Going to California
There was an attempt last night to assuage growing coronavirus fears in the U.S. But that attempt went over like a lead balloon.
Following the fifth consecutive drop in U.S. markets, President Donald Trump expressed a whole lotta love for the nation. Trump assured everyone: “Because of all we’ve done the risk to the American people remains very low.”
“We have quarantined those infected and those at risk,” he said. “We are rapidly developing a vaccine. The vaccine is coming along well.”
Unfortunately for Trump, the Centers for Disease Control and Prevention (CDC) announced that not quite everyone was quarantined in the U.S. The CDC revealed the discovery of a patient with no direct ties to the coronavirus’s immigrant song outbreak.
In other words, this particular infection didn’t come from over the hills and far away … it was home-grown near San Francisco, California.
News of the unrelated outbreak hit Wall Street hard today, sparking another sharp sell-off. Investors are particularly concerned that, when the levee breaks on the coronavirus in the U.S., the economy could face a recession … one that even central bankers will be unable to fix.
But President Trump is no fool in the rain. He provided no quarter for the outlook on the COVID-19 outbreak in the U.S.
“There’s a chance it could get worse; there’s a chance it could get fairly substantially worse, but nothing’s inevitable,” the president said.
Nothing’s inevitable? Death and taxes would like to have a word with you, President Trump.
I won’t ramble on about the coronavirus like I have in the past. With more than 10 years gone, the bull market is sick again. Very sick.
The Dow has plunged more than 9% in the past four days, setting Wall Street’s favorite barometer back to levels last seen in October 2019. The Dow’s next line in the sand appears to be the 25,750 to 26,000 region.
This area is home to the Dow’s October 2019 lows and could provide short-term support for stocks.
So, if you’re looking for a short-term positive for the broader market, that’d be it. A move below 25,750 would be a heartbreaker for the market and a potential sign that things will get much worse.
Right now, you might be dazed and confused, wondering: “Hey … hey, what can I do?”
If you’re a regular Great Stuff reader, you already know what to do. Continue moving out of riskier, aggressive investments — like that winger you took on Virgin Galactic Holdings Inc. (NYSE: SPCE) — and get yourself into more conservative investments … such as gold or bonds.
If you’re not sure what is and what should never be when it comes to investing in gold and bonds, the iShares 20+ Year Treasury Bond ETF (Nasdaq: TLT) and the SPDR Gold Trust (NYSE: GLD) exchange-traded funds (ETFs) are great places to start.
But, if you’re feeling particularly trampled underfoot with the market sell-off, there’s no reason to visit the gallows pole. The experts at Banyan Hill are here to guide you through Wall Street’s communication breakdown!
For instance, it doesn’t matter if the market experiences good times, bad times … you know we’ve all had our share … mega tech trends such as 5G and electric vehicles aren’t down for the count. No sirree, Bob!
If you invest in the right mega tech trend stocks, your time is gonna come, and Ian King’s Automatic Fortunes can help get you there.
But… (And there’s always a but, isn’t there?)
If this virus shebang has you fighting the battle of evermore, you don’t want to miss out on what may turn into a prime time to buy. In that case, Jeff Yastine’s research is just what the plague doctor ordered.
Jeff knows how to spot standout companies trading for pennies on the dollar — and there are a lot of those out there right now.
Going: Penney for Your Thoughts
If you had told me yesterday that J.C. Penney Co. Inc. (NYSE: JCP) would be one of today’s hottest stocks … I’d have probably called you crazy. And yet, here we are … watching JCP shares rally amid another Wall Street bloodbath.
The department store hasn’t had the best track record in the earnings confessional in the past year, but Santa Claus apparently took pity on Penney. The company reported a surprise fourth-quarter profit of $0.13 per share, blowing away consensus expectations for a loss of $0.06 per share.
Revenue was also better than expected, falling 7.9% to $3.49 billion, but it still arrived ahead of Wall Street’s $3.38 billion target. Same-store sales dropped 7% on the quarter but were better than the expected 7.3% decline.
Finally, Penney indicated that the worst may have finally passed in its turnaround efforts. The retailer forecast same-store sales to fall a mild 3.5% to 4.5% for 2020, halving the consensus target for a 7.7% decline.
Clearly, J.C. Penney isn’t out of the woods just yet, but it’s finally making some headway. If the company can continue to progress with turnaround plans amid the coronavirus outbreak, it may finally be time to take Penney seriously again.
Going: Be Best
Strong prior-quarter results are no longer enough to cut it in this coronavirus world. Just ask Best Buy Co. Inc. (NYSE: BBY).
The big-box electronics retailer reported strong fourth-quarter results. Earnings rose 7% to $2.90 per share, while revenue sallied 3% higher to $15.2 billion. Both figures easily topped analyst expectations.
Best Buy’s earnings and revenue beats are even more impressive when you consider the company’s 2019 struggles with Chinese tariffs and the trade war. Best Buy has an extensive supply chain in China.
But it’s out of the fire and into the frying pan, with the coronavirus sweeping across China like a Mongol horde. “As we enter fiscal 2021, we are closely monitoring the developments related to the coronavirus outbreak,” said Chief Financial Officer Matt Bilunas.
Best Buy expects 2020 earnings of $6.20 per share on sales of $43.8 billion. “Our guidance ranges for both Q1 and the full year reflect our best estimates of the [coronavirus] impacts at this time,” noted Bilunas.
Both figures were well below Wall Street’s expectations — which seems odd, considering that analysts know Best Buy’s China situation. Personally, I see this as more proof that Wall Street hasn’t completely accepted the full potential impact of the virus.
Keep an eye on Best Buy. The company is strong and well-run, meaning you could find a diamond in the rough if you jump on BBY shares at the right time.
Gone: Shut the Windows
And the list continues to grow…
“Although we see strong Windows demand in line with our expectations, the supply chain is returning to normal operations at a slower pace than anticipated at the time of our Q2 earnings call,” the company said in a statement. That second-quarter earnings call was just last month. My, how quickly things can change.
So, what’s the impact? The company says that its personal computing, Windows and Surface sales will not be up to snuff due to the virus outbreak. Microsoft’s personal computing unit accounted for 36% of total revenue last quarter, meaning that a slowdown here could materially hamper current-quarter results.
MSFT shares were punished hard for the warning, but ol’ Softy will be back — you can bet on that. Remember, Microsoft is the company that outlived the dot-com bust … and several other market disasters along the way.
That’s right, Great Stuff readers … this sell-off in MSFT is a buying opportunity. Maybe not right now. The market has a pretty nasty cold. But if you hold MSFT, there’s no reason to sell. In fact, look for opportunities to buy … just be careful about when.
Rabble, rabble, rabble. It’s time for Great Stuff readers to babble!
Welcome to your weekly Reader Feedback!
This week, we asked you for your thoughts on Warren Buffett, the market and the coronavirus. So, let’s get things kickin’, shall we?
China’s West Province
Howz it goin’!
– Don’t follow Buffett, he makes most of his money selling puts, or he just buys the companies, or he waits for the leeches to come to him and rips them off … lol.
– If Trump is still president, S&P 500 will be up.
– If you mean corona viral market, I have my own gauge. When hundreds of infections start showing up here in China’s west province … British Columbia, Canada … lol (sad but true ), then I’ll start worrying ’cause there has to be a few full 747s coming in daily.
– Like your newsletter, read it every night.
Keep up the good work.
Here’s a guy who followed this week’s assignment to the letter. You get an A+, Tony.
I, too, will start to really worry when hundreds of infections start showing up in North America. With today’s news of a spreading infection near San Francisco, I’m thinking you might get pinched from below … instead of air-dropped from Chinese 747s.
Stay safe, brother, and thanks for reading Great Stuff!
Plug Into Options
Hi, I really enjoy Great Stuff, and Profits Unlimited has made me some money. Would Joseph like any comments on Tesla from an options trader?
’Sup, Gary! So, you want to trade Tesla Inc. (Nasdaq: TSLA) options … hmmm. You know, you haven’t picked the best market time to consider this option, right? Volatility is through the roof right now. That means that Tesla options (heck, all options) are a bit expensive.
Thirty-day volatility on TSLA right now is higher than 90% of all readings taken in the past year. In layman’s terms, that’s pretty high, and TSLA options are expensive.
Remember, Gary, options trading is not for the faint of heart. And your strategy depends on what you want to get out of the trade. Are you looking to own Tesla stock at a lower price? Or, are you looking to profit from TSLA’s decline or rally?
Basic options strategies like buying calls or puts are going to be rough in a high-volatility environment. You’ll pay a lot and miss out on returns because of it. But, if I were forced to trade TSLA options, I would probably look at short-term puts … maybe in April or May, just to give myself some breathing room.
But that’s only if I were forced to trade TSLA options. I’m not forced, so I won’t.
By the way, Gary, I see you have Profits Unlimited … did you know that Paul also has an options trading research service? If you’re interested in TSLA options, you should really check out Rebound Profit Trader.
All right, Gary wore me out. I’m sorry if I didn’t get to your question today. I’ll try to hit you up next week, so keep writing in!
And if you haven’t written in yet … what’s stopping you? Drop me a line at GreatStuffToday@banyanhill.com, and let me know how you’re doing out there in this crazy market.
Until next time, good trading!
Editor, Great Stuff