Over the past two weeks or so, fear of the Coronavirus has caused a notable correction in the Stock Market and these are the kinds of events that undermine people’s confidence with regards to investing. However, it shouldn’t, because we knew that the market had come a long way and we spoke about avoiding hastiness when making long term investments at any point in time, but especially times when the market seems overextended to the upside. Therefore, we should be in a position to take advantage of opportunities in this falling stock market, instead of panicking.
Though the market has not pulled back to any great extent relative to how much it has appreciated, I think it is time to start looking for opportunities. Keep in mind that one still has to be measured because I believe that we could still see further significant downside.
At times we may get distracted by the overall action of the market without seeing the performance of some of the individual components and so as a starter, I am looking at companies whose business are hardest hit by this virus fear. These companies are down significantly more than the market. My first priority is companies related to travel and entertainment. I will explore other sectors as well, and I encourage each person to explore what makes sense to him or her.
I always encourage keeping things simple, so all one has to do to get investment ideas along this line is to consider the things one will avoid doing during this outbreak, and look at the companies that are involved in those activities. Once one arrives there, then check the performance of companies during this period and determine which to invest in based on one’s chosen research criteria. For example, here is a sample list of major airlines where one can see the impact (This is not an all-inclusive list). Also, here is a list of companies related to the entertainment industry (again, not an all-inclusive list).
Note that even though these companies have already sold off significantly, a further market downturn could still push them down further. Additionally, they could remain depressed for an extended time as their businesses try to recover. An ideal approach is to only invest 25-50% of the position one intends to establish and then add the rest over time, which may be at a likely lower price if that happens or higher on any indication of light at the end of the tunnel. Good luck! J
Disclaimer: I am not a financial adviser and therefore none of the companies indicated here should be considered as a recommendation, but rather just ideas and examples shared for education or entertainment.