Global stock indices staged an epic rebound on Tuesday, March 24, but are still way down from their all-time highs. The reason for the dramatic reversal from 2019’s strong gains is the ongoing spread of the coronavirus throughout the world. Investor concerns are justified as hundreds of millions, if not billions of people, are quarantined and not spending money to support the economy.
Also, the highly infectious disease has resulted in many factories grinding to a halt which implies that many people will lose their jobs.
Consider for example the Dow Jones Industrial Average which gained more than 2,100 points to close the day on March 24 at 20,704.91. While the one-day 11.37 per cent appreciation is nothing short of spectacular, the index is still trading lower than where it was last week and seemingly miles away from all-time highs which were recorded just a few months ago.
There is no general consensus if the market plunge is merely accelerating or close to the end at this point. The coronavirus pandemic is certainly the first of its kind in the modern era and an unfamiliar foe for central banks to tackle. The world has learned its mistakes from a global financial crisis but this is different. This is a global pandemic that can’t be solved by merely throwing money at the problem.
Good stocks to invest in: plan accordingly
Investors looking for good stocks to invest in at current depressed levels are encouraged to do so carefully and avoid fully jumping back in. They should also keep in mind that once the coronavirus pandemic is resolved, the world will certainly not be the same as it was before.
Tens of millions of people across the world will be without a job while trillions of dollars of wealth would have vanished from the stock market collapse. Will the same number of people be lining up to buy the latest iPhone? Chances are more likely no than yes.
The global tourism industry contributed $8.8 trillion to the global economy in 2018 and even an optimistic 10 per cent reduction implies an $880bn negative impact. What if the more realistic figure is 30 per cent or even 50 per cent?
So investors looking for exposure to stocks should follow a common theme: current good stocks to invest in should be limited to companies that offer value and aren’t exposed to impacted industries such as tourism. The world will refuse to put their lives on hold and want to consume and share experiences. But they may need to do so at lower costs.
Good stocks to invest in: retail
TJX is a global fashion retailer that sells quality brand names at a discount which makes it one of the good stocks now. The company derives more than three-quarters of all sales in the US with the remaining locations found mostly in Europe and Canada.
The company will be in a position to buy large amounts of new inventory from department stores and mall-based retailers who were struggling even before the virus broke out. Consider for example Macy’s, the department store whose struggles have been well documented for a few years. The company simply lost any sort of major relevance with consumers and now has to deal with a “junk” bond rating from S&P.
Other department stores experiencing similar woes include Kohl’s which had a terrible holiday 2019 performance. If at the peak of American consumer confidence and record-high employment data the company couldn’t gain traction how will it survive in the post coronavirus recovery world?
The answer is it won’t. But TJX can because it spent the past few years making sure the entire retail community knows it offers discounts and value on a daily basis.
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Alternatively, Burlington Stores is a smaller off-price discount retailer to TJX. But the company has a similar business model of offering everyday discounts and value. The market should certainly be large enough for more than one winner but TJX has a larger scale and scope which gives it the advantage of operating from a position of strength.
Current good stocks to invest in: the coronavirus cure
What are good stocks to invest in after the market crash? Hopefully, by the time you read this, there will be a known and provable cure for the coronavirus. Unfortunately, as of the time of writing (March 24, 2020), there are no approved medications or vaccines.
But some companies are showing signs of progress which would make them good stocks to invest in right now. One of the more notable companies currently making headlines is Teva Pharmaceuticals and Mylan, both of which make a treatment called hydroxychloroquine.
Studies attempting to prove the medication’s effectiveness in treating the coronavirus is underway in the US involving 1,500 people who were exposed to the virus. Similar studies are underway across the world, including South Korea and Spain.
Piper Sandler analyst David Amsellem told investors the treatment at the very least passes the legitimacy test. He wrote it is “an oral molecule that has been around for decades, has a well-established track record from a safety perspective, and would be inexpensive – it has been a commodity generic for some time.”
Aside from being a coronavirus play, Teva happens to be the world’s largest maker of generic drugs. The company does have its set of issues, including exposure to a multi-state opioid lawsuit. But under the leadership of CEO Kare Schultz, the Israel-based company deserves credit for slashing its debt load. The potential to help supply the world with a solution to the coronavirus would result in a windfall for investors.
Another coronavirus-themed play is Gilead Sciences, the mega-cap company behind remdesivir, a treatment that has proven success against Ebola, MERS, and SARS. The therapy was recently granted a “Rare Disease Status” for the treatment of coronavirus. This gives the company the sole ability to profit from the product for a period of seven years. Naturally, if proven to be successful, Gilead would be known as the company that saved the world from the coronavirus – and earned a large profit doing so. This makes Gilead a current good stock to invest in.
The bottom line
Although the global economy is in trouble and the stock markets are extremely volatile, there will always be good stocks to invest in. Stay tuned to the latest stock market news, which can bring outstanding trading opportunities. Track the performance of the most-traded stocks live and make up you own list of top shares to invest in with Capital.com.