[Editor’s note: “7 U.S. Stocks to Buy on Coronavirus Weakness” is regularly updated to included the latest analysis of the rapidly evolving coronavirus situation and which stocks to buy.]
The novel coronavirus pandemic is starting to rear its ugly head again, as the U.S. moves to reopen its economy, and it’s having a negative impact on U.S. stocks.
Covid-19 hospitalizations and positive test rates have been on an upswing in states such as Arizona, Utah, Texas, Arkansas, South Carolina and Alabama, a sign that the virus is spreading more freely in those states today than it was just a few weeks ago.
U.S. stocks freaked out in response to these renewed Covid-19 fears. On June 11, the Dow Jones shed 1,800 points, marking its worst day since March and one of its worst days on a raw point basis, ever.
But, not all hope is lost, and now may be the time to actually look for U.S. stocks to buy on the dip. For a few reasons.
First, the coronavirus pandemic continues to track mostly in the right direction, despite rising hospitalizations in certain states.
The daily case curve is still declining. The daily death curve is also still declining. Of course, those curves will rise some as the economy reopens and consumers go back outside again. But, with most of the country following health protocols such as wearing a face-mask in high-risk situations, this “second wave” shouldn’t be that big. Plus, now that projections for the death rate remain around flu levels at ~0.2%, the fatal damage inflicted by a second wave likely won’t be enough to scare consumers back into their homes or force a nationwide shut-down of the economy again.
Second, U.S. economic activity is rebounding, and will continue to rebound.
As state and local governments have eased restrictions on business activity, the U.S. economy has begun its recovery. The U.S. economy created 2.5 million jobs in May. Activity in both the services and manufacturing sectors is rebounding. The New York Fed’s gauge of weekly economic activity is rebounding. Consumer spending is rebounding.
All of these favorable trends will persist, driven by pent-up consumer demand and unlimited fiscal and monetary stimulus.
Third, U.S. stocks are cheap after this selloff.
On the assumption that the economy will recover over the next 12 to 18 months, Wall Street’s consensus estimate for fiscal 2021 earnings per share is $164, up 30% year-over-year. My modeling suggests that this number can actually climb towards $180. In today’s environment of low rates, an 18-times forward earnings multiple seems fair. That combination implies a 2020 price target for the S&P 500 of 3,240.
So, as opposed to running away from U.S. stocks during these renewed coronavirus fears, I’m running towards them, building a portfolio of long-term winning assets at heavily discounted prices.
To that end, here are the 7 best U.S. stocks to buy on renewed coronavirus weakness:
- Apple (NASDAQ:AAPL)
- Nike (NYSE:NKE)
- Advanced Micro Devices (NASDAQ:AMD)
- Netflix (NASDAQ:NFLX)
- Intel (NASDAQ:INTC)
- Amazon (NASDAQ:AMZN)
- Microsoft (NASDAQ:MSFT)
Coronavirus Stocks to Buy: Apple (AAPL)
The coronavirus outbreak hit global technology giant Apple hard in early 2020.
Across the globe, Apple’s supply chain was disrupted, with the company closing offices, stores, and contact centers. Many of the factories from which Apple sources its hardware products shut down, too. And demand for Apple products fell off a cliff against the backdrop of plunging consumer spending.
But supply chain disruption and depressed demand are temporary headwinds that will reverse course in the second-half of 2020.
Apple has already re-opened many of its stores in China and South Korea. Many of the factories which supply Apple parts are also back up and running. It appears likely that more stores and factories will re-open outside of China in the coming weeks and months as governments lift lock-down policies. As they do, Apple’s supply chain will get back to normal.
On the demand side, consumer discretionary spend should rebound as economies across the globe re-open. As it does, Apple’s demand trends will improve, just in time for a blockbuster 5G iPhone launch later this year.
None of these favorable trends will be materially disrupted by a second wave, so long as that second wave is contained well (which it should be).
Big picture: the coronavirus headwinds which have killed AAPL stock so far, are reversing course. They will continue to reverse course for the foreseeable future, and converge on a big 5G iPhone catalyst later this year, to spark a big rebound in Apple stock.
Nike (NKE)
Consumers aren’t spending money on discretionary items. One of the hardest hit verticals from depressed consumer discretionary spending has been clothing. Clothing stores sales dropped 90% year-over-year in April.
Naturally, that’s bad news for athletic apparel giant Nike. Regardless of how strong the Nike brand is, if consumers aren’t buying clothes, then Nike’s sales will take a big hit.
That’s why NKE stock presently trades almost 20% off all time highs.
But, let’s take a step back.
Are consumers really over discretionary purchases forever? No. Once the virus fades, pent-up consumer demand could turn into robust spending on shoes, shirts, and the like.
Has the athletic apparel trend lost any steam? No. Again, once the virus fades, consumers will be more concerned than ever before about their health and wellness, sparking accelerated interest in being active and working out, and sparking increased demand for athletic apparel.
Is Nike no longer the king in athletic apparel? No. Thanks to its broad portfolio of big athlete endorsements, global reach, relentless innovation, and purpose-minded marketing, Nike is still the unparalleled leader in athletic apparel.
So, once the virus fades, consumers will get back to buying clothes. They’ll buy a ton of athletic apparel clothes, and they’ll buy a ton of Nike clothes.
All of that means that current weakness is a great time to buy the dip in NKE stock before a strong second-half rebound.
Coronavirus Stocks to Buy: Advanced Micro Devices (AMD)
At first, shares of red-hot chip maker Advanced Micro Devices plunged amid concerns that the coronavirus outbreak would dampen chip demand globally and spark significant supply chain disruptions in Asia.
That did happen. But only for a bit.
Semiconductor chip demand has rebounded thanks to an accelerated enterprise and consumer pivot towards cloud-hosted, virtualized services and products. Meanwhile, the semiconductor supply chain is already normalizing.
That’s why, despite coronavirus disruptions, AMD is still guiding for 20%-plus revenue growth in 2020.
It’s also why AMD stock has rebounded more than 40% from its March lows to trade just shy of all time highs.
This big rebound in AMD stock will persist. Major demand tailwinds from cloud computing, 5G, and IoT will sustain robust revenue growth for AMD for the rest of the year. Concurrently, AMD’s global supply chain will continue to normalize, margins will continue to improve, and profits will keep roaring higher.
As all that happens, AMD stock will keep powering higher, too.
Netflix (NFLX)
Streaming giant Netflix has had it easy during the coronavirus selloff. While every other stock has fallen off a cliff, NFLX stock has surged to all time highs.
Why?
Because this company wins when consumers are stuck at home.
The more consumers stay home out of fear of catching the virus, the more likely they are to subscribe to and watch Netflix, because Netflix is the best at-home entertainment option out there… by far.
The numbers prove this. In the first quarter of 2020, Netflix added a record 15.8 million global subscribers — double what was expected.
Meanwhile, long-term, the coronavirus pandemic has likely accelerated the international shift from linear to internet TV. That’s great news for Netflix, because while Netflix has a ton of U.S. competitors, they don’t have as many internationally. Netflix is one of the only streaming services available across all of the Americas, all of Europe, and most of Asia/Oceania.
Consequently, Netflix is disproportionately exposed to international streaming TV growth, meaning that Netflix will add a ton of international subscribers in 2020, and further extend its global lead in the streaming TV market.
That extended lead gives Netflix more data and more resources to keep making better original content than peers, which will only bolster the company’s competitive positioning in the market, and add more firepower to the long-term growth narrative.
Net net, this company is and will remain the leader in the booming global streaming TV market, so stick with NFLX stock for the long haul.
Coronavirus Stocks to Buy: Intel (INTC)
The bull thesis on global semiconductor giant Intel is very similar to the bull thesis on Advanced Micro Devices.
Specifically, Intel stock originally plunged on fears that the coronavirus outbreak would dampen global semiconductor demand, and then rebounded as those fears abated. Those fears will continue to abate for the remainder of the year, powering a sustained rebound in INTC stock.
Come summer 2020, demand will come soaring back, thanks to a fresh round of fiscal stimulus from central banks, pent-up enterprise demand, an accelerated pivot towards cloud-hosted services and products, and huge next-gen tech growth catalysts like the commercial launch of 5G.
Intel’s revenue growth rates will improve in coming quarters. So will the company’s profit growth rates, since higher demand will lead to more pricing power, which will lead to bigger margins and bigger profits.
Big picture: it will take more than a short-term pandemic to derail the 5G/AI/data/self-driving demand trends that underlie Intel stock. When those demand trends return, dirt-cheap INTC stock — shares trade at 12.6-times forward earnings — will rebound.
Amazon (AMZN)
Arguably the best U.S. stock to buy amid the coronavirus pandemic is Amazon, and that’s because Amazon is everywhere rising demand is today.
Consumers are shopping more online right now. Amazon owns the world’s biggest e-commerce platform in Amazon.com.
Consumers are also turning towards online grocery platforms. Through Whole Foods and Amazon Fresh, Amazon has a sizable presence in online groceries.
Video game spending and streaming has picked-up amid the pandemic. Amazon owns Twitch, the world’s largest video game streaming platform.
Enterprises have picked-up their cloud spending, as a shutdown of physical business has forced a more rapid transition towards cloud-hosted business. Amazon Web Services is the largest cloud infrastructure business in the world.
Net net, Amazon is actually winning because of the coronavirus pandemic. Better yet, Amazon will likely turn this recent demand surge, into long-term growth, because its various businesses are sticky and offer enduring value props.
Long story short, then, AMZN stock is a great buy here and now.
Coronavirus Stocks to Buy: Microsoft (MSFT)
Cloud technology giant Microsoft initially tumbled amid the coronavirus pandemic on concerns that the rapidly spreading outbreak of coronavirus would kill demand for the company’s cloud computing products.
MSFT stock has rebounded over the past few weeks because that hasn’t happened.
Microsoft just reported third quarter numbers that included 60%-plus Azure growth, 25% Office 365 commercial revenue growth, and very minimal Covid-19 impact.
The takeaway? Despite the pandemic, Microsoft is firing on all cylinders because demand for the company’s cloud infrastructure, productivity, and communications services is roaring higher as corporations across the world increasingly virtualize their workplaces. This virtualization tailwinds will persist for the next several years. As it does, Microsoft will remain on fire.
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.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he was long NFLX, AMZN, and MSFT.