Put plainly, it's been a brutal past five weeks for Wall Street and investors. Through just this past weekend, the benchmark S&P 500 had lost 32% of its value in a stretch of just 22 sessions, while the Dow Jones Industrial Average dipped into bear market territory following only a 16-session swoon. In the span of a month, we've gone from prepping our hats to read "Dow 30,000" to wondering if Dow 15,000 is right around the corner.
While the selling tied to the uncertainty over COVID-19 has shown little signs of letting up, long-term investors have also been here before. Whether it was the financial crisis, the dot-com bubble, a war, an oil embargo, or hyperinflation, long-term investors know that the stock market eventually erases bear markets in their entirety. As long as you buy high-quality companies and give your investment theses the proper time to shine, you tend to come out a winner.
The question, of course, is where to put your money when seemingly every sector and industry is getting clobbered. Right now, I view three industries as no-brainer buys, even with the full economic effect of the coronavirus still unknown.
One of the biggest head-scratching moments of this downturn has been watching healthcare stocks get hammered. Although COVID-19 will assuredly push optional procedures down the road, which could work against some medical device companies and surgical centers, the vast majority of the healthcare industry is not going to see any harm from the coronavirus.
Think about it this way: Regardless of how well or poorly the U.S. economy performs, or how quickly or slowly COVID-19 is spreading globally, it's not going to change the fact that we can't control when we get sick or what ailment(s) we develop. This creates a steady and predictable stream of revenue for most healthcare companies -- but especially drug developers.
While you could also freely include profitable biotechnology companies in this category, my suggestion would be for investors to feast on discounted pharmaceutical stocks. If people needed anti-inflammatory and cancer medications last month, they're going to need them in March and beyond just the same.
The specific company I'd highlight here is Bristol Myers Squibb (BMY -0.33%). Bristol Myers, which goes for less than seven times Wall Street's consensus earnings estimate for 2021, recently acquired Celgene, bringing top-selling cancer drug Revlimid into the fold. Between Revlimid, cancer immunotherapy Opdivo, and blood thinner Eliquis (which is co-marketed with Pfizer), Bristol Myers Squibb has three therapies fully capable of reaching $10 billion in annual sales (with Revlimid already there). The coronavirus is going to have little to no bearing on the growth potential of these core therapies.
Another industry that's offering investors a no-brainer opportunity to buy in on the cheap is gold mining, with physical gold prices likely to soar in the months and years ahead.
As a reminder, I strongly suggest buying gold-mining stocks and not the metal itself because you'll have more data to pore over with individual stocks. Additionally, you can receive a dividend from individual stocks, which is not something you'll get from physical gold, and the management teams of individual companies have the ability to adjust their mining operations to meet prevailing market conditions. In other words, your upside potential is considerably higher with gold-mining stocks.
There are three core reasons I believe we'll see physical gold hit a new all-time high. First, central banks around the country are pumping cash into their financial systems at a rapid pace, which tends to be a major positive for gold. Second, global bond yields are virtually nonexistent, providing few if any safe havens for investors. And three, uncertainty is likely to continue for some time. All of these factors make gold a viable store of value for the foreseeable future.
Though most folks are probably sick and tired of me discussing my favorite gold-mining stock (and my largest personal holding), SSR Mining (SSRM 0.23%), I do so because it's one of a very small number of mining stocks with a net-cash position. SSR Mining ended 2019 with $282 million in net cash, and has plans to eliminate $115 million of its $288 million in debt by the end of March. This gives it much better financial flexibility than its peers.
Furthermore, SSR Mining expects continued production expansion at its two gold mines -- Marigold in Nevada and Seabee in Saskatchewan, Canada -- and should deliver even more impressive cash flow in 2020 and beyond as physical gold prices rise.
A third no-brainer industry to buy into during this coronavirus crash is electric utilities.
As a general rule, it's never a bad idea to consider buying into companies or industries that provide a basic need, good, or service. If you own or rent a home, you're going to rely on electricity. Similar to patients taking medicine, the need for electricity doesn't decline significantly just because the economy is struggling or COVID-19 is spreading. In fact, it could be argued that people spending more time at home could lead to an even higher amount of electricity consumption in the weeks and months ahead.
The coronavirus panic has also pushed the federal funds target rate back to its record low. What this means is that it's once again incredibly cheap for businesses to borrow money. Since electric utilities typically lean on debt to finance their projects, this could encourage a wave of green-energy upgrades that lead to lower-cost power generation.
The standout name among utilities is NextEra Energy (NEE 0.27%). No electric utility is currently generating more from solar or wind than NextEra, which is a big reason its electricity generation costs are lower than its peers. Though these renewable energy projects haven't been cheap, it's placed NextEra ahead of the curve in making the switch toward cheaper renewable energy. With homeowners and renters unlikely to change their electricity consumption habits, and NextEra's traditional businesses regulated (and therefore not exposed to wholesale pricing), investors can count on this utility to produce highly predictable cash flow and a healthy dividend.