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We Could Be Here For A While - Buy Quality

Mar. 06, 2020 7:37 AM ETGTN, PARA, UNM, TD, OZK, SHEL, EQNR, OYIEF, CCL, GD, COR, CAH, LUV, CAT, TD:CA41 Comments


  • This market situation, influenced by the Coronavirus, could persist for some time to come - weeks or months - as the current market seems to be driven by two things.
  • The important thing is not to lose one's head and give into either fear or exuberance, but to continue executing your investment strategy with a cold head.
  • I keep buying many of the same stocks I've bought the past few months, but I can now add some ultra-quality/defensive names as well.

The dip we began last week has turned into an up-and-down trend, a very volatile sort of dance which seems to correspond somewhat to the ongoing trends of what the Coronavirus, COVID-19, is doing across the world.

From what we've seen, the federal stimulus has woefully failed to at least at this time address the "problem" (if one wants to see it as such), and the ups and downs seem to continue as investors take larger supply chain disruptions into account. Days of yearly record gains are subsequently followed by days of extreme drops, which are seeing certain sectors hurting badly.

Many readers have contacted me over the past few days with the question - just how am I preparing for a long-term sort of bear market/negative trend, which we may be going into?

I thought it could be a good idea to update the article from last week with some more thoughts on the matter.

What are we buying and for how long?

When entering any sort of negative market trend, the companies which the market views as "risky" or especially "exposed" to what's causing the trend are usually the ones thrown out with the bathwater. It's the same thing we're seeing now.

One of the more common questions that I receive is do I keep buying the same companies ad infinitum as we go down.

To this, the answer is - yeah, and more.

(Photo Source)

Much like a virus, the current market sentiment can be said to have two strains. The fear/surrender of local spread/community spread and millions/billions of people contracting COVID-19, which they fear would deeply affect the economy, growth and supply chains. The second strain is driven by the hope of stimulus from central banks across the world - and when these meet, we get the sort of volatile, Jojo-like market action we've been

This article was written by

Wolf Report profile picture

Wolf Report is a senior analyst and private portfolio manager with over 10 years generating value ideas in European and North American markets.

He is a contributing author for the investing group iREIT on Alpha where in addition to the U.S. market, he covers the markets of Scandinavia, Germany, France, UK, Italy, Spain, Portugal and Eastern Europe in search of reasonably valued stock ideas. Learn more.

Analyst’s Disclosure: I am/we are long ABC, CAH, CAT, CCL, EQNR, LUV, MDP, OYIEF, OZK, RDS.B, TD, UNM, VIAC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

While this article may sound like financial advice, please observe that the author is not a CFA or in any way licensed to give financial advice. It may be structured as such, but it is not financial advice. Investors are required and expected to do their own due diligence and research prior to any investment. I own the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies listed in my articles.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

Adream profile picture
what's your though on the long term care liabilities for UNM. I think that's why it's so cheap right now?
I like the way you think through how you are going to invest.
5ofDiamonds profile picture
True - Buy Quality, but I am not sure businesses like $ABC, $LUV are what I consider quality given a plenty of better choices @Wolf Report
Kmasse profile picture
Thank you for the article Wolf!

OYIEF seems interesting. Do you what is their dividend payout ratio? Noticed that they intend to shave their dividend (over 19%) almost 25%
11146471 profile picture
@Kmasse it's currently 19,20% (!) Even after a 25% cut it will be around 15%...
jillydavid profile picture
Great article! I’ve also added CAT and GD at this prices and have been averaging down on VIAC, RDS.B and UNM. I wonder what your take is on XOM. It’d be great to see your analysis.
dunnhaupt profile picture
Good point. Coronavirus is not a single catastrophe like Lehman. It could last and last - although most epidemics of the past did gradually disappear during the summer.
Stocks has been so expensive as today only two times in US history. 1929 and 2000. What followed in 1929 was 93% drop and 0% gain for next 50 years. And yeap people like Robert Kiyosaki and Ray Dalio expect even bigger depression to be coming.

I hope you are mentally ready to see your portfolio be down 60-90% without knowing it will recover in your lifetime. Silver on other hand is cheapest since 14th century. So be smart and hedge your portfolios.
11146471 profile picture
@czhunter I have some bad news for you...nobody cares in the 21th century about an investment in $SLV which bears zero distribution. Silver isn't even considered a precious metal anymore like ii was in the 14th century. Maybe a low demand industrial metal but not a precious one like gold which conserves value.

People in the 21th century are mainly looking for distributions (value stocks and bonds) or innovation (growth stocks). Add to this the frantic population increase (+12M per annum) and the increase of the median income worldwide and you will see why an investment in stocks cannot be beaten by silver or other static investments.

A virus that will kill less than 12M people per year cannot put a brake in the underlying demand for stocks, products and services. This too shall pass.
Could you take a look at Swedish investing companies such as Investor ab, Latour ab etc.?
Bin there dun that profile picture
Other than $RDS.B, the yield on the stocks you've listed is peanuts. If I'm gonna take a chance buying stocks in a bear market, they better be dividend aristocrats and pay out a damn good dividend yield.
Of stocks listed in this article, VIAC yields 4.5% and is Corona virus proof to boot. It's been hammered lately along with most other stocks.
RJMC profile picture
VIAC is a value trap. I am a victim.
TD checks those boxes. I’m giving that a look, perhaps adding to my position. I personally think that when you identify sectors and trends such as the author does, it makes sense to just buy sector ETFs. You can try to pinpoint the individual winners, but Southwest could just as easily be Delta. So own both. Then when somebody coughs on a southwest flight, you don’t go broke.

More specifically, and to agree with your general point, I bought into last week’s dip by taking half of my cash and buying an S&P low volatility ETF. I got a basket of great names on sale. And the yield is enough to keep me content.
11146471 profile picture
I'm doing exactly the same. Not sold a single share, only bought new positions and added to existing ones in small incrementals. I am looking my portfolio collapse in value (luckily less than S&P as we speak) and try to have this not affecting me. I focus on the long term perspective. People are people, they get panic, they hit the sell button. In 2 years time the Corona word would just mean crown in Spanish to everybody.
freebird66 profile picture
Great article! Thank you!
My 2 favorite words: BUY QUALITY.
Of your stock list, I prefer ViacomCBS, both on valuation and being Corona virus proof.
Bin there dun that profile picture
@Southbuckeye - $VIAC has been a HUGE loser, fwiw.
ViacomCBS is not exactly virus proof. Quarter of their revenue from Paramount pictures which is hoping for some big theatre releases in 2020. The cinemas will be hit hard by the virus and some of their releases will be delayed or go straight to home video.
tk77mann profile picture
I am not at all reassured hearing that for 80% of people who get the coronavirus it’s only like having the flu. That 80% will be out of work for two weeks while the other 20% will need real medical care, including some hospitalizations. This virus has significant infection rates so unfortunately besides the impact on those infected this outbreak will have a dramatic impact on the economy for months to come, in the best of cases. While I’m not selling all my stock I am looking at anything that can’t withstand an extended recession.  

And certainly industries like the airlines, hotels, and cruise lines are in serious trouble considering their high debt loads and high fixed costs. You couldn’t pay me enough to take a cruise now.
freebird66 profile picture
Hysteria on your part.
Cruise lines are floating Petri dishes, this business is dead.
Airlines are dishes too, but they may get some relief from dirty cheap oil. Half-dead, like oil stocks.
Dave Wo profile picture
I agree on cruise ships. Talk about sitting ducks (in many ways). We were stuck in mid-ocean on a cruise in the Gulf of Mexico 3 years ago during a hurricane. The ship was tilting sideways about 20 degrees for hours. Fortunately, eventually the wind died down somewhat, and we made it safely back to port in Galveston. But after 4 cruises and knowing what a virus paradise those ships are (norovirus, flu, corona) , we will never cruise again.
T'pee profile picture
wise words, thank you:)
Do you see any sign of MDP turning things around? Especially if we head into bear market/recession?
fhfhfhfh profile picture
Thanks for another great article.
davey112 profile picture
Very well said man !!!!
Buy quality blue-chip stocks and aristocrats when on sale.
Thank you for sharing. This is exactly the approach that I am taking - adding modestly to my positions in high quality dividend payers and looking for buying opportunities on my watch list. I was happy to start a position in CAT on the recent pullback under $125.
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