COVID-19 coronavirus pandemic has brought immense amounts of fear into the market as the major indexes and many stocks have dropped more than 30% in the last few weeks. I still remain extremely cautious in these markets, but below are a few groups and stocks that our family has been buying. Please remember, this is NOT a recommendation for anyone to buy or sell any particular stock. Rather simply full-disclosure of our thoughts and or strategy, which can change in the blink of an eye based on various market conditions and rapidly moving headlines.
Communications Stock – Zoom Video Communications (ZM): Zoom was probably on the top of everyone’s list as it has exploded due to the pandemic. I should note, the stock went public nearly a year ago on April 22 opening at $65 a share. We purchased a few shares off the IPO, but have never had a big holding. Right now, the company seems to be making most of its traction via conference calls with workers at home, college lectures, and online webinars. We personally started using Zoom a few months before the pandemic for a few conference calls and it’s been great! In addition, many conferences that have been canceled have switched over to presenting them online via Zoom. I’ve even done quite a few the last few weeks and it seems like my calendar keeps getting filled up with more and more. Overall, it looks like Zoom is adding users at a breathtaking clip, and its revenue should surge in the quarters ahead. The downside is the fact its current valuation is already pricing in massive growth so the company has to deliver. Other stocks I own in this space: Verizon (VZ), Facebook (FB), Snap (SNAP), Twitter (TWTR).
Streaming Stock – Roku (ROKU): One of the biggest sleepers on my list was Roku! My son Jordan actually approached me with this idea about a week ago when the stock was trading near its low around $65.00. Keep in mind, the 52-week high on the stock was at $176.55, which is over a -60% decline in the past few weeks. I was skeptical about this idea at first because I thought it was another streaming service such as Netflix, Disney +, or Apple TV. After a bit of research and listening to my son, it turns out Roku is actually a “platform” for all these services to be streamed on similar to an Amazon Fire Stick. After a little more research, I found out how much market share Roku has in the smart TV space, which looks to be the big growth area for streamers moving forward. Think about it, if your TV already has a Roku installed, then there would be no reason to use an Amazon Firestick. I don’t see a great deal of competition in this space, perhaps Apple TV due to its exclusive content and compatibility with iPhones. I should note, the company recently expanded partnerships with TCL, Westinghouse, Hisense, and Funai at CES earlier this year. Not to mention, TV streaming time increased in the U.S. alone by +12% last week. Roku is definitely one to keep on your radar as we move forward. I’ve added to the position a couple of times since picking it off near the bottom. Other stocks I hold in this space: Disney (DIS), Apple (AAPL)
Retail Stock – TJX Companies (TJX): As I mentioned in my morning comments earlier this week, I think TJX is definitely something worth keeping an eye in the next few weeks. For full disclosure, my move in retail was the purchasing of TJX who owns discount retailers like TJ Max, Marshalls, and Home Goods stores. I should also mention, my wife really likes these stores so perhaps I can get some of my money back:) he stock had got beaten up on the break and I’m of the belief there’s going to be a ton of retail inventory from big names that will need to be blown out when we come back online. I also like the thought of them being a “discounter.” Overall, I don’t see people coming out of this and racing to buy the big name or high-end items like Louis Vuitton or Hermes like they once were a few months back.
Wellness Stock – Peloton Interactive (PTON): COVID-19 and crowded, sweaty gyms don’t seem to be mixing well together as most fitness centers across the U.S. are currently closed. My kids are telling me a lot of their friends are jumping to online yoga, Crossfit, and workout classes. We are thinking this could be a huge windfall for Peloton. I should note, the stock has been quite volatile since its IPO in September opening at $29. In addition, before the pandemic, we saw the stock trading at all-time lows. Since then, it’s been around the $25.00 range, but will definitely be looking for growth in the next coming months to get back to its all-time highs. First off, at home workout sales have been off the charts the last few weeks with gyms closing. Second, I like what Peleton is doing outside the gym equipment space. The more you look into Peloton it seems like their fastest-growing business is non-cycling content as more than 30% of the classes taken by members in the last quarter were non-cycling activities. Their treadmills have been doing well, but what’s more intriguing to me is what they’re doing with Apple and Amazon. Peloton recently launched an app on Apple TV and Amazon Fire TV as well as an app for Apple Watch that provides users with additional workout metrics. I suspect they keep driving growth as they continue to leave their footprint in these areas. The downstroke is more competition probably pivots into this space as COVID-19 closes more gyms and workout centers.
Gaming Stocks – Electronic Arts (EA): This is a video gaming stock. Again my kids are telling me more and more people they know are playing video games at home online with and against their friends and others around the world. With so many kids home from school and sports across the globe being canceled, video gaming stocks look to be an area of future growth. What excites me the most about EA is their most recent pivot into the subscription-based model. In these subscriptions, gamers can access unlimited playing time on many of EA’s best games for as little as $4.99 per month or $29.99 per year. Not sure how long this lockdown will last, but I think there’s a lot of potential for these games to blow up when it comes to Twitch or YouTube as more and more people continue to adopt viewing these games online. I can even see it starting to be shown live on ESPN or other sports networks. Keep in mind, a lot of the championships are already televised on ESPN. Why couldn’t leagues be started in the meantime while sports across the globe are canceled? Other stocks I hold in this space: Activision Blizzard (ATVI) and Take-Two Interactive (TTWO)
Pets and Animal Stocks: Chewy (CHWY): This is probably the least familiar stock on the list. For everyone that doesn’t know, Chewy is an online retailer of pet food and other pet-related products. Many of you probably haven’t heard of it because it IPO’d right around the same time as Uber and Lyft. The biggest reason many are starting to invest in Chewy is that they are the leaders in the pet delivery space. We all know how Millenials are with their pets, so its likely dogs and cats are probably the last ones to go starving in this environment. I also like Chewy because of how the online grocery store delivery space has been adopted as of late. I should also mention, I recently saw Instacart is currently trying to hire +300,000 more employees. It seems like we’re obviously heading towards convenience and moving away from big box stores. In addition, it only makes sense to me that people are starting to get everything else delivered straight to their doorstep, why not pet supplies and toys? For us its combination of the pet space as well as the delivery space that is attractive. The other animal-related stock we really like is Zoetis Inc. (ZTS)– The company is engaged in the discovery, development, manufacture and commercialization of animal health medicines and vaccines, with a focus on both livestock and companion animals. The Company has a business, commercializing products across eight core species: cattle, swine, poultry, sheep and fish (collectively, livestock) and dogs, cats and horses (collectively, companion animals), and within five product categories: anti-infectives, vaccines, parasiticides, medicated feed additives and other pharmaceuticals. Its livestock products include Ceftiofur injectable line, Draxxin, Spectramast, Bovi-Shield line, Rispoval line, Suvaxyn/Fostera, Embrex devices and Lutalyse. Its companion animal products include Clavamox/Synulox, Convenia, ProHeart, Revolution/Stronghold, Apoquel, Cerenia and Rimadyl.
Crop Related Stocks: CF Industries Holdings, Inc. (CF) manufactures and distributes nitrogen fertilizer, and other nitrogen products. The company’s nitrogen fertilizer products are ammonia, granular urea, urea ammonium nitrate solution (UAN) and ammonium nitrate (AN). Its other nitrogen products include diesel exhaust fluid (DEF), urea liquor, nitric acid and aqua ammonia, which are sold primarily to the Company’s industrial customers, and compound fertilizer products (nitrogen, phosphorus and potassium or NPKs). A few in this space I purchased on the deep break include Nutrien (NTR), Cortiva (CTVA), Deere (DE), and if you are looking at an ETF… I actually own is called “Defiance Next Gen Food & Agriculture ETF” with the symbol DIET. Obviously, I think food and agriculture are going to play an important role as we work through all of these coronavirus headlines and hiccups.
Banking: We are currently holding small positions in… PayPal (PYPL), Goldman Sachs (GS), JP Morgan (JPM), Visa (V), and MasterCard (MA). We started nibbling on the bigger break. Now holding!
Food and Grocery: We are sticking to simple blocking and tackling i.e. Walmart (WMT) and Costco (COST). We have been long and remain long.
Disclaimer: I am not an individual investment advisor or licensed professional. This article is my own personal opinion and is not meant to be a recommendation of the purchase or sale of stock or ETF. Investors should conduct their own research before investing to see if the companies discussed in this article fits into their portfolio parameters.