The markets are beginning to calm down and make more rational investment & trading decisions. The correlation between stocks, which has been high throughout this market crash due to indiscriminate selling, is starting to diminish. Volatility is settling down today with the Dow trading within a 500 point range (+/- 2.5%), a good break from the 1,000+ point swings over the past 8 trading days, and the Nasdaq composite is the outperforming index as investors start buying up tech firms whose coronavirus impact may have been overstated.
Equities have seen forced selling throughout the beginning of this week with massive downward moves that triggered margin calls and volatility that force funds to evacuate positions. Today we have been able to relax and focus on which industries & stocks have priced out too much. The markets are awaiting a solidified fiscal stimulus, to decide where the government will be placing its support and to what extent.
On a calm day like today it is a good idea to develop a watch list of stocks you are looking to buy. In this time of uncertainty and escalating economic turmoil, you need to ensure that you are choosing stocks with robust balance sheets, savvy management, and essential product/service offerings that are relatively immune to cyclical factors. We need to be focused on equities that will effectively weather this pandemic storm.
Below is my
Top 10 stock watch list: Technology Microsoft (( MSFT Quick Quote MSFT - Free Report) )
An essential enterprise cloud player with an extremely healthy balance sheet. I’m a buyer at any price below $150.
Alibaba (( BABA Quick Quote BABA - Free Report) )
The leading e-commerce and cloud player in the most populous country in the world. I’ve been buying this stock whenever it dips below $180, but its a deal at any price below $200.
Adobe (( ADBE Quick Quote ADBE - Free Report) )
An essential cloud platform for digital media and marketing analytics. This cloud powerhouse will sustain its necessity in these turbulent times. I like this stock at any price below $300.
Splunk (( SPLK Quick Quote SPLK - Free Report) )
The leading real-time machine data management company with a very bright future in the 4th revolution, and robust balance sheet considering its size. This stock is more volatile because of its high growth nature, but any price below $100, this stock is a bargain.
Multi-Sector Conglomerates Johnson & Johnson (( JNJ Quick Quote JNJ - Free Report) )
A long-standing conglomerate with a diverse portfolio of essential products in the medical field as well as consumer staples. JNJ is trading at its lowest level in 6 months and represents an excellent long-term portfolio addition at its current level. I like this stock at its current level, especially considering its roughly 3% dividend yield.
Disney (( DIS Quick Quote DIS - Free Report) )
This stock has been hammered due to its global theme parks & resorts shutdowns and long-term concerns. Disney is a highly diverse company, with its hand in a lot of spaces. Its new direct-to-consumer platform, Disney+, is going to be the future of this firm, and the concerns about the parks is only short-term. I like this stock at any price below $100. I have been buying below $90.
Defense Lockheed Martin (( LMT Quick Quote LMT - Free Report) )
This company pulls 70% of its revenue from US government contracts, and these contracts will continue to flow once this pandemic is controlled. I like this stock around $300.
Retail McDonald’s (( MCD Quick Quote MCD - Free Report) )
This fast-food chain continues to keep its drive-thrus open, and they have been packed. This company is still bringing in money, despite this pandemic and despite its shares taking an over 32% hit this month. These shares have been discounted to a value buy, and its cushy 3.6% dividend makes it even more attractive.
Financial JP Morgan Chase (( JPM Quick Quote JPM - Free Report) )
Financials have been battered down due to the Federal Reserve cutting rates. Interest rate cuts will marginally hamper the company’s bottom-line, but the market has more than priced out this impact. JPM is a best-in-class global financial services company that has a very diverse portfolio of product and service offerings. The company is a leading innovator/investor in financial technology, with a healthy balance sheet, and a savvy management team that has proven its ability to maintain its head in the best and worst of times. I wouldn't hesitate to buy this stock if it fell below $80.
ETF QQQ (( QQQ Quick Quote QQQ - Free Report) )
I think it is a good idea to think about putting an already diversified ETF into your portfolio. I choose QQQ because it holds the top 100 Nasdaq companies, which I believe will be the most resilient to this virus and will have the most considerable upside once the pandemic fear trading subsides.
I am not banging the table about any of these as an immediate buy because they all may experience a further slide. I would recommend that you buy small positions in these stocks and price-average down on red days. These levels that I recommended are based on what I am comfortable with as a long-term investor, and shares may plunge through these.
I am beginning to buy on stocks this week, with all the S&P 500 down 30%, and will continue to buy as we fall. A lot of the bad news has been discounted, but volatility is here to stay until this virus can be controlled. That being said, these next couple of months could represent one of the few great buying opportunities in our lifetimes.
P.S. remember to wash your hands before and after each trade.
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