WASHINGTON – Gazing into the crystal ball and predicting the future these days is dangerous work. But investors need ideas right now about where to invest the cash they raised before, during and after Wall Street’s massive spring coronavirus crash. So today, Monday, as Mr Market essentially treads water while trying to make up his mind, here’s an additional list of Plague Year stocks to consider adding to our portfolios. Today’s article highlights potential winners in Communications and, believe it or not, Energy. Yes, Energy. Read on.
More stocks to take the sting out of Plague Year 2020
In our special Sunday investing column, I listed some potential buys for investors who believe – as I do – that much of the US economy will recover. Sunday’s potential pick hits were in the Information Tech and Retail sectors. Today’s list includes one more tech along with some possibly good bets in the Communications and Energy sectors.
Before we start, please note: Stocks listed in this article are suggestions, not recommendations. We don’t do that here for a variety of reasons. Individual investors need to make their own investment decisions. So don’t rely exclusively on what you read here. As you would with a medical diagnosis that has you worried, it’s always a good idea to seek a second or even a third opinion before you make any move.
Our portfolios already hold some of the stocks mentioned here and we’ll tell you which ones. Others are shares we’re considering but have not bought. And may never buy if they keep going up, forcing us to chase them, which we rarely if ever do.
That said, let’s go.
One more tech stock
Yesterday’s column neglected to mention a vintage tech company I’ve never particularly loved, but one that’s performed very well in this chaotic environment. And that’s…
Microsoft (trading symbol: MSFT) –
We held a healthy position in Microsoft prior to the spring Coronavirus Plague Year market crash. When we saw Mr Market taking a Wile E. Coyote Acme-style cliff dive, we dumped them all for a substantial profit. And indeed they dropped like a rock during the decline, from a roughly $200 per share plateau down to the low $130s.
We thought this was absurd. Investors still tend to perceive Microsoft as an operating system and Microsoft Office Company. But under new management, they transformed themselves into something different. And their most notable evolutionary change launched the company as a major player in the up-and-coming cloud-computing universe. In fact, they’re now Amazon.com’s (AMZN) major rival in the cloud. And they’re making a lot of money there.
Furthermore, given the essential wildness of the tech sector, the cloud is becoming a stable, reliable, lucrative business for several companies, adding some stability to the wild price swings that characterize a great many tech stocks.
Since zero commissions are now the thing at major discount brokerage houses, little guys like you and me can now buy increasingly expensive shares like those of MSFT on the installment plan, 1-5 shares at a time. We started loading MSFT back into our portfolios in mid-March when it was languishing in the ±$140 per share range.
The shares have gone back up to the $180 range, although Tuesday’s turbulent trading action put pressure on MSFT and everything else. I keep buying 1 share at a time on any decent price break, and there could be one coming up. On the other hand, it’s rarely a good idea to chase this or any other stock.
Communications Services offers risky and boring Plague Year stocks
S&P finally revamped its old Telecommunications investment sector structure a couple of years back. Made sense, given that the list only included telephone companies. Except that today’s investors started asking an unanswerable question: what’s a telephone company. Fact is, the once significant number of US telcos were doing a vanishing act, either via mergers or by growing into other areas. Like AT&T (T) buying into the media industry.
So S&P renamed the Telecommunications sector the “Communications Services” sector. This allowed them to make this newly revised sector a lot sexier for investors and ETF creators. Sure, the new sector included AT&T, Verizon (VZ), and Century Link (CTL – which devoured the old Baby Bell, Quest, a few years back, and more recently network innovator Level3. But now the sector also includes Facebook (FB), Disney (DIS), Netflix (NFLX), Comcast (CMSCA) and lots of other entertainment and streaming services that are also “communications” type stocks.
Netflix and Facebook
Right now, the hot stocks in this new communications sector are clearly Netflix and Facebook. Both have gone rather stratospheric, however, and chasing them at this point is risky, as markets look prone to a pullback. But if you can catch either of these stocks in a correction, that might be the time to move. I missed them and have no current position in them, so I’m hoping for a pullback. This pair has proven their ability to serve as the true leaders of the Communications Services sector.
AT&T and Verizon
On the other hand, there are always those old, stodgy “telephone companies,” namely AT&T, Verizon and (maybe) Century Link. All three pay you a high dividend “Wile U Wait,” as those old roadside signs used to read. I currently hold shares in both AT&T and Verizon. The latter has proved a better investment recently, despite the competition offered by AT&T with its entertainment profits offering far more investment zoom that legacy landlines. But, perhaps due in part to the AT&T’s languishing DirectTV business, its stock hasn’t done very well in 2020. While Verizon is up significantly, despite its utterly botched investments in AOL and Yahoo. (What are they?)
XLC: The Communications Services ETF
Finally, if investors want less volatility but still want to be in the Communications Services investment sector, a relatively new ETF, symbol XLC, tracks the sector quite accurately, at least recently. That’s probably what I’ll end up buying instead of racing after Facebook and Netflix. If you chase stocks like this, odds are you’ll probably just give up and buy them at any price. At which point they’ll crash. Hard. Investing tends to treat stock chasers that way.
Energy Sector: High risk Plague Year stocks in the oil patch
Energy stocks? Are we kidding? Personally, I’ve had my head handed to me on a platter in a few of these stocks. But given the bizarre situation in April where oil suddenly began to “sell” for negative numbers, it’s possible that oil has bottomed out. Better yet, the Saudis decided to really cut volume, realizing, perhaps, that they were cutting their own throats on this issue. But whatever the case, with economies starting to go back on line, post-coronacrisis, individuals and businesses will start needing Texas Tea again, and prices should gradually improve. And along with it, the Energy Sector stocks. Meaning that the better managed oil and oil-related companies may start doing a lot better by calendar Q3 or Q4 2020.
The best bet in Energy lately has been well-managed and cost efficient Conoco Phillips (COP). With the exception of a few days when oil went negative, COP has continued to climb, little by little, like the Little Engine that Could. I’ve held a small position in this stock for a while. And whenever it has a bad day or two, I buy a few shares at a time. (Shares are currently in the high $39-low $40 range.) Again, this is one stock you consider when the market takes a nosedive. But it moves slowly enough that there’s probably more than enough time to catch this one for a bit of a positive ride. Other energy stocks can’t hold a candle to this one right now.
Plains All-American Pipeline and Enterprise Product Partners
Other decent but risky energy plays here also include Plains All-American (PAA) and Enterprise Products Partners (EPD). Both are essentially pipeline companies that pay very high dividends. But both also run excess oil storage capacity, and, given the current oil glut, stand to profit handsomely by offering to store part of the glut until the oil giants and / or big refiners can work down the inventory.
Finally, I’ve made money many times on Valero (VLO), a high-dividend-paying refiner company that lives in Texas. Specifically Houston. VLO has been on a bit of a tear recently and now sits in the low $60 per share area. But it can go much higher over time. And patient investors could see it head back up over $100 per share. A current 6.19% annual dividend, payable quarterly, makes Valero’s shares even more tempting. I am constantly in and out of this one, and am currently in, FYI.
But beware: Mr Market may be in a mood to correct soon
Mr Market tried to stay positive today, but I think he’s getting tired of the great rally we’ve recently experienced. So he may want to start fizzling a bit here and sinking somewhat lower. Just to let us know that it’s not yet all over for the lockdowns and overhyped coronavirus panic. In any event, stocks took a mid-afternoon nosedive that affected all three major averages. And the Dow took a surprisingly big whack of about -40 points just a minute or two before the close. Either some goof went massively short, the ETF end of day adjustments were a bit violent, or some large fund accidentally pressed – and held – the sell button.
But if stocks get gloomy again for a time, the Plague Year stocks above are names I constantly keep my eye on. I think we’ll recover our economy sooner rather than later. I think there will be additional coronavirus illness and death. But I also think that nearly all Americans (save for college age and adult snowflakes) are now tired of house arrest and won’t ever cooperate in another shutdown again.
More Plague Year stocks coming up in a future article. Stay tuned.
And fingers crossed.
– Headline image: The bull looks set to go after the bear at the stock exchange in Frankfurt, Germany. Is he ready to fight the coronavirus crisis? (Image via Wikipedia entry on market trends, GNU 1.2 license).