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Some Thoughts on What's Next

Written by Briton Ryle
Posted March 16, 2020

Last Wednesday evening, we got the news that my daughter's college, Tulane, was shutting down. Thursday, I was in the car to go get her. 2,200 miles driven in four days. I was averaging 26 mph even when I slept...

Yeah, the coronavirus is wreaking havoc on our lives. The U.S. is just at the beginning of people getting sick. There is no way to know what comes next, and that is the worst feeling. Rumors are swirling that the government may go for a two-week total shutdown. Planes, trains, restaurants...

The stock market clearly doesn't like that. Another beating today. Even after the New York Fed provided nearly a trillion of liquidity last week. 

This sell-off isn't about a recession or bad earnings. People are selling because they need the cash. You know companies are selling some of their own stock they've bought over the last few years. Boomers that are at or near retirement are selling, too, to make sure they can salvage a retirement. Pension funds are selling to make their distribution obligations. Insurance companies are selling because who knows what their liability will be. 

If you don't need the cash, there's no point in selling now. In fact, I just transferred some money to my IRA. That's right, I'm going to buy more stock today. I've already bought some Maxar (NYSE: MAXR). I'll probably grab some Bank of America (NYSE: BAC) under $20.

They say the time to buy is exactly when you really, really, really don't want to. And I will admit, buying stock wasn't the first thing that sprang to mind when I got up this morning and saw what futures were doing. The first thing I thought was a string of expletives that I won't repeat here. Buying something was the second, maybe third thing I thought of...

REITs and Tech 

I don't know when things will get back to normal. A month maybe? Two? But I know that we will start going to restaurants. I know I will eventually go see that new James Bond film. And I know that, one day, the stocks I've bought over the last couple weeks will be higher than they are now. 

This is not the time to buy speculative stocks. And frankly, I'm leery of buying index funds, too. This is a time to buy quality. Starbucks (NASDAQ: SBUX) is trading for $60 a share. A little patience and you might catch it at $50 — seems like a pretty good deal. Apple (NASDAQ: AAPL) is down $75, at $250. 

Target (NYSE: TGT) is nearly at $90, down from $130. I wouldn't fool with many retailers. Kohl's (NYSE: KSS) might not survive this. Same for Macy's and Nordstrom (NYSE: JWN). But Target has already made the turn to the new retail reality. And if a couple of its competitors go down, it will be that much stronger when this virus is in the rearview mirror. 

Twilio (NYSE: TWLO) is one of the best tech companies out there. It provides a platform for companies to do their online customer service. It's been cut in half and currently selling for nine times revenue. Sure it might get cheaper. But it just started turning a profit. And revenue was expected to grow about 40% this year. That probably won't happen now — that's why it's on sale. 

I like some REITs. Those yields are tasty, data centers are the place to be. Office buildings and malls maybe not so much...

The Cloud Cometh

Both my kids are finishing their school years online. Teachers are scrambling a bit to get everything up and running. They weren't ready. A whole lot of people (including me) will be working from home for the foreseeable future.

But it seems to me that if you're looking for ways that this virus will push change on us, work and school online is a good place to look. 

We've all known that we would be slowly transitioning to more school/work getting done in the cloud. Coronavirus is pushing that future to the here and now. 

Teleconferencing company Zoom Video (NASDAQ: ZM) has been on fire. And my Wealth Advisory subscribers have had the good fortune to see online health care stock Teladoc (NYSE: TDOC) roll higher. 

Those data center REITs will benefit. Google (NASDAQ: GOOG) will, too, as 5G becomes all the more critical — and useful. 

Like many companies, Angel Publishing uses Slack (NYSE: WORK) for our office communications. It will benefit from more people telecommuting. The stock is $17, down from a high of $42.

If you're gonna do more online, then security becomes an issue. Jason and I pulled the plug on Palo Alto (NYSE: PANW) when this whole thing got started. I think we got out around $195? Shares are down to $140. Its five-year low is from around $108. That would be a pretty nice entry. 

Again, I'm not telling you the bottom is in. What I'm telling you is that there is enough fear and WTFs in the air that some stocks are looking attractive. Act accordingly. And if you buy something today and the price falls tomorrow, don't sweat it. We're playing the long game here.

Until next time,

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Briton Ryle

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A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.

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