Making Safe, Investment Grade Bets in Stocks Hammered by the C-19 Coronavirus Chaos

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Energy, aviation and lodging firms hit hard by the coronavirus chaos will offer handsome returns for high-yield investors in the months ahead.

There are opportunities for discerning money managers and aggressive retail investors.

We and other Top money managers see opportunities in stressed and distressed companies, along with investments with higher quality names, with stable cash flow, greater visibility and less exposure to the chaos. Among those are telecom, infrastructure and tech firms

Look at the mix this way: quality income Vs more upside total return.

Despite real interest rates at or below zero and Fed asset purchase programs, credit is still an option for investors to reach their income targets

That level of low rates, significant ais/relief/stimulus, and earnings recovery is going to continue to drive default premiums down and therefore spread compression, and that is a healthy environment for credit.

Even with low yields, there’s still excess return you can get from credit of quality companies that are seeing positive earnings Vs sitting in cash.

Financials are starting to look attractive as they reduce their reserve ratios that they took for a potential risk losses.

In the case of global energy, we expects Crude Oil prices to stabilize between 50 – 60bbl, so we sees value for investors in the low cost producers and associated global infrastructure companies. Some of these assets are attractive at these valuations and you can achieve attractive total returns over the next several years. I cover them when they breakout in the Cash Pile column, HAL is an example.

We do not believe there is liquidity risk at investment grade companies now.

Further we look for a pick up in M&A activity in the tech, software, and energy sectors as companies look to reduce their supply chain risk and integrate within their local regions.

Wednesday, the major US stock market indexes finished virtually flat at: DJIA -85.19 to 27692.88, NAS Comp -64.38 to 11146.54, S&P 500 -14.93 to 3374.85

Volume: Trade on the NYSE came in light at 766-M/shares exchanged.

HeffX-LTN’s overall technical analysis of the major US stock market indexes is Bullish with a Very Bullish bias.

  • NAS Comp +24.2% YTD
  • S&P 500 +4.5% YTD
  • DJIA -3.0% YTD
  • Russell 2000 -5.8% YTD

Looking Ahead: Investors will receive the weekly Initial and Continuing Claims report, the Conference Board’s Leading Economic Index for July, and the Philadelphia Fed Index for August Thursday.

Have a healthy day, Keep the Faith!