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A Wall Street veteran provides a list of what to buy and what to avoid, and explains why

  • David P. Goldman recommends that investors should begin buying stocks, but says that stock selection is key.
  • Companies increased earnings per share by buying back stock, he says, despite "top-line pre-tax profits [which] have been declining since 2014, and sharply." Stock buybacks will become harder, because "to buy back their shares, US corporations have borrowed at increasingly lower credit ratings", and "there are a number of reasons why the credit market will be less enthusiastic about lending money to corporations that want to buy back their own shares."
  • At the same time, "with the US 10-year Treasury note yielding less than 1%, there is no alternative to equities." Mr. Goldman therefore provides "a few examples of sections of the equity market that seem attractively priced post-crash".
  • His favorite sector is tech companies with strong market positions, steady top-line growth and little debt. "China’s tech companies were outperformers during 2019 and 2020 to date, and remain my favorite sector. There are two ETF’s, KWEB and CQQQ, that offer a diversified portfolio of Chinese tech companies."
  • "US consumer staples companies (ETF ticker XLP) looked rich before the crash and now look cheap."
  • "Well-managed utilities with strong balance sheets look attractive after the crash."
  • "In Europe, the automakers suffered extreme losses during the crash and now look cheap."
  • He's cautious about airline, hotel and tourism stocks because "I have no idea how long the coronavirus will persist or when these sectors will start earning money again."
  • He's also not buying office or retail REITs, because their unsecured debt has not improved, telecommuting might lead to a change of behavior which reduces demand for high-end office space, and the crisis might accelerate the shift to online shopping.
  • While Mr. Goldman didn't name these explicitly, here are tickers to research for readers who are considering his buy and avoid recommendations:
  • For utilities ("Well-managed utilities with strong balance sheets look attractive"), the ETF is XLU. Its top holdings are NextEra Energy (NYSE:NEE), Duke Energy (NYSE:DUK), Dominion Energy (NYSE:D), Southern (NYSE:SO), American Electric Power (NYSE:AEP), Exelon (NASDAQ:EXC), Sempra Energy (NYSE:SRE), Xcel Energy (NASDAQ:XEL), WEC Energy Group (NYSE:WEC) and Eversource Energy (NYSE:ES).
  • Airline, hotel and tourism stocks (avoid) include: Alaska Air  (NYSE:ALK), American Airlines (NASDAQ:AAL), Carnival Corporation (NYSE:CCL), Delta (NYSE:DAL), Hilton Worldwide Holdings (NYSE:HLT), Hyatt Hotels (NYSE:H), InterContinental Hotels (NYSE:IHG), JetBlue (NASDAQ:JBLU), Marriott International (NASDAQ:MAR), Norwegian Cruise Line Holdings (NYSE:NCLH), Park Hotels & Resorts (NYSE:PK), Royal Caribbean Cruises (NYSE:RCL), SkyWest (NASDAQ:SKYW), Southwest (NYSE:LUV), Spirit Airlines (NYSE:SAVE) and United (NASDAQ:UAL).
  • Office REITs (avoid) include: Boston Properties (NYSE:BXP), Vornado (NYSE:VNO), Kilroy (NYSE:KRC), Douglas Emmett (NYSE:DEI), SL Green (NYSE:SLG), JBG Smith (NYSE:JBGS), Hudson Pacific (NYSE:HPP), Cousins (NYSE:CUZ), Highwoods (NYSE:HIW), Equity Commonwealth (NYSE:EQC), Corporate Office (NYSE:OFC), Paramount Group (NYSE:PGRE), Brandywine (NYSE:BDN), Columbia Property Trust (NYSE:CXP), Piedmont (NYSE:PDM), Empire State Realty (NYSE:ESRT), Washington REIT (NYSE:WRE), and Mack-Cali (NYSE:CLI).
  • Retail REITs (avoid) include: Acadia Realty Trust (NYSE:AKR), Agree Realty (NYSE:ADC), Alexander's (NYSE:ALX), Brixmor Property Group (NYSE:BRX), CBL & Associates Properties (NYSE:CBL), Cedar Realty Trust (NYSE:CDR), EPR Properties (NYSE:EPR), Getty Realty (NYSE:GTY), Federal Realty Investment Trust (NYSE:FRT), Kimco Realty (NYSE:KIM), Kite Realty Group (NYSE:KRG), The Macerich Company (NYSE:MAC), Federal Realty Investment Trust (FRT), National Retail Properties (NYSE:NNN), Pennsylvania Real Estate Investment Trust (NYSE:PEI), Realty Income (NYSE:O), Regency Centers (NASDAQ:REG), RPT Realty (NYSE:RPT), Saul Centers (NYSE:BFS), Seritage Growth Properties (NYSE:SRG), Simon Property Group (NYSE:SPG), SITE Centers (NYSE:SITC), Spirit Realty Capital (NYSE:SRC), STORE Capital (NYSE:STOR), Tanger Factory Outlet Centers (NYSE:SKT), Taubman Centers (NYSE:TCO), Urstadt Biddle Properties (NYSE:UBA), Urban Edge Properties (NYSE:UE), Weingarten Realty Investors (NYSE:WRI), and Whitestone REIT (NYSE:WSR).

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