There’s an adage in the stock market: “A rising tide lifts all boats.” The flip side is that a falling tide lowers them.
That’s not true during the COVID-19 pandemic. Despite an April rally in stocks, indexes around the world still are substantially down from their February highs. But the outgoing tide has not pulled down all boats with it. Some stocks are faring quite well in this unsettled market.
Last week, I introduced the concept of Cornerstone Stocks – key companies that should perform well even in a pandemic and emerge stronger on the other side. The first five were Walmart, Costco, BCE, AT&T and Franco-Nevada.
This week, I’m adding five more to the list, as follows.
Pfizer Inc. (PFE-N). This is one of the world’s leading pharmaceutical companies and a leader in the race to develop a vaccine for the novel coronavirus. Last week, the company announced it is aiming to have 10 million to 20 million doses available by year-end – assuming the vaccine meets regulatory standards. Right now, the vaccine is in the trial stage in Germany.
But the company’s portfolio goes well beyond a COVID-19 vaccine. Its business units include oncology, inflammation and immunology, rare disease, hospital, vaccines and internal medicine. Its Upjohn division focuses on off-patent and generic medicines. The company recently released its first-quarter financial results, in which it reaffirmed its guidance for earnings per share of US$2.82 to US$2.92 for 2020 and said it has adequate liquidity for the foreseeable future. The stock pays a secure quarterly dividend of 38 US cents, to yield about 4 per cent.
Amazon.com Inc. (AMZN-Q). Amazon’s business is booming – sales in the first quarter were up 26 per cent to US$75.5 billion. However, profit came in below expectations at US$5.01 per share. And the company announced plans to spend its entire operating profit for the second quarter – an estimated US$4-billion – on COVID-related costs, including getting products to customers faster, raising wages, and keeping employees safe. The latter includes investing hundreds of millions of dollars developing the company’s own testing facilities. “We’re not thinking small,” said founder Jeff Bezos.
Amazon shares lost ground on Friday after its first-quarter financial results came out, closing at US$2,286.04. However, Amazon is still one of the few stocks to have gained ground this year, up 23.7 per cent from its Dec. 31 close of US$1,847.84. And the longer the crisis continues, the more sales will rise.
Microsoft Corp. (MSFT-Q). Microsoft’s latest quarterly revenue (to March 31), was US$35-billion, up 15 per cent from the same period a year earlier. Earnings per share were up 23 per cent to US$1.40. More people working from home increased demand for its Windows operating system (Windows runs 90 per cent of the world’s personal computers), while its commercial cloud revenue was up 39 per cent to US$13.3-billion. The company also reported a big jump in users of its Teams service for video conferencing, distance education and personal use. The stock is up 10.7 per cent for the year and the shares pay a quarterly dividend of 51 US cents.
J.B. Hunt Transport Services Inc. (JBHT-Q). If we didn’t recognize before that transportation is an essential service, we certainly do now. If it weren’t for the big rigs delivering food to our grocery stores, we’d all be starving. J.B. Hunt is one of the biggest trucking firms in the U.S. and a Fortune 500 company. The company reported a 9 per cent increase in revenue in the first quarter to US$2.28-billion. Earnings per share were US$0.98, down from US$1.09 in the same period a year ago. But that was partly due to a one-time charge of US$12.3-million in staff bonuses as a thank-you for their work during the crisis. The stock pays a quarterly dividend of 27 US cents a share. It’s a modest yield – a bit more than 1 per cent – but it looks safe.
Fortis Inc. (FTS-T). No matter what the economic conditions, we need utilities to keep the lights on and deliver the natural gas to keep furnaces running. Fortis, which is based in St. John’s, is an international company, providing services in five Canadian provinces, nine U.S. states and three Caribbean countries. The company has a strong balance sheet, having paid down $2.2-billion in debt last year and the quarterly dividend of 47.75 cents looks safe. I expect revenue will be down this year due to the shutdown of many businesses, but the company should be able to weather the storm with minimal disruption. First-quarter results are due this week.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.