In this covid pandemic, we have stocks falling down. With the stocks crashing, stock prices are down. Which means, there are possible opportunities to be had.. There are tons of undervalued stocks to uncover. But wait, with all the hundreds of stocks in the Philippines and thousands more worldwide, how do we know which stocks are great investments?
As an investor, I am going to share with you how I pick stocks in this kind of environment.
Charlie Munger said to “Fish where the fish are.” And since the water is in low tide (as in low prices), we are able to see clearly where the fishes are in the little puddles that the water has left behind.
Only difference is, in the stock market, people are scared to fish when the water is low. But I am going to hand held you and tell you that its ok.
Where to look for investments?
Go look to where the effect is massive.
Look for companies that are greatly and directly affected by the corona virus crisis.
The post about the negative oil, although peak of the fear, have started to rebound and have made great profits to some investors. You do need to have some knowledge in the industry to make a wise bet and profit from the situation, but the first thing to do is learning how to look and not be affected by the fear. Especially the negative oil.
Because of the price and demand for oil going down, the companies that sell oil are directly hit. But there might be a comeback for these companies if you look deeper.
Another directly affected industry is tourism, so I would look at real estate companies and most especially those that have hotel and resort exposures. There would probably be bankruptcies in the coming years because of this, but it also means more opportunities for investors like us. It pays to be prepared, make a list of the companies you want to follow and pounce when the opportunity is ripe.
Ahhh… Airlines, Warren Buffett’s cruel mistress. Airlines has been one of Buffett’s source of loss and profit. He always said that he would stay away from airlines after losing millions of money from it. Only to come back and made millions again from it. Then get out again at a small profit. The fact is, the airline industry is one hell of an industry and is very hard to profit from. But there are companies out there who may be in trouble now but would survive after the pandemic. And those companies would provide you with great investment returns. As long as you know when the reason for buying is not valid anymore and sell.
Real Estate in General
I am sure a lot of people would not be able to pay their mortgages once the pandemic is over. In the US, some mortgage products are just postponing the payments, not entirely waiving them. Meaning, if things get back to normal, all the months they did not pay, will have to be paid in one month. And most people would not be able to afford that.
In the Philippines, most banks have waived mortgage payments. Meaning I don’t have to pay this month for mortgage, but people might not have jobs to go back to after this pandemic is over. So even if the mortgage payments are waived, the person with the mortgage might not have a job to go back to. Which would go to foreclosure or forced selling of the properties.
Real Estate Malls
We all know malls are not operating at this time. But there might be a comeback when the pandemic is over. I am saying “might” because we don’t know. People might change after this. They might not like malls anymore after. Who knows. But its still a good place to look.
Go look for companies that went down but actually not affected by COVID
There are companies that crashed in stock price, but in reality are not affected by the coronavirus and in fact flourishing.
There are companies that we can consider “essentials”. Mandated by the government to continue operating because for obvious reasons, we can’t live without them. But during the scare, their price went down, giving great opportunities to the calm investors.
Food (especially relief goods)
Companies producing canned goods and instant noodles have a good position to be in. They are essential to daily life and thus are required by law to continue their businesses.
Restaurants and fast foods might not be affected too much because there are deliveries. But I wouldn’t count on that too much since their bottleneck is the delivery man power. There might be a comeback when this thing pass.
Telecoms, power companies, water, all the essentials to a modern life are affected but not really in danger of going bankrupt. They are required by law to continue their operations so the cashflow would still… flow.
Most of these companies are going up because of obvious reasons, but in the first few days of the panic, these companies are not exempted from the crash, which only the calm investors might have taken advantaged of.
Knowing if the fish is good
Knowing where to fish is one thing. I have told you what I think to where are the great fishing spots are currently. Now what is left is for you to distinguish if the fish you catch is actually of good quality or not. And for that you will have to learn fundamental analysis. Or learn the basics by watching investing philippines youtube channel.
Join our discord channel and chat with other fishermen (i mean investors). https://discord.gg/brbNyJj