If one were to constantly take the advice of the news, investing would be a terrible activity to take part in. Headlines tend to stir up fear and greed, leading many to commit the cardinal buy-high and sell-low sin. However, the best investors out there know to ignore the news and buy high-quality stocks on dips.
Such was the case after the recent market sell-off at the end of 2018. While panic was running high, seasoned shareholders were scooping up stocks for the long haul at bargain prices. Three companies that our Foolish contributors think you should be watching are JPMorgan Chase (NYSE:JPM), Madison Square Garden (NYSE:MSG), and General Motors (NYSE:GM).
Buy the big-banking dip
Nicholas Rossolillo (JPMorgan Chase): The banking industry was a downright lousy place to put money last year -- at least as far as investing goes. As measured by the Dow Jones U.S. Bank Index, the sector sank 18% in 2018. JPMorgan Chase was no exception, falling 9% on the year and 20% from its high-water mark posted in the fall.
Where there is adversity, though, there is money to be made, and this bank could be a beat-up member of the banking sector to add to your watchlist. During the third quarter of 2018, Warren Buffett added the stock to Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) portfolio when the price was some 10% higher than it is as of this writing.
It's true that the fourth quarter of 2018 wasn't great for the bank, as it reported its first business underperformance relative to its own estimates in quite some time. Much of the negative results were due to poor performance in the company's bond trading segment, while the other areas of operation continued to show healthy returns. JPMorgan Chase remains a well-run financial institution, and has some of the best returns on equity in the big-banking industry.
With shares now trading at a mere 10.6 12-month forward price to earnings, now could be a good time to add the Buffett portfolio holding to your own investments.
Check out the latest JPMorgan Chase earnings call transcript.
Live sports aren't going anywhere anytime soon
Chuck Saletta (Madison Square Garden): During the market's downturn in December, sharp investors with available cash took the opportunity to scoop up shares of solid companies while they were on sale. That includes Menlo Park-based Silver Lake Group and its decision to up its stake in Madison Square Garden. Silver Lake Group actually boosted its stake in Madison Square Garden twice in December, so that it now owns around 4.9% of the iconic sports arena and the franchises it owns.
For an organization that calls itself "the global leader in technology investing" to take on that large a stake in a sporting organization -- and increase it twice within a month -- shows its strong conviction. Much of that conviction probably comes from the recognition that in this era of internet-based entertainment, live sports and live events still generate incredible revenues from ticket sales and broadcast rights.
Some conviction, however, comes from its proposed spinoff plan. Madison Square Garden owns not just the arena that bears its name, but also the New York Knicks, New York Rangers, the New York Liberty, the Chicago Theatre, and other teams and venues. But it plans to spin off its sports teams into a separately traded public company sometime in the first half of this year. While the Dolan family is expected retain control of both public companies after the spinoff, there's a decent chance that the spinoff will unlock value hidden in the currently combined entity.
Check out the latest Madison Square Garden earnings call transcript.
Driving the future
Daniel Miller (General Motors): It might surprise you, but at a time when many investors have bailed on Detroit automakers some of the world's investors are gobbling up shares of General Motors. In fact, Warren Buffett's Berkshire Hathaway, Edgar Wachenheim's Greenhaven Associates, and John Levin's Levin Capital Strategies, among others, all bumped up their shares of GM in their last filings.
Despite the pessimism surrounding automakers in a slowing North American market, and the uncertainty regarding potential trade wars, General Motors received an upgrade from BMO Capital, and the automaker even delivered upbeat 2019 guidance. On Friday, January 11, GM's stock jumped when CFO Dhivya Suryadevara announced 2019 full-year guidance would improve from 2018: adjusted earnings-per-share between $6.50 and $7.00, compared to 2018 guidance of roughly $6.00 per share. It also expects adjusted automotive free cash flow between $4.5 billion and $6 billion, up from 2018 guidance calling for roughly $4 billion.
But some of the world's best investors aren't buying into GM because 2019 looks better than 2018. Rather, they're buying in because the long-term future is bright. In November GM announced a restructuring that would drive about $6 billion in cash savings by the end of 2020. That capital will help GM drive commercialization of autonomous vehicles with GM Cruise. RBC Capital already laid out the blue print for a $43 billion GM Cruise valuation, and argued it could generate $32 billion in annual revenue for GM by 2030 by operating a fleet of driverless vehicles.
There's plenty of pessimism surrounding the automotive industry currently, but if GM continues to invest in more profitable vehicle segments and emerges as a leader in driverless vehicles, it could reward investors in the decades ahead -- and a number of hedge funds believe that's a real possibility.
Check out the latest GM earnings call transcript.