Even though “the market” is down, many individual stocks are showing strength. Here are two sectors, and two stocks within them, that are looking good today
Around the InvestorPlace offices, we often say, “It’s not so much a stock market as it is a market of stocks.”
We say this because the stock market is made up of many different industries and many different companies. Various economic climates affect industries differently. Something good for one industry isn’t necessarily good for another industry.
For example, the early stage of the coronavirus crisis was great for grocery stores because people rushed to stock up on food … but it was terrible for cruise line operators and airlines …
Instead of thinking of “the market” as a monolithic entity into which you put money, we prefer to focus our attention on individual industries and companies. There’s quite a lot happening behind the curtain we call the Dow Jones Industrials Average.
The quote above comes from our CEO, Brian Hunt, which was a part of a piece he wrote for our InvestorPlace Mission Control Center.
(If this is the first time you’ve heard of it, the Mission Control Center is InvestorPlace’s central repository for real-time guidance on investing during this COVID-19 crisis. Check in regularly to get the latest news impacting the investment markets and your portfolio. You can bookmark this link.)
Returning to Brian’s idea …
This suggestion to focus on individual companies is a critical concept for investors today who might be tempted to stick their head in the sand until the storm has passed. That’s because, while “the market” might be suffering, many individual stocks are showing strength. And that creates opportunity for calm investors with foresight.
Our expert macro investor and editor of Investment Report, Eric Fry, echoed this sentiment in his update to subscribers yesterday, noting how great stocks often buck the trend of a broader market that’s languishing.
From Eric:
… even if the S&P 500 Index has not bottomed out, many individual stocks have.
“Best of breed” stocks, in particular, tend to bottom out first, and then they move higher while the rest of the market is languishing. Since we rarely get the opportunity to buy best-of-breed stocks on the cheap, we should be looking for the opportunity to do that.
So which sectors — and specific stocks — are poised to do well in this chaotic market environment?
In today’s Digest, you’ll get Eric’s answer. We’ll also hear from Matt McCall, editor of Investment Opportunities. He’s also seeing pockets of strength.
So, let’s jump in, and find out why Brian tells us “it’s not so much a stock market as it is a market of stocks.”
***One sector getting a COVID-19 boost
Let’s begin with Eric.
What sector is he eying right now in the midst of the market volatility?
Over the past year, semiconductors nearly suffered a one-two knockout.
First, investors beat up the sector last year on fears of slowing growth and worries about the U.S.-Chinese trade tensions. (Remember those?)
Then, along came COVID-19 to yank the global economy into reverse.
But now, two triggers will pull semiconductors out of their doldrums and make them a big winner for investors once again.
To make sure we’re all on the same page, semiconductor companies make integrated circuits for all sorts of electronic devices. They’re a critical component in the majority of tech products we love and use every day, including our laptops, cell phones, and countless other electronic devices.
Back to Eric for his first “trigger”:
Chip Trigger No. 1: Near term, of course, the coronavirus epidemic is depressing demand. But long term, many companies might attempt to counteract the operational risks of the next global pandemic by shifting more of their processes to machines of some sort, rather than human beings.
Almost every commercial product or recreational activity that eliminates or reduces human interaction relies on semiconductors and transistors.
Eric goes on to point toward how COVID-19 is already accelerating the adoption of chip-dependent technologies, highlighting the telemedicine sector.
Back to Eric:
It’s been around for years, but many of us are now using it for the first time to speak with doctors and receive treatment rather than visiting in person. Just look at what the coronavirus has done for top telehealth company Teladoc Inc. (TDOC) …
As to the second trigger which Eric believes will drive the semiconductor sector higher, he points toward Apple and its debut of its new 5G-native iPhone this fall.
Eric tells us that this alone isn’t bullish for the chip sector, but it shows that 5G is becoming more and more a part of our daily lives. And once 5G adoption is widespread, we’ll all upgrade our smartphones, laptops, modems, smart TVs, and plenty more personal tech devices. That will be a massive boost to the semiconductor industry.
***So, which semiconductor stock does Eric like today?
It’s one of the world’s top 5 memory chip-makers, Micron Technology (MU).
From Eric:
On March 25, Micron reported outstanding earnings results. It posted earnings per share (EPS) of $0.45 and revenues of $4.80 billion. Both numbers topped analyst estimates by a healthy margin. The company also provided a surprisingly upbeat forecast for next quarter, also topping analyst estimates.
Plus, Micron corroborated my suspicion that the pandemic will help boost the chip sector by revealing that it is seeing a surge in orders from data center operators that are building more capacity to deal with the expansion of people working from home …
(The COVID-19 selloff) is providing an opportunity to buy best-of-breed tech stocks like Micron “on sale.”
If you don’t want to put all of your eggs into one basket, you could also look at the VanEck Vectors Semiconductor ETF, SMH. It holds some of the biggest semiconductor stocks in the market, including Eric’s pick, Micron, plus Intel, Nvidia, Qualcomm, and Broadcom, among others.
***Meanwhile, Matt McCall is focusing on the other sector Eric just referenced
Matt is an expert thematic investor. In other words, he finds the massive trends that are reshaping our world, and by extension, our investment markets. He then identifies the specific stocks best positioned to ride those trends higher.
And one trend in his crosshairs today is the same one Eric noted above — telemedicine.
In fact, Matt was bullish on this space two years ago, which is why he added a specific telemedicine company to his Investment Opportunities portfolio … and thanks to Eric’s write-up above, you already know what it is …
Teladoc (TDOC).
From Matt:
Every year, I wonder: Why sit in a doctor’s waiting room with sick people if all you need is a checkup, or something that can be easily diagnosed from home — with the right technology?
That’s what Teladoc provides. And that’s before you get into the more critical applications that experts are calling for now. Think robots that can monitor a patient’s IV bag … or “smart beds” that can turn patients or drive them down the hallway!
I could go on. But the bottom line is that these stocks have held up during the coronavirus, which is a great sign for investors. It shows that if you’re invested in the right stocks, you’ll do well — even when panic and hysteria happens from time to time.
As Eric noted, the divergence between Teledoc and the S&P here in 2020 has been striking. Below are the returns as I write Friday morning. As you’ll see, Teledoc is up nearly 90% as the S&P has fallen more than 23%.
As I write, Matt’s subscribers who acted on his Teledoc recommendation are up over 285% … with more gains likely.
As we wrap up, while it’s easy to think of “the market” is one, big investment that generally moves in a unified direction, that’s hardly the case. Tremendous investment opportunities exist today, though they’re camouflaged by the broad-market losses. After all, it’s not so much a “stock market” as it is a “market of stocks.”
Finally, a reminder to check-in regularly with our InvestorPlace Mission Control Center for real-time guidance on investing during this COVID-19 crisis.
Have a good evening,
Jeff Remsburg
