Corona Crisis = Ripening Buys
The markets continue to break down after the worst one-day selloff in over 2 years. The US equity markets, which appeared to be immune to the early onset of the coronavirus, are now infected with fear. The Dow Jones Industrial Average fell over 1,000 points in one day, the third time this has happened in history. The markets are officially down for the year following a strong start.
The coronavirus has caused a chain reaction of anxiety on the exchanges, and the firms with the richest valuation are getting pounded. Portfolio’s around the world have seen substantial losses, so do not think you are alone in your suffering.
I am personally looking to add to my current positions at the discount price the markets are offering me. As a long-term investor, I am looking to doubling down on my favorite stocks and buy into stocks I missed out on. The key is to find a price point that you are comfortable buying at and setting up some limit orders at those prices.
The robust fundamental outlook for 2020 has not changed, and I don’t believe it is likely to change. It appears that China has been able to control the spread of this wannabe pandemic.
The Centers for Disease Control and Prevention (CDC) just came out and said they expect the virus to spread in the US. This has spurred a more significant selloff. I think that we will continue to fall as the infection spreads. Leading the downward charge are airlines, energy, and leisure/vacation stocks.
In the chart below, you can see the S&P 500’s massive slide in the last two days as the index barrels down towards its 200-day moving average (Green Line), which is only 2.5% away. Once the broader market hits this point, I am going to start averaging down in S&P tracking ETFs SPY, IVV, VOO and look for good entry points in my favorite tech stocks.
Stocks to Watch
Stocks will always recover as they have since the beginning of the financial markets, and this virus scare is no expectation. Below are a couple of stocks I will keep an eye on as the markets continue to break.
Visa (V)
Visa has been pummeled in the past 2 trading days, falling roughly 10%, but is this drop warranted? Visa is the largest transaction processing company in the world, and they make their money through consumer transactions. Meaning that their stock is tied to consumer spending, and investors are worried that the coronavirus fears will sizably reduce consumer demand.
This drop has created an opportunity to get into this fintech giant at a discounted price. I would wait for this stock to slide down to its 200-day moving average of around $180 before I would start averaging down on shares if the price continues to fall.
Disney (DIS)
This global media and entertainment conglomerate has dropped around 10% this week as the coronavirus shutter DIS shareholders. Disney just released its game-changing streaming service Disney+, which has gained substantially more traction than initially expected.
The shares had traded up on the risen expectations of the space altering streaming platform but marginally slid at the end of 2019 into 2020 as the markets attempted to value this new topline driver. DIS has now fallen to its lowest level since Disney+ was announced, and it is beginning to line up as a buy.
The coronavirus will have people cooped at home with nothing to do but stream their life away. If this virus continues to spread (knock on wood), Disney+ could take off as global consumers broaden their collection of streaming platforms for new content.
Disney just announced after the market closed today that Bob Chapek will be replacing Bob Iger, and the stock traded down another 2.5% on this news. Iger had been at the helm for 15 years, had overseen its recent acquisition of 21st Century Fox and the launch of its direct-to-consumer platform last fall. He was ready to hand the reins over to a successor and no better person than the chairman of Disney parks, experiences, and products, Bob Chapek. This further decline looks like a larger potential upside to me.
Take Away
The coronavirus has spread global fear, and the equity markets are getting walloped. Buying opportunities for long-term investors are ripening the further the markets fall. Look for entry points you are comfortable with and set a limit order at that price level for your favorite stocks and ETFs.
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The Walt Disney Company (DIS) : Free Stock Analysis Report
Visa Inc. (V) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
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