7 U.S. stocks to buy on coronavirus weakness

The coronavirus outbreak is a short-term problem, and these are stocks are long-term winners.

  • By Luke Lango,
  • InvestorPlace
  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

The outbreak of Covid-19, a novel coronavirus strain which originated in China but has since gone global, is a big deal. To date, it has infected over 110,000 people across the globe, and killed at least 4,000. Even if the disease stopped spreading today — which it won’t — this outbreak will still go down as one of the most pervasive epidemics in modern world history.

At first, markets didn’t care. When it was just a Chinese issue, U.S. stocks stayed in rally mode on the idea that it was problem that would stay on that side of the Pacific Ocean. From Jan. 1 to Feb. 19, the S&P 500 rose more than 5%.

Then, coronavirus went global. U.S. stocks started caring. In a big way. From its mid-February highs, the S&P 500 has shed 18%, a drop which included the index’s worst weekly and daily performances since the financial crisis in 2009.

So, it this really the end of the world? No. What happens next? Some choppiness, and then a sharp rebound in U.S. stocks.

The coronavirus is a big, scary, and volatile thing. But, it’s still just an epidemic. And, like all other major modern epidemics, this too shall pass, and relatively soon. Warmer weather — which tends to kill influenza-type outbreaks like this — will couple with strict quarantining and wider distribution of potential treatments like Gilead’s (GILD) remdesivir to ultimately put this outbreak to bed within the next few months.

This is more than just my opinion, too. Data supports this claim. Look at new cases in China. They are near zero, just a few months after the outbreak started there. Look at new cases in South Korea. They are closing in on sub-100 levels, just a few months after the outbreak started there. Simultaneously, consider that only 1 in 10,000 people got coronavirus in South Korea, and just 1 in 20,000 got it in China. Even further, consider that in South Korea where testing is the most advanced and complete, the mortality rate is 0.7%, not much higher than the flu at 0.1%.

Thus, both common sense and data support the claim that, come April or May 2020, the coronavirus outbreak will be largely dead. So will this sell-off. Stocks will rebound, on a fresh round of central bank stimulus and still easing global trade tensions.

My two cents is simple. Buy strong, high-quality U.S. stocks on this temporary weakness. Don’t chase the coronavirus stocks like face mask producers amid this frenzy. Ignore that noise. Buy strong U.S. stocks which have been unfairly beaten up.

As Clinical Professor of Finance David Kass at the University of Maryland’s Robert H. Smith School of Business wrote in an email to InvestorPlace:

“The worldwide fear of the coronavirus is likely to result in the outperformance of health stocks in the near future … [but] biotech stocks trying to develop a vaccine for this virus … have already had large stocks moves to the upside. Instead of those highly visible potential beneficiaries of the spreading of this disease, I suggest looking elsewhere within the healthcare sector.”

I already picked some Chinese stocks to buy once coronavirus fears fade. Now, I’m picking seven U.S. stocks to buy on coronavirus weakness. Those seven strong U.S. stocks to buy on coronavirus weakness include:

Apple (AAPL)

Nike (NKE)

Advanced Micro Devices (AMD)

Netflix (NFLX)

Intel (INTC)

Amazon (AMZN)

Microsoft (MSFT)

Let’s take a look at those names that are among the top coronavirus stocks to buy today:

Apple

Global technology giant Apple has been hit hard from multiple angles thanks to the coronavirus outbreak in China. First, the company closed all corporate offices, stores and contact centers in mainland China. Second, many of Apple’s suppliers in China have been ordered to reduce or altogether halt production. Third, thanks to the production pause, Apple’s AirPods may have a supply shortage for the new few weeks. Fourth, there are concerns that iPhone production will now be behind schedule.

None of that is great news, especially since China is a big part of the Apple growth narrative.

But, Apple will be just fine. This is true for a few reasons. First, the App Store will get a big boost during the outbreak (consumers globally will increasingly stay home and spend more mobile games and apps). Second, February typically isn’t a big month for iPhone sales. Third, because an iPhone is a big-ticket purchase, any lost demand during February won’t forever disappear — it will just shift into March or April. Fourth, Apple’s big iPhone launch comes in the back half of 2020. By then, the outbreak should be old news.

It’s also worth noting that Apple is re-opening its stores in China because it appears that the worst of that outbreak is over. That’s a huge positive for this company heading into the second quarter.

All in all, Apple will weather the coronavirus storm just fine, and the company is still staring at huge growth potential in the back half of the year. Buy AAPL stock on any coronavirus weakness here.

Nike

Shares of global athletic apparel giant Nike have been pummeled on concerns that the coronavirus outbreak could materially impact the company’s operations in China and across the globe.

Those concerns were confirmed in early February, when management said in a press release that they expect the outbreak to have a “material impact” on operations in China. Since then, the outbreak in China has gotten better, but the outbreak everywhere else has gotten worse. As such, Nike stock remains under coronavirus pressure.

But, this pressure won’t last much longer.

As noted, the situation in China is vastly improving. Consumers are gradually getting back into the swing of things. Come mid to late March, consumers will be back at full strength, and Nike stores will be jam packed again. Meanwhile, everywhere else, the same rebound will happen, just with a month or two delay. Thus, by May 2020, consumers around the globe will be back at full strength, and Nike stores everywhere will be jam packed again.

It also helps that centrals banks everywhere have lowered rates to create more favorable spending conditions for consumers, and that global trade tensions have eased so that there’s less cost pressure on Nike.

Thus, once the outbreak ends, Nike’s business will get back to firing on all cylinders, and NKE stock will rebound.

Advanced Micro Devices

Shares of red-hot chip maker Advanced Micro Devices have plunged amid concerns that the coronavirus outbreak would dampen chip demand globally and spark significant supply chain disruptions in China.

These concerns are rationale. But, their longevity is being overstated.

Demand will be dampened so long as the outbreak sticks around. But, base case is for the outbreak to largely die down within the next two months. When it does, chip demand will come roaring back, with more vigor than before, because trade tensions have de-escalated and there’s more liquidity now than there was in 2019.

Similarly, China is already starting to re-open factories. The more the outbreak dies down globally, the more supply chains across the globe will get back to operating at full capacity.

Thus, while the supply/demand situation in AMD’s core markets is troubled today, it won’t be troubled for much longer. Maybe a few more months. So, when you see AMD stock down 20% on issues that will only last a few months, that looks like a good buying opportunity.

Netflix

Streaming giant Netflix has had it easy during the coronavirus sell-off. Shares are “only” down 7% from their 52 week highs.

But, this relative strength doesn’t mean you shouldn’t buy the dip in NFLX stock. Instead, any weakness in NFLX stock here is worth buying with both hands.

This company has very little coronavirus exposure. It doesn’t have any operations in China, and everywhere else, the more consumers stay home out of fear of catching the virus, the more likely they are to subscribe to and watch Netflix. So, if anything, the coronavirus is a net-positive for Netflix.

At the same the time, the company is firing on all cylinders right now. Netflix is shrugging off competition concerns which plagued the stock in 2019. They will continue to shrug off those competition concerns for the rest of the year, as more and more subscribers are attracted to Netflix’s unparalleled content portfolio and low prices. As they do, NFLX stock will breakout to new highs.

So, if Netflix stock starts to show any weakness as a result of the coronavirus outbreak, that weakness is nothing more than an opportunity to buy the dip in a stock that’s ready to rip higher.

Intel

The bull thesis on global semiconductor giant Intel is very similar to the bull thesis on Advanced Micro Devices.

Specifically, Intel stock has plunged on fears that the coronavirus outbreak in China will dampen global semiconductor demand. That will happen. But only for a little bit. Come summer 2020, demand will come soaring back, thanks to a fresh round of fiscal stimulus from central banks, easing trade tensions, and huge next-gen tech growth catalysts like the launch of 5G.

Meanwhile, Intel just reported a blowout fourth-quarter earnings report and delivered a robust first-quarter guide, the sum of which imply that demand in the company’s core data-centric markets is rebounding, not falling.

It will take more than a short-term epidemic to derail these rebounding demand trends.

Broadly, then, the most likely path forward for Intel stock in 2020 is higher, not lower. The stock is also quite attractive here from a valuation perspective.

Amazon

Alongside the rest of the market, shares of e-commerce juggernaut Amazon have fallen off a cliff in February on coronavirus fears. But, zooming out, all appears well in the Amazon kingdom.

At the end of January, Amazon delivered strong fourth-quarter numbers which smashed revenue and profit expectations, and included a healthy guide. The e-commerce business continues to capitalize on a shift towards online shopping, and the cloud business continues to dominate the enterprise cloud infrastructure market. The ad business has tremendous upward momentum. Moreover, revenues and profits are running higher at an impressive pace, and there’s no sign that this pace will slow anytime soon.

Has anything about that changed because of the coronavirus outbreak?

For a quarter or two, yes. Maybe consumers shop less, or maybe enterprises spend less on their cloud migrations. And maybe merchants stop advertising as much on Amazon. But all of those impacts will be short-lived, because come April or May, warmer weather coupled with strict quarantining, swift government responses and a potential vaccine will ultimately kill this outbreak. In turn, Amazon will promptly get back to firing on all cylinders.

So, big picture, don’t let near-term headwinds scare you out of a long-term winner like Amazon stock.

Microsoft

Cloud technology giant Microsoft has tumbled over the past few trading days on concerns that the rapidly spreading outbreak of coronavirus will kill demand for the company’s cloud computing products.

But, will that actually happen?

No. Nothing about this outbreak says that demand for cloud computing products will drop anytime soon. The outbreak isn’t large enough in most countries to derail the secular enterprise cloud transformation, and where the outbreak was big enough to do that (China), it is dying down to the point where cloud computing demand should be ramping back up.

Big picture, then, maybe Microsoft’s number got slightly dinged in the first quarter. But, not by much, and come the second quarter, the numbers will be flawless (as they usually are).

From this perspective, any and all near term weakness in Microsoft stock is a golden buying opportunity into a company which, thanks to cloud computing tailwinds, is set to be a winner for the next several years.

As of this writing, Luke Lango did not hold a position in any of the aforementioned securities.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

For more news you can use to help guide your financial life, visit our Insights page.


Copyright 2020 © InvestorPlace L.P.
Votes are submitted voluntarily by individuals and reflect their own opinion of the article's helpfulness. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.