Following perhaps the most contrarian move in the market when bullish investors doubled down amid the initial chaos of the novel coronavirus, the environment today is much more subdued for potential stocks to buy. However, the college basketball tournament known as March Madness may provide the spark traders are looking for.
As benchmark indices reached phenomenal valuations, bond yields rose. This spooked investors as higher yields disincentivizes the narrative of growth stocks to buy.
Technology-centric companies absorbed the brunt of the damage. Typically, tech plays don’t offer dividends so there’s no point holding their shares if you have a strong conviction of future volatility. But that’s also why stock proponents turn toward the March Madness tournament. Historically, the market tends to do well during this event.
I’m not a big basketball fan. I’m certainly no expert in gambling on stocks to buy during March Madness. However, based on historical data from the Dow Jones Industrial Average, there may be something to this catalyst. Primarily, while March is typically one of the slowest months. The following April is one of the strongest, featuring average month-to-month sequential gain of 0.96% since 1900.
Also, the March-to-April layup – OK, that’s as much basketball lingo I’m going to use – represents historically an upside opportunity before shares typically crumble in May.
Therefore, for speculators, March Madness couldn’t come soon enough. Here are the stocks they may target:
- AT&T (NYSE:T)
- ViacomCBS (NASDAQ:VIAC)
- Capital One Financial (NYSE:COF)
- Coca-Cola (NYSE:KO)
- Lowe’s (NYSE:LOW)
- DraftKings (NASDAQ:DKNG)
- Under Armour (NYSE:UA, NYSE:UAA)
On a final note, you should use sound fundamental and technical analysis to decide whether you buy, sell or stay on the bench.
March Madness Stocks to Buy: AT&T (T)
As one of the pivotal sponsors of the March Madness tournament, stakeholders of telecommunications giant AT&T – including this non-basketball-watching author – will be looking for the wild event to get T stock out of its funk. What seemed to be a promising contrarian (and dividend-paying) opportunity leading up to the coronavirus disruption has since become a place where money goes to wallow in the locker room.
However, if you were going to bet on stocks to buy based on the college basketball tournament, you may want to give AT&T a second chance. According to SI.com, many of the games will be featured on AT&T-owned channels via its WarnerMedia subsidiary, which are TBS, TNT and truTV.
Moving beyond March Madness, T stock could be one of the more viable stocks to buy in this period of uncertainty. Yes, it’s boring but heck – boring is good during these times. Without the price of shares becoming frothy through rampant speculation, it’s possible that AT&T could ride out the storm (assuming it arrives).
One of the stocks to buy off this sports-related phenomenon is ViacomCBS. The media entertainment stalwart is brushing volatility off like no one’s business. For example, VIAC stock was up nearly 13% in the week beginning Feb. 28. Over the same period, the Nasdaq Composite index was down almost 4%.
So far, ViacomCBS shares are up nearly 103% year-to-date. Personally, I don’t like buying into such enormous strength due to the possibility of holding the bag. Sadly, I know a thing or two about bag holding so I don’t want it to be you next time.
Still, if March Madness delivers the goods in a resounding manner, you may want to play the momentum trade in VIAC stock. From SI.com, “In the final weekend, CBS will carry the broadcast for both Final Four games as well as the National Championship.”
Although I know jack about basketball, I do know that millions of people will be tuning in – what else do they have to do during this uneasy lull in the pandemic? Thus, consider ViacomCBS as one of the stocks to buy if you don’t mind the heat.
Capital One Financial (COF)
Another major sponsor of the NCAA and March Madness, Capital One Financial makes for an interesting idea among stocks to buy. Similar to ViacomCBS, COF stock has marched higher this year without missing much of a beat despite the surrounding volatility.
For instance, shares were up more than 4% in the week beginning Feb. 28, while again, the Nasdaq and even the venerable S&P 500 index printed red ink over the same period. For me, the same principle applies regarding the momentum of COF stock – I’m a bit uncomfortable wagering on a security that has moved against the grain of the major indices.
Still, if you’ve got the speculative fervor running through your blood, Capital One offers a fundamental case for your courage. Mainly, I’m looking at credit card delinquencies, which have dropped to near record lows. This tells me that millions of Americans used the savings from the widespread work-from-home initiative – along with prior stimulus checks and other forms of government assistance – to bolster their personal balance sheets.
Translation? The average consumer is more financially resilient than you might think, which makes COF a surprising name among stocks to buy.
March Madness Stocks to Buy: Coca-Cola (KO)
The last of the major sponsors of March Madness is Coca-Cola. It might just well be the most compelling on a holistic basis relative to the other stocks to buy on this list. I say that because KO stock is a secular play. Whether we spark a continuation of this record-breaking bull market or we succumb to a bear market, the soft drink giant is a name worth considering.
Though I’m not going to guarantee that the market will incur a sharp correction, the evidence seems to point in that direction. Also, you can rely on the natural rhythm of life. Just when you think that the bull market will charge to even more ridiculous heights, that’s exactly when Murphy’s law decides to strike.
But if it does, KO stock would be in a better position than most other investments. Mainly, Coca-Cola has a reputation of being a “recession-proof” asset. I prefer the term recession resistant as I don’t want to make too many severe pronouncements. Setting that aside, Coca-Cola products provide a cheap distraction from the everyday doldrums of an economic downturn.
On the other hand, should the economy escape yet another bullet, people can’t get enough of their diverse and addictive pipeline.
As one of the NCAA’s corporate partners, Lowe’s is an intriguing idea both as a play on March Madness and as a hedge against whatever comes next for our economy. Back when the coronavirus first upturned our paradigm, LOW stock gained from the purchasing of necessities and emergency goods.
However, with new daily Covid-19 infections conspicuously declining and as the vaccine rollout gains momentum, many investors had second thoughts about LOW stock. Also, rising yields didn’t help matters for the hardware and supplies retailer because it could hurt housing demand.
But if the pandemic worsens, Lowe’s could see a return of its cynically bullish narrative. You should bear in mind that this isn’t an unreasonable hypothesis. According to the Wall Street Journal, a new strain of Covid-19 is imposing a devastating impact on Brazil.
On the sunnier side, let’s say the economy improves. Even if yields rise a bit, that might not be enough to reverse housing demand. Furthermore, a stronger consumer base from an improved economy should bolster renovation work and construction, boosting LOW as one of the stocks to buy.
I’d be remiss if I were discussing stocks to buy for March Madness and didn’t mention DraftKings. With favorable legislative momentum allowing an increasing number of Americans to bet on sports – I’m talking legal gambling so fuggedabout your Uncle Vinny – DKNG stock is poised to be a hot commodity for many years to come.
Sure enough, DraftKings shares have held up well during the recent market rout. It’s probably not over yet so I don’t want to speak prematurely. Nevertheless, in the month-long period between Feb. 8 and March 5 of this year, DKNG stock was down 4% while the Nasdaq shed nearly 8%.
Therefore, should we have an exciting college basketball tournament, it’s possible that DKNG could swing higher. More importantly, the Super Bowl proved that even with a pandemic, the U.S. can host a major sporting event with little to no problems.
That’s a confidence boost that should serve DraftKings well.
March Madness Stocks to Buy: Under Armour (UA, UAA)
With March Madness just days away, Under Armour finds itself in a strange situation. Over the past several months, the athletic apparel manufacturer has been jettisoning its expensive sponsorship deals, particularly with collegiate athletic programs. Fundamentally, then, it appears that the timing couldn’t be worse for the company, especially on the eve of a major tournament.
Nevertheless, management could be making the right decision. As sports deals become increasingly expensive, the return on investment of sponsorships become much narrower. That leaves struggling investments like UA stock in a bind. By making cuts, the company can focus on rebuilding its brand, perhaps keying in on profits and thereby stabilizing the business.
It might be strange to say this considering that the company is competing against sports industry behemoths Nike (NYSE:NKE) and Adidas (OTCMKTS:ADDYY). Further, these latter two will be featured heavily during the tournament. At the same time, they’re going to pay a price for the privilege.
On the other hand, Under Armour will be mitigating that pressure by focusing on the consumer. This contrarian approach could make it a surprising choice among stocks to buy.
On the date of publication, Josh Enomoto held a long position in T.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.