[Editor’s Note: this story was updated on June 29, 2020, to correct the spelling of Mike Liss’ name.]
The stock market declined to finish off the week as worries about a second wave of the novel coronavirus in the U.S. started to creep into the market. The unexpected plunge should give investors a healthy dose of reality, as volatility is likely to continue through the end of the year. But for long-term investors who are looking for stocks to buy and hold on to, dips like this are a great opportunity to pick up quality names.
As summer earnings season approaches, it pays to be cautious. Until now, traders have had very little concrete data to price stocks with. When second quarter results come out and the market has something more to go by, it could cause companies to crumble. With that in mind, it may not be the time to dump your life savings into the stock market.
Instead, use this pullback to start building positions while maintaining a healthy balance of stocks and some cash reserves to deploy in the event of another major decline.
- McDonald’s Corp (NYSE:MCD)
- AT&T (NYSE:T)
- Alphabet (NASDAQ:GOOGL,GOOG)
- Facebook (NASDAQ:FB)
- Remark Holdings (NASDAQ:MARK)
Cheap Stocks to Buy Now: McDonald’s (MCD)
Over the past few months, several firms cut or suspended their dividend payments altogether in an effort to preserve liquidity. While the majority of dividend stocks are still paying out, it raises the question of whether or not more cuts and suspensions are to come.
According to Mike Liss of American Century Investments, the answer to that is totally dependent on the progression of the coronavirus pandemic and the subsequent economic recovery:
“If we’re going up more in a V-shape [economic recovery], dividends are going to get restored a lot sooner, and you will have fewer dividend cuts. [If a second wave materializes] you will have a lot more cuts from where we are right now.”
With that in mind, choosing dividend stocks with financial fortitude that will be able to pay even in a worst-case scenario is important. You could do a lot worse than McDonald’s stock.
There’s no question that MCD is feeling the same pain as the rest of its restaurant peers as the pandemic weighs on revenue. Notably, the firm suspended stock buybacks in the wake of the lockdowns in order to preserve capital, but the dividend remained untouched and is likely to stay that way.
CEO Christopher Kempczinski underscored the firm’s commitment to paying out its dividend during McDonald’s Q1 earnings call saying it comes second only to investing in the fast-food chain’s growth.
Another plus to owning MCD stock is the fact that the firm’s drive-through locations can continue bringing in revenue even through pandemic-spurred lockdowns. Not only that, but it’s low-priced fare will continue to be a miniature luxury that people can afford, even in a prolonged economic downturn.
MCD stock is down roughly 7% from where it was a week ago making it a good bargain buy following the pullback.
Another dividend stock worth putting on your buy list is telecom giant AT&T. The firm offers an impressive 7% dividend yield. Like the rest of Wall Street, AT&T was burned by the lockdowns during the first quarter — the contraction cost the firm 5 cents per share.
However, AT&T should reap the benefits of more time spent at home with the launch of HBO Max at the end of May. And it could have more opportunities. Robert Siegel, lecturer in management at Stanford Graduate School of Business, noted that the pandemic should focus companies like AT&T even more on the streaming world. In an email to InvestorPlace, he wrote, “You will see news networks develop subscription like services for streaming for which they can charge (i.e. not unlike the NY Times and The Wall Street Journal) and you could expect to the free services offered by CNN/MSNBC/Fox News to attempt to charge higher prices to the extent they are seen as “loss leaders” for the distribution arms of AT&T and Comcast.”
Even with the impact of coronavirus factored in, AT&T was able to turn a profit in the first quarter, so Q2 should be notably better.
With or without the pandemic on the cards, T stock has been one of my favorite telecom stocks to buy because of the firm’s strong focus on the future of streaming. AT&T is not only a streaming and media play, but it’s also a bet on this year’s 5G revolution as well.
So far, T stock has fallen about 10% over the past week and is down 24% on the year.
Big-name tech stocks have been the stars of the market’s epic rally since March, so if you missed the initial market crash, now is a good time to upgrade your portfolio with a few big-tech names.
One such name is Facebook, whose share price has fallen roughly 5% over the past week. Since the market crashed in mid-April, FB stock has soared to new highs. Rising user numbers as well as its latest segment Shops, which puts it in direct competition with Amazon (NASDAQ: AMZN), are the major reasons for the ascent.
With that said, Facebook is undoubtedly a stock to buy and hold onto. The firm’s solid position in the social media space has made it an advertising juggernaut that simply can’t be ignored. Any pullback in FB stock makes the company worth picking up, and this is no exception.
Alphabet (GOOG, GOOGL)
Alphabet, like Facebook, is a play on advertising because that’s the firm’s bread and butter. Alphabet could see its coronavirus pain drawn out a bit further because of its greater exposure to travel-related advertising, but all-in-all the worst is expected to be behind GOOG stock.
That’s evident in Google’s more muted recovery — while Facebook is trading above its February highs even with the recent pullback, Google is still roughly 10% lower than its pre-pandemic levels.
But GOOG stock has a lot to offer investors in terms of growth on the horizon — the firm not only will continue to grow its advertising business, but its AI arm has become particularly enticing. That’s especially true when you consider Alphabet’s influence in the autonomous driving space through Waymo.
That’s not the only place Google is utilizing its AI prowess, however. Other potential high-growth segments include healthcare, climate change and security.
Of course, this could be the start of a larger decline as a second wave of coronavirus rears its ugly head. That would be detrimental to the U.S. economy, as well as the stock market and would almost surely put a stop to the boundless optimism on Wall Street.
But that doesn’t mean you should simply stay out of the market. There are plenty of companies that will continue to prosper even amid a surge of new virus cases. Remark is one such company whose products will probably be in high demand in the post-pandemic world.
Remark incorporates AI into its thermal scanning products, which makes the process more efficient. That’s going to be particularly useful in order to reopen businesses that will struggle with crowd-control like air travel and theme parks. As long as there’s a threat of coronavirus, temperature scanners will be in demand and that makes Remark one of the best pandemic stocks to buy.
MARK stock also offers investors a stake in Sharecare, a company specializing in online healthcare. Sharecare is rumored to be preparing for an IPO, something that could make Remark stock all the more valuable.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.