In our latest episode of Coronavirus S.O.S. we’re talking your portfolio, how the robo-advisors and dum dum asset managers are failing you.
We’re also talking about our Coronavirus S.O.S short portfolio and why it continues to be a great trade.
With the markets now down 25% from recent highs it’s time to talk about stocks to buy as well.
There are 5 stocks in our “Buy every Dip” basket which we love for the short, medium and long term.
The Software as a Service sector (SaaS) is also offering some bargains, we’ll take you through our four favourite stocks there.
For another take on what this virus means for politics and the economy check out our in-house economist, Chris Wood’s take.
Grizzle Coronavirus Short Basket Still Working
We initially mentioned this trade on Feb. 24 and its worked out even better than we could have imagined.
Including stock performance today March 12, which isn’t captured in this chart, the short basket is down more than twice as much as the S&P 500.
This trade will continue to work as long as the world’s quarantine efforts are ramping up, which they still are.
The three sectors in the short portfolio are Cruise Lines, Airlines and Energy.
Here is a list of the specific stock tickers: GOL, AAL, ZNH, MEG, NBL, EQT, NCLH, CCL, RCL
The Stay at Home Basket Trade Was Never Going to Work
Back in late February investors started circulating a buy list of stocks that they thought would benefit from consumers being stuck in their homes.
This story worked for a few days, but what most people overlooked is that when a few days off turn into an economic recession, spending goes out the window.
Even stock market darling Netflix has started to crack as the narrative switched from “party at home” to “survive at home”.
Zoom, the video communication darling is still holding on, though this stock will also start to fall once investors turn their focus from the coronavirus to the global economy.
What Are We Buying?
For Grizzle, there is a basket of five companies that are in such a strong competitive position that you own them for the long term and simply buy more on weakness.
Yes, the stocks are expensive compared to the S&P 500, but for good reason.
They have both better growth prospects and better profitability than much of the junk stocks that make up the S&P index.
Grizzle “Buy the Dip” Basket
These stocks are now 25% off and they could get even cheaper if the economy truly cracks.
We are nibbling on these five names while leaving some excess cash to buy more on further weakness.
Grizzle Software as a Service Basket One to Watch
These stocks help us organize the mountains of data being generated on the internet or make business collaboration easier and cheaper.
Multiples are still very high for these four names in a recessionary situation so we think they are headed lower, however, these are absolutely excellent companies to own for the next 10 years.
We are nibbling at these names in the here and now, but would be putting more money to work if they fall another 30%+.
Grizzle “SaaS” Portfolio
Update on Our Gold Trade
We’ve been pounding the table on gold and while the trade has been disappointing in recent weeks we still believe gold is a must-own part of the portfolio to protect against runaway government stimulus.
If we see fiscal stimulus (aka government handouts) and money printing to pay for it all, this is the scenario where gold is truly worth owning.
Gold vs Treasury Bonds
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.