A better headline for this piece might have been “Ten stocks to Buy at the Bottom”, except that you have to redefine the word “bottom.”
The rules of the greatest liquidity-driven market of all time demand a different explanation of The NEW bottom, and that is something that hasn’t gone up lately.
And that would be big tech, which appears ready to blast out to the upside from a six-month long sideways “time” correction.
It would be a perfectly rational thing to see in these highly irrational markets. After all, these names just announced blockbuster earnings presaging greater things to come. And these companies actually HAVE earnings, compared to recent market frontrunners, which have none at all.
Coming in here and betting the ranch is now a no-lose trade. If I’m right, the pandemic ends in three months, stocks will soar. If I’m wrong and the global epidemic explodes from here, you’ll be dead anyway and won’t care that the stock market crashed further.
Needless to say, I have a heavy tech orientation with this list, far and away the source of the bulk of earnings growth for the US economy for the foreseeable future. If anything, the coronavirus will accelerate the move away from shopping malls and towards online commerce as consumers seek to shy away from direct contact with the virus.
What would I be avoiding here? Directly corona-related stocks like those in airlines, hotels, casinos, and cruise lines. Avoid human contact at all cost! There is no way of knowing when or where these stocks will bottom. Only the virus knows for sure.
Microsoft (MSFT) – still has a near-monopoly on operating systems for personal computers and a huge cash balance. Their inroads with the Azure cloud services have been impressive.
Apple (AAPL) – Even with the Coronavirus, Apple still has a cash balance of $225 billion. Its 5G iPhone launches in the fall, unleashing enormous pent-up demand. Apple’s rapid move away from a dependence on hardware to services continues.
Alphabet (GOOGL) – Has a massive 92% market share in search and remains the dominant advertising company on the planet.
QUALCOMM (QCOM) – Has a near-monopoly in chips needed for 5G phones. It also won a lawsuit against Apple over proprietary chip design. In the very near future, you won’t be able to do ANYTHING without 5G. It’s also not a bad idea to own a chip stock during the worst global chip shortage in history.
Amazon (AMZN) – The world’s preeminent retailer is growing by leaps and bounds. Dragged down by its association with the world’s worst industry, (AMZN) is a bargain relative to other FANGs.
Visa (V) – The world’s largest credit company is a call on the growth of the internet. We still need credit cards to buy things. And guess what? Coronavirus will accelerate the move of commerce out of malls where you can get sick to online where you can’t.
American Express (AXP) – Ditto above, except it charges higher fees and has snob appeal (read higher margins). Its stock has lagged Visa and MasterCard in recent years.
NVIDIA (NVDA) – The leading graphics card maker that is essential for artificial intelligence, gaming, and bitcoin mining. Another great chip play that has flatlined for half a year.
Advanced Micro Devices (AMD) – Stands to benefit enormously from the chip shortage created by the coming 5G and the explosion of the cloud.
Target (TGT) – The one retailer that has figured it out, both in their stores and online. It can’t be ALL tech.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
