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.
David Rosenberg: Investments that will thrive in the post-pandemic world (plus what to avoid)
What the world looks like when the crisis ends is truly anyone’s guess, but I will say with 100-per-cent clarity that it is going to look a lot different than it did before, David Rosenberg writes. Working from home is certainly going to be a more dominant force, with obvious negative implications for commercial real estate, but positive implications for internet infrastructure, computer hardware and video conferencing.
There is going to be a sharp reduction in travel to work, indeed travel in general, and this means fewer cars on the road. All the reasons to avoid the energy sector will now be accentuated, and there’s nothing good here for the auto sector or office real estate investment trusts.
Delivery services, on the other hand, have now become an essential, so here is a budding bull market right there for Amazon and any business model that copies it. I should tack on grocery chains with online services coming out of this as a winner. I sense that spending on robotics, which was already very strong, is now going to go parabolic. It goes without saying that biotech and pharma will be sectors you want exposure to for a long time. Read more of his insights here.
Gordon Pape: Three stocks that are bucking the market trend
Despite the April rally, all the major North American indexes are still deep in the red so far this year because of the COVID-19 shock. As of Friday’s close, the S&P/TSX Composite Index was off about 15.5 per cent year to date, while the S&P 500 was down more than 12 per cent. But some stocks are bucking the trend. They have rebounded strongly from the March lows and have outperformed the indexes for most of 2020. Three to consider are UnitedHealth Group, J.B. Hunt Transport Services and Gilead Sciences. Here’s why.
More from Gordon Pape: In these unpredictable times, here’s how your portfolio should look right now
John Heinzl: The dangers of juicy preferred share yields, where to hold RBC shares, and more
A reader asks John Heinzl: The yields on preferred share exchange-traded funds look very appealing. Do you think their dividends are sustainable?
His response: I’m skeptical. The reason preferred yields are so high is that preferred share prices have tumbled (prices and yields move in the opposite direction). And one reason prices have tumbled is that the market is dominated by rate-reset preferreds, whose dividends are adjusted every five years based on a predetermined yield spread over the five-year Government of Canada bond yield.
With the coronavirus flattening the global economy and central banks slashing interest rates, the five-year bond yield has plunged to a near-record low of about 0.44 per cent. That’s a problem because, if bond yields remain low, companies that reset their preferred dividends over the next few years could reduce their payouts. We saw this the last time government bond yields went for a skid. The ugly action in the preferred share market suggests investors are fearing a repeat performance. You can read his answers to more reader questions here.
More from John Heinzl: Zoom Video, Gap and more investing stars and dogs for the week
Lessons from one of the greatest investors of all time (and no, it’s not Warren Buffett)
The investment skills of Hetty Green (1834-1916) earned her the sobriquet Queen of Wall Street in the decades before the first world war. With stocks currently off their highs and possibly headed for another downward tumble (if past bear markets are a guide), it might be a good time to take a look at her decidedly contrarian style, Larry MacDonald writes. As she told a reporter: “I buy when things are low and nobody wants them. I keep them until they go up and people are crazy to get them.”
She always kept a large war chest of cash on hand to buy up real estate, bonds and railway stocks when pessimism was rife. She was particularly fond of real estate, watching out for foreclosures to pick up properties dirt cheap. When it came to buying stocks, she never bought on margin so that she would have staying power if and when the market went down.
It’s no good simply buying assets just because their prices are down. A low price can be appropriate for an unsustainable enterprise. An investor needs to have the investigation skills to distinguish the real value of assets in order to determine if they are truly on sale.
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Investors were slow to see coronavirus’s global spread. Are they again too complacent about the economic risks?
In the days immediately before the COVID-19 pandemic slammed into the global economy, investors were calmly pushing North American stocks to record highs, Tim Shufelt writes. In hindsight, that level of complacency in mid-February seems difficult to reconcile with the outbreak, considering the ravages already inflicted on China’s society and industry, combined with the fact that the virus had spread around the world.
Now, after a blistering rally over the past month from the lows of March, are markets repeating the same mistake? Entire industries are suspended, consumer spending has collapsed, corporate earnings are shrinking rapidly and unemployment is soaring, yet investor confidence seems to be steadily improving.
False rallies within a bear market are quite common. If the current rally proves to be such a head fake, both Canadian and U.S. stocks would have to fall by about 20 per cent just to reach lows set a month ago.
What investors need to know for the week ahead
The week ahead will include a U.S. Federal Reserve announcement on interest rates on Wednesday and Canada’s real GDP numbers for February on Thursday. Other economic data on tap include: U.S. goods trade deficit for March (Tuesday); U.S. pending home sales for March (Wednesday); Canada’s industrial product and raw materials price indexes for March as well as U.S. personal income and consumption for last month (Thursday); Canadian and U.S. auto sales for April plus U.S. construction spending for March (Friday).
Companies releasing their latest financial results include Canadian National Railway, Alphabet, Amazon, Tesla Caterpillar, Gilead Sciences, Ecolab, Ford, Harley-Davidson, Merck, Pfizer, Starbucks, UPS, Boeing, Cenovus Energy, Facebook, General Electric, Gildan Activewear; Maple Leaf Foods, Husky Energy, West Fraser Timber, Spotify, Altria Group, Visa, Colgate Palmolive, Imperial Oil and Exxon Mobil.