Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
Gordon Pape: Quality companies are going to survive this market turmoil. Here are the sectors and stocks to target
My responsibility is to provide guidance on the financial impact of the world coronavirus crisis, Gordon Pape writes. Clearly, it’s not an easy task, given the uncertainty of the situation. No one can predict how long the crisis will last or how deep the economic damage will be.
However this plays out, the crisis will eventually end. What investors need to do now is avoid what one reader calls “The baby with the bathwater syndrome.” In other words, don’t sell stocks of sound companies that are going to survive, no matter what happens. Hold on to them, collect dividends and, if you have some cash put aside, buy them while they’re cheap. Here’s where to look. Yes, that includes banks, telecoms and utilities, but also food distributors and information technology firms.
Amid dividend cuts, income investors can still find safety
First, the coronavirus slashed share prices, John Heinzl writes. Now, it’s triggering dividend cuts, prompting investors to look for sectors that offer reliable income streams in times of trouble.
In the United States, companies that have suspended dividends include Boeing, Delta Air Lines and Ford. Others, including Occidental Petroleum, have chopped their payouts.
In Canada, with governments ordering eateries to close their dining rooms, at least two restaurant royalty trusts – Boston Pizza Royalties Income Fund and SIR Royalty Income Fund – suspended distributions this week. Powersports vehicle maker BRP also suspended its dividend, while bus maker NFI Group Inc. cut its payout in half.
So what sectors offer income investors relative safety? Analysts say banks are unlikely to reduce dividends, given their financial strength. Other sectors that will likely be spared from dividend cuts include telecom companies, utilities, pipelines and power producers, they say.
Crashing stock markets remind us that this is the No. 1 rule of retirement planning
A year ago, the idea of retirees keeping two or three years’ worth of expenses in cash seemed like the biggest waste of time ever, Rob Carrick writes. But after the stock market plunge that began in late February, it’s now clear that maintaining a cash cushion should be Rule No. 1 in building a retirement portfolio.
The benefit of holding a few years’ worth of cash is that you have resources to draw on if the stock markets crash. There’s no need to cash in your beat-up stocks or equity funds, and neither do you have to deplete better performing bonds and bond funds. The cash can be held in high interest savings account mutual funds or exchange-traded funds within an investment account, or in a high interest bank account held outside the portfolio. Another option is a three-year ladder of guaranteed investment certificates.
Heinzl’s mailbag: Market predictions, bank stocks in RRSPs, and clearing up the confusion over Telus’s dividend
A reader asks John Heinzl: Have we seen the worst of the pandemic selling and do you think now is a good time to acquire stocks?
He replies: Normally, I don’t try to predict what stock markets will do in the short run. However, with the coronavirus showing no signs of slowing down in North America, I believe it would be wise to prepare for the possibility that business shutdowns and social-distancing measures could remain in place for several months. This could lead to continued volatility on the stock market until there is some clarity on when the pandemic will recede.
As always, the best approach is to stay diversified by holding a mix of high-quality stocks, fixed-income investments and cash. If your time horizon is years, not months, selectively buying stocks now may prove to be a good move. But it’s also possible that there may be even better buying opportunities ahead. So proceed with caution. You can read his answers to other reader questions here.
More from John Heinzl: Netflix, Peloton and more investing stars and dogs for the week
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Humble GICs go from schlub to stud in just four weeks as stocks tumble
Guaranteed investment certificates are the investing world’s version of the Keep Calm and Carry On sign, Rob Carrick writes. GICs have been their inert self during the coronavirus crisis, which is to say they have done nothing but pay interest. GICs at best today yield in the 2-per-cent range for terms of one through five years. Four weeks ago, while stock markets were peaking, those returns looked pathetic. Today, not so much.
GICs have a flaw that has to be addressed in the context of the economic uncertainty ahead and the potential for people to need cash suddenly. While stocks and bonds can be sold on any business day, GICs are locked in. The exception is cashable GICs, where you accept a lower interest rate to get liquidity.
More from Rob Carrick: Big banks are trying for a kumbaya moment with their virus response: Can you trust it?
What investors need to know for the week ahead
Companies releasing their latest financial results in the week ahead include Dollarama, Roots, Park Lawn, BlackBerry, Corus Entertainment, Walgreens Boots Alliance and Constellation Brands.
Economic data on tap include: Canada’s real GDP for January as well as industrial product and raw materials price indexes for February (Tuesday); Canadian and U.S. auto sales for March and U.S. construction spending for February (Wednesday); Canada’s merchandise trade balance for February, plus U.S. factory orders and goods and services trade balance for February (Thursday); U.S. employment numbers for March (Friday).