Even with a devastating first quarter behind them, investors aren't particularly hopeful the second quarter might be much better as the coronavirus crisis—which is hurting companies and their ability to function profitably—continues to ravage markets.
U.S. President Donald Trump told Americans this week they should brace for a “very, very painful two weeks” ahead as the virus outbreak sickens more people, while putting additional lives at risk.
In the midst of this uncertainty and fear, it's more challenging to find promising investments. To help, we've put together a list of 10 stock ideas from Wall Street analysts who see some compelling opportunities for long-term investors, following previous, or upcoming, bouts of indiscriminate selling.
4 Dividend Stocks
With many companies now suspending their dividends to preserve cash after this massive shock to the economy, it’s become difficult for investors to confidently pick safe dividend stocks that can continue to provide a steady income stream.
To help, Goldman Sachs screened the Russell 1000 universe for companies with a track record of 90 consecutive quarters of dividend payouts without a cut. These companies also have ample cash and healthy balance sheets, Goldman said in a note.
Some of the strongest names in this list include Home Depot (NYSE:HD), IBM (NYSE:IBM), 3M (NYSE:MMM) and Cisco Systems (NASDAQ:CSCO).
“These Russell 1000 companies have continuously demonstrated their commitment to their dividend and have not significantly underperformed the index since the market peak,” Cole Hunter, Goldman’s U.S. portfolio strategist, said in a note on Monday.
3 Large Caps
Bank of America has also come up with its “top 10 U.S. ideas,” including stocks which have the ability to survive in this highly challenging operating environment.
The list includes the tech giant Apple (NASDAQ:AAPL) which, according to the bank, has most of the negative news related to the coronavirus already priced in. After a 26% plunge from its January high, Apple now trades at $240.91, providing an attractive entry point for both long- and short-term investors. The bank has a buy rating on the stock with a price target of $300 a share.
The multinational, industrial conglomerate Honeywell (NYSE:HON) is another of Bank of America's top picks due to its strong balance sheet, lower operational risk and cash-flow generation.
“We see Honeywell’s diversification, backlog, and mix of long-cycle revenue as offering above-average revenue visibility,” the bank said, setting a $155 price target for the shares, which closed yesterday at $129.71.
Consumer staples is another sector where investors can take refuge when recession risk rises. Procter & Gamble (NYSE:PG), the global consumer staple manufacturer which owns such marquee brands as Crest, Tide and Bount, is one significant candidate in this group.
PG produces essential products consumers continue to need, and buy, no matter the economic environment. It's therefore one of the first stocks many top banks recommend when volatility drives markets, and investors, to seek slow but steady capital growth with reliable dividend payments.
After surging more than 80% since the middle of 2018, PG stock has also taken a hit in the current market rout, falling 12% this year. It closed yesterday at $109.33. Bank of America has a buy rating on the stock, with a price target of $135.
3 Tech Giants
According to Credit Suisse, though the sector has been pummeled, some technology stocks will emerge stronger once the coronavirus-related uncertainty is over. These companies will benefit from the changing business and consumer preferences in the post-coronavirus world.
Transitions include local advertising moving online, increased e-commerce for groceries and luxury items, a higher percentage of workers telecommuting and the decline of business travel. Companies that will benefit from this massive shift include Amazon (NASDAQ:AMZN) and Google’s parent Alphabet (NASDAQ:GOOGL).
“We expect the highest value to accrue to those companies which have the wherewithal (balance sheet, headcount, product development nous) to play offense versus defense in this environment,” the note said. “To that end we believe Amazon and Alphabet stand to emerge from this crisis with the biggest intrinsic value accrual.”
While it’s hard to see a quick rebound for travel-related stocks when the majority of the developed world is under movement restrictions, Credit Suisse anticipates an opportunity for the travel website Booking.com (NASDAQ:BKNG) once COVID-19 lockdowns subside. In their view, the company is well capitalized and can win more market share from vulnerable operators.