shifted into cash to find a better buying opportunity after the outbreak. Yes, cash is the position too, but if you stay too long in that position might cause the earning of zero. Yet, it is better than losing capital but you’ll miss the opportunity to profit. Yes, even now while markets are down you can still earn. There are some industries and sectors where you can invest especially now. Of course, no one can guarantee that stocks will rise forever, but why don’t we call stats as help.
How to Invest in Biotech stocks
Here are some ideas on how to invest when the coronavirus pandemic causes all markets to drop.
So, according to data biotech stocks are a good choice right now. Also, health care. Maybe more than ever both sectors are active these days. The virus COVID-19 is still greatly new and the subject of many scientific types of research. They are all looking for COVID-19 treatments. The companies involved can be a great opportunity. For example, large and mid-cap companies from that sector. According to data, closed near 52-week highs at the end of last week. On the last trading day, they played very well. For example, MASI which is a large seller of pulse oximetry to hospitals. Or CNC, and some others like QDEL, just take a look at its historical data.
Or maybe Roche Holding AG ROG, which gained 3.7% in premarket trading today (Thursday, March, 19) just after they announced its plans to work on Phase 3 clinical testing Acterma. It is a drug used in rheumatoid arthritis treatments but showed good results in treating patients with COVID-19 with severe pneumonia.
Roche announced it is in consultations with the FDA. This company needs the authorities’ approval to start research with the Biomedical Advanced Research and Development Authority. It is expected that about 330 patients from all over the world will take part in that. Recently, Roche got FDA’s approval for manufacturing COVID-19 tests for the U.S.
Roche’s stock fell 7.7% in the last 12 months.
Small-cap companies from the same sector are not such a good choice because there are too many speculations around them and it is possible for investors to end up with losses faster since those companies could disappear overnight.
How to Invest in Safe-haven stocks
Do you know how important soup is important today? What do you think, can some producers of soup be a safe-haven investment? The example of Campbell Soup Company shows us it can.
Popular safe havens are running a bit better than their growth equals. They are paying high dividends reducing the losses caused by lower prices. For example, Campbell Soup Company is paying a 2.84% forward dividend yield. Moreover, the company is trading near a 52-week high after its earnings report.
Also, Mondelez International traded at $46.55 and with a dividend yield of 2.45%. This sweets producer is a super-force: Toblerone, Oreo, Cadbury, Belviva, TUC. The company produces pre-packaged goods. And that kind of producer is among the most desired safe-haven stocks right now since its goods can be used at consumers’ homes. There is no need for visiting restaurants and being in the crowd.
MDLZ stock is outperforming the S&P 500 by more than 10%. For some investors, the problem with this company can be its exposure to China, and store shelves are less stocked now. But the company’s branch in China is very close to setting the situation to normal.
Maybe Johnson & Johnson a 134 old company? It is one of the largest healthcare companies in the world. The company covers pharmaceuticals, medical materials, and devices, surgical and orthopedic robotics, etc. It has well-known products Band-Aid and Tylenol. The analysts are optimistic about the company’s long-term growth prospects.
How to invest during the coronavirus pandemic?
This can be an ethical and financial question. Both are inappropriate. Money has to work.
It is true, in just several weeks, the Coronavirus pandemic hit almost a third of the world market cap. The Sensex is 20% below from its highest highs reached just two months ago. The Indian equity market bounced back last Friday. The other markets have fallen even more.
The coronavirus spreading caused panic all over the world and lessened the confidence of investors.
The other unpleasant events happened also. For example, the crude oil war between Russia and Saudi Arabia has added volatility to the markets. But something has changed. It isn’t all about the coronavirus outbreak, the other things influence the markets also.
The commodities and currency market are in turbulence because of the crude oil war. This is a crash of huge magnitude. It will take time for confidence to come back but that doesn’t mean we have to sit aside. This can be a great opportunity to invest.
The stock market condition today
Stock market volatility is normal, and also discouraging but doesn’t have to be. For some investors, it is almost impossible to avoid panic and sell-off, we know that.
One of Wall Street’s main stock benchmarks, the Dow Jones, dropped and entered bear market territory on Wednesday, March 11. Dow Jones has been in a bull market since the financial crisis in 2008-09. Also, the big volatility is present, partially due to the oil price war but also, due to the fears of the coronavirus. Of course, that is stressful for investors. But they know, as much as we know, that stopping investing is the worst scenario ever.
So, how to invest when the coronavirus pandemic sends all markets down sounds illogical for professionals. Investing must continue. And we show you where and how. Stay invested! Maybe this can help.
