Investors may need to consider adjusting their strategies for stocks to buy in light of the rise of the newest health threat.
With a name that sounds like something out of a cringe science-fiction film from the 1980s, the omicron variant of the novel coronavirus might elicit bathos were it not for the potential seriousness of the matter.
First, let’s discuss why medical experts are so concerned about the new strain. Number one, mainstream reports indicate that omicron is spreading rapidly in Europe. To be fair, Nature.com reports that scientists are still trying to figure out a more complete picture of the variant. This process may take weeks, which is why investors may want to consider defensively oriented stocks to buy.
Second, the New York Times along with several other sources have reported that omicron has already touched down in the U.S.
Of course, given how quickly prior variants of Covid-19 spread to other nations, this news wasn’t surprising. What it does showcase, though, is that government agencies might have to hope for the best. Without fully understanding the variant, it’s not useful to recommend certain protocols. Still, the ambiguity might aid defensive stocks to buy.
Obviously, pretty much everyone understands the balance between common-sense measures and individual liberties. As I discussed on a cable news program, retail revenge is a real phenomenon: people are tired of having been cooped up at home for a year. Losing another year is simply not in the cards. Therefore, the idea of stocks to buy is a precautionary idea, not a panicky one.
However, nobody knows how this crisis will pan out. I think it’s also fair to point out that we’ve tried the ignore-it-and-hope-it-goes-away approach with disastrous results. Further, with so many other countries taking the omicron variant seriously, it’s wise to consider these stocks to buy.
- Abbott Laboratories (NYSE:ABT)
- Merck (NYSE:MRK)
- Home Depot (NYSE:HD)
- Costco (NASDAQ:COST)
- Duke Energy (NYSE:DUK)
- Disney (NYSE:DIS)
- Moderna (NASDAQ:MRNA)
As a content developer, I understand that a large number of people have grown cynical or skeptical about the pandemic itself. Believe me, I get it. This list of stocks to buy does not center on opinions about the SARS-CoV-2 virus but rather, anticipated responses by others in the market. Keep that in mind as you conduct your due diligence.
Omicron Stocks to Buy: Abbott Laboratories (ABT)
When the first reports came out that multiple states reported omicron cases, many investors undoubtedly tagged Abbott Laboratories as one of their stocks to buy. Admittedly, the argument is a tricky one.
Earlier in August, the New York Times published a rather shocking story: Abbott requested that its factory employees destroy inventory of rapid Covid test kits. Weeks later, the U.S. suffered a surge in cases, which must have enraged some circles in upper management. Because in addition to the inventory destruction, the company also laid off workers due to declining sales of test kits.
With another surge possible — early reports suggest that omicron is highly transmissible — Abbott is again in the spotlight. Hopefully, management learned its lesson. Better yet, the company issued a statement that it believes its rapid and PCR tests can detect the SARS-CoV-2 virus, irrespective of the omicron mutation.
If so, it might be time to add ABT to your list of stocks to buy. Naturally, demand for testing kits has increased due to the omicron threat. As well, even if the variant turns out to be a dud, Abbott is a strong, dividend-yielding company.
With another variant popping up that the international community must address, the answer to the ongoing saga seems to be simple: get a majority of the population vaccinated so that we can defeat this pandemic once and for all.
However, conspiracy theories and a deep mistrust of government authorities across the globe have fueled significant resistance.
Under this circumstance, investors might want to consider adding Merck to their list of possible stocks to buy. As you know, the company generated headlines several weeks ago with its oral antiviral drug molnupiravir, but recently, the investor response to the drug has been tepid.
Much of this stems from the therapeutic’s 30% effectiveness in reducing the risk of hospitalization and death in high-risk patients.
This efficacy rate stands in sharp contrast to the 50% effectiveness touted in October. As well, questions exist about molnupiravir’s effectiveness in the real world, especially if other countries administer the therapy.
At the same time, vaccination rates in multiple jurisdictions have been disappointing, cynically pointing to future demand for Merck’s drug. Moreover, the Times article referenced near the top reported that prior infection may be little defense against omicron. If so, that’s another cynical catalyst for MRK stock.
Omicron Stocks to Buy: Home Depot (HD)
I’ve mentioned this opinion before but Home Depot was a pandemic winner in more ways than one.
Sure, the surge of demand for critical household goods bolstered the case for HD being one of the top stocks to buy during the new normal.
But on a less quantitative basis, I believe Home Depot’s brand earned a trip several rungs higher on the reputation ladder. It was one of the few businesses that stayed open into the evening hours, which was a godsend for people with unorthodox schedules. Plus, the hours helped folks who wanted to avoid the crowds.
Currently, though, the pandemic is not the main catalyst for HD stock. Rather, the company’s strong third-quarter earnings report, which saw the top and bottom line beat consensus forecast is the main driver.
Primarily, customers spent more money on home improvement projects. That could still be a theme in Q4 because the Federal Reserve is opening the door for benchmark interest rate hikes.
If so, that move might see a reduction in housing prices (due to higher borrowing costs), meaning that this might be the last chance for homeowners to sell their property at the highest price possible.
A few days ago, CNBC’s Jeff Marks and Jim Cramer presented an interesting case for Costco.
As one of the few publicly traded companies that provide monthly sales reports in addition to quarterly disclosures, the big-box retailer is one of the most transparent firms in business. During November, the company saw core comparable sales increase 9.1% year-over-year in the U.S., missing estimates of 11.4%.
But rather than viewing this blip as a signal to sell, the pair maintain their optimistic thesis “that Costco is gaining new customers and taking market share.” In their view, a “small miss was bound to happen at some point, and we are chalking this up to nothing more than the expectations getting a bit too bullish.”
I think it’s a valid point, even if the omicron variant realizes the worst fears of infectious disease experts. First, the sales results are still very solid — comparisons against 2020 are difficult to make anyways. Second, Costco features a very wealthy membership base, with the average shopper earning a six-figure income.
Let’s be real — we’re not going to solve the social equity challenge overnight. While we’re waiting, you might as well focus your stocks to buy on where the money is.
Omicron Stocks to Buy: Duke Energy (DUK)
With uncertainty being the main theme for these stocks to buy, Duke Energy fits in nicely since it may enjoy multiple positive catalysts.
For one thing, its coverage map features several states in the Midwest and the east coast, which can get chilly. Bring in the forecasted cooler-than-usual winter and you have a case for people turning up the heat.
Further, if the cooler temperature exacerbates the Covid-19 pandemic, many people may decide to avoid going out and about for vacation and instead stay at home — or close to it. In turn, this dynamic would imply greater energy usage, which should benefit DUK stock.
Also, it’s possible that companies could delay asking their workers to return to the office. If that happens to be the case, we could see energy consumption spread more broadly across Duke’s coverage map. In a cynical sense, omicron could be what the utility firm needs to get shares moving again.
As well, you have the general thesis that utilities are indispensable in a modern society. Therefore, if you’re feeling jittery about the new strain, DUK is worth consideration.
One of the riskier names among stocks to buy on this list, Disney is down more than 15% in the last month.
Most of the red ink is due to a rough Q3 earnings report, which saw the streaming and theme-parks business segments miss analyst expectations.
However, Barron’s Nicholas Jasinski may have the right idea on this equity share.
“For Disney, it’s more about the destination than it is the journey. Streaming success will be measured by subscriber scale in 2024, not today. And it was always going to take longer for Disney’s theme parks business to rebound from Covid-19 than it took for it to plummet,” he said.
Plus, I’ll add that the initial disruption of the pandemic forced disruption in the content-making space, thus hurting demand for Disney’s streaming division. However, moving forward, if the omicron variant spreads rapidly, more people will be incentivized to stay at home, which could boost at-home entertainment options.
Of course, that will affect outdoor activities but even so, many cabin fevered households could opt for Disney theme parks since many countries are shutting their borders to contain the new variant. It’s risky but contrarians might want to take a shot here.
I’m going to stick Moderna last on this list because it’s not clear how this company will perform if the cynical tailwind of Covid-19 fades away. In addition, the company has been suffering from a spate of bad news and bad publicity.
Comedian and host of The Daily Show Trevor Noah recently took aim at Moderna, doubting the objectivity of the biotechnology firm’s CEO Stephane Bancel. Specifically, Noah labeled the chief executive as “the guy who stands to gain millions from new vaccines.”
He later expressed the need for a more objective source regarding the development and distribution of a new vaccine.
Noah stated the quiet part out loud, which was surprising given his generally progressive stance on political and social issues. As painful as that call out might be, Moderna also reeled from losing a patent dispute regarding lipid nanoparticles, which safely deliver mRNA to cells.
Still, the subsequent red ink for MRNA shares could be an opportunity for contrarian stocks to buy. Down the road, it’s possible that the parties to the patent dispute could settle out of court. In the meantime, it’s also possible that people could finally get the message about vaccinations.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.