The coronavirus crippled the U.S. economy, making it tricky to determine which stocks to buy. Businesses across the nation have shut down. More than 16.8 million Americans lost their jobs. The travel industry ground to a halt. Food stores have struggled to stock shelves with many of us stocking up on supplies. JP Morgan warns of a 40% decline in U.S. GDP for the second quarter and a potential surge in unemployment to 20%.
In short, the U.S. economy has been decimated. It’s why President Donald Trump and Congress passed three major pieces of legislation to address the pandemic.
In early March, for example, a phase one program provided $8.3 billion in funds for health agencies, testing, and for small business loan subsidies, says Wall Street Journal contributors Jacob M. Schlesinger and Joshua Jamerson. Phase two was worth $100 billion and provided tax credits for employers offering sick leave, increases to unemployment benefits, and food assistance.
Phase three was worth $2 trillion and included checks to households, bailouts for financially-distressed industries, and loans and grants to small business. There’s even talk of a fourth stimulus bill that could include more checks for Americans, hazard pay for health workers, and the potential for infrastructure spending.
With current and potential phase four stimulus, here are the top three stocks to buy already moving.
- United Airlines Holdings (NASDAQ:UAL)
- Advanced Micro Devices (NASDAQ:AMD)
- VMC Materials Co. (NYSE:VMC)
United Airlines (UAL)
Under the strain of COVID-19, airlines were some of the hardest hit. Demand for travel dried up. Revenue began to plummet. Flights were cut. Planes were grounded. There were even worries of bankruptcy filings and liquidity concerns.
However, with the industry likely to see $25 billion in loans and grants as part of the stimulus program, concerns of bankruptcy and liquidity fell by the wayside. It’s why stocks to buy like United have bounced well off their lows. Since mid-March, UAL stock ran from a low of $18.09 to a current price of $29.
While a bailout is still likely, there’s another roadblock in the industry’s way. Apparently, U.S. Treasury Secretary Steven Mnuchin told major airlines they have to repay some of the $25 billion in cash grants. According to Reuters, Mnuchin said “the department was offering 70% of the grants that would not need to be repaid, while airlines would be required to offer warrants and repay low-interest loans in exchange for the remaining 30%.”
Airlines aren’t happy with the proposal, noting $25 billion doesn’t even cover payroll costs, as highlighted by Motley Fool contributor Lou Whiteman.
Advanced Micro Devices (AMD)
After plunging on concerns the virus could put a dent in global chip demand and lead to potential supply disruption, AMD stock roared back. In fact, since hitting a low of $36.75 in March, the stock rallied back to a high of $50.30.
Analysts appear bullish as well. Piper Jaffray’s Harsh Kumar just increased his rating to “overweight” from “neutral,” with a $56 price target. He notes the virus-induced pullback “provides an attractive opportunity for long-term investors.”
More impressive, with many of us now working from home, there’s higher demand. “Companies from Zoom Video (NASDAQ:ZM) to Teladoc Health (NYSE:TDOC) have seen a huge boost in demand from workers or patients connecting with the world from home. These services need additional data center space in order to handle the surge in demand,” says TipRanks. “The end result is huge boost in demand for data center chips from the likes of AMD.”
VMC Materials (VMC)
If we see a fourth installment of stimulus, there’s a chance infrastructure could be a part of it. If that’s the case, VMC Materials will be a solid stock to buy.
“With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill. It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4,” President Trump tweeted.
On hopes for this stimulus, VMC recently rallied from a low of $65.56 to $108.85. After all, Vulcan Materials is one of the top companies that produces and sells construction aggregates, asphalt mix, and ready-mixed concrete.
In addition, Bank of America analyst Timna Tanners upgraded the VMC stock to the equivalent of a “buy” from a “hold” rating with a $150 price target.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.