While Churchill’s words can sound harsh, it would be stupid and self-inflicting to ignore current markets flows while most are invested in it (Equity, ETFs, Mutual funds, Index funds, Pension funds, etc.). A short overview.
General markets
As I’m no #COVID19 expert, i’ll refrain from making any direct comments on it. What we can assess are the indirect complications: China’s lock-down, Italy’s lock-down, numerous reports on people stockpiling basics like toilet paper (why?) & food (long shelf-life products like pasta & rice, this makes at least some sense), short supply of medical equipment like the test-kit, masks & sanitizers, etc.
A handy site with the latest COVID19 numbers: https://www.worldometers.info/coronavirus/
S&P historic +20% drops:
Some significant market segments to keep an eye on:
Airlines (Lufthansa, Delta AL, KLM-Air France, etc.), leisure companies (cruises, travel agents, etc.), Hotel chains. All are suffering from the travel restrictions and cancellations.
With cancelled conferences and company specific travel restrictions, companies will become more proficiency in running virtual meetings/ Teleconferencing (Zoom, Skype, WebEx, etc.). Will this have a lasting effect on how we look at business travel & it’s cost vs benefits?
“Working from home” was already becoming increasing popular and just got an extra boost. Even a minimal decrease of traffic has an impact on congestion levels. A win-win for everyone. Except for the commercial real estate in the city centers…
“Stay at home” stocks: Netflix, Amazon, Domino’s Pizza, Peloton, etc.
- Bio science / Vaccine plays: One example: Aptose Biosciences IncNASDAQ: APTO . I’m staying away from these ones as the winner will take it all.
- “Mask” companies: Alpha Pro Tech, Ltd. (NYSEMKT:APT) stock is already up by an astonishing 517% this year. The company’s tie-in to the outbreak is its N-95 face mask. 3M is another well-known producer of the N-95 mask, the caveat here is that it’s just a very small contributor to their overall sales.
- Bitcoin (right) hasn’t taken up it’s safe haven status like gold (left) did:
- Neither did “poor-man’s-gold” silver. Touching the ‘100’ Au:Ag ratio level.
- Oil
- Gold producers: At an absolute sweet spot…. With gold touching 1700 & oil down significantly (-30% roughly after Russia openly declared war on the US Shale industry), it doesn’t take a math genius to count that 1+1=3. Mining is an energy intensive business so if these lower oil prices sustain, watch for jaw dropping profits in the next quarters. Like Newmont’s CEO Tom Palmer stated at the #BMOConference recently: “For every $100 increase in the gold price, we generate $400Mil of free cashflow extra every year.”
- Personal favorites that took a good beating. I’m sure you all follow some good companies that felt pricey (outside of junior mining land of course). Good news, most of these will be on sale. Microsoft, Volkswagen, Intel, Shell (dividend!), etc.
- Stimulus packages will be unrolled globally like no tomorrow.
Junior explorers
Basically you can make 2×2 groups here now:
- Those who are cashed up, and those that aren’t
- Gold leveraged and those that aren’t (Base metals & others)
Personal: I sold out the liquid names that where at a profit or flat (03/03/20).
Cheers, Pete
