The S&P 500 fell more than 30% in only 30 days, one of the sharpest and quickest market declines in the past half-century. Market drops of 30% are rare things -- they've happened only about once every eight years over the past 50 years.
It's part of my investing plan to take advantage of these rare opportunities, and I've acted quickly and aggressively to buy. Here are 15 stocks I have bought during the crash:
|Company||Price Change From 2020 Peak|
|American Express (NYSE:AXP)||(31%)|
|Wells Fargo (NYSE:WFC)||(42%)|
|SVB Financial Group (NASDAQ:SIVB)||(37%)|
|U.S. Bancorp (NYSE:USB)||(38%)|
|Bank of N.T. Butterfield & Son (NYSE:NTB)||(53%)|
|First Solar (NASDAQ:FSLR)||(37%)|
|Brookfield Infrastructure Partners (NYSE:BIP)||(30%)|
|Atlantica Yield (NASDAQ:AY)||(31%)|
|Clearway Energy (NYSE:CWEN.A)||(17%)|
|Terraform Power (NASDAQ:TERP)||(25%)|
|CareTrust REIT (NASDAQ:CTRE)||(31%)|
|Ryman Hospitality Properties (NYSE:RHP)||(62%)|
So, even with the market having recovered some of its losses in the past few days, all 15 still represent a discount to their pre-crash prices. Let's take a closer look at why I bought them.
This isn't 2008
This is not the same situation as we saw in 2008 through 2010. The increased capital requirements implemented after the global financial crisis mean most banks have far stronger balance sheets than a decade ago. Sure, a few will probably still fail -- it happens every recession -- but the implications are completely different. So there's less risk.
There's also enormous value. American Express, N.T. Butterfield, U.S. Bank, Wells Fargo, and SVB Financial Group have seen their valuations plummet:
I know what many of you are thinking: P/E ratio is useless right now! Their earnings are going to fall! Yes, that's probably true.
However, 2019's results are still a good benchmark for the level of earnings these banks should generate in a normal, non-global-pandemic-that's-crashing-the-economy environment. And that means there is enormous value to be had for anyone willing to buy now and hold through what could be a very sharp recession. I've added -- or added to -- all five in the past few weeks.
The "war on cash" has a new viral ally
I don't want it to seem like I'm making light of the impact of COVID-19 on so many people and families, but the spread of this contagious disease is changing how a lot of people pay for things. Despite the growth of electronic payments in recent years, cash is still king in global payments.
COVID-19 won't completely upend cash, but millions of people are having to adapt to restrictions on personal interactions, and that's pushing more commerce online and encouraging people to use touchless payments. Visa will be a big beneficiary of that in the long run.
Today, investors are hyperfocused on the next few months, erasing about a year's worth of gains for Visa shareholders. That's an excellent entry point for someone looking to own the company for many years.
Businesses built for downturns
I've had trouble understanding why this group of stocks has declined over the past month:
In every market crash, there are certain stocks that get unnecessarily beaten down by investors looking to sell anything and everything. Atlantica Yield, Brookfield Infrastructure, Clearway Energy, and Terraform Power meet that description. They own renewable power generation, water supply systems, gas and electricity transmission systems, and other kinds of critical infrastructure. These are the things people rely on no matter the economic environment.
While other investors sold off great businesses with cash flows that could prove reliable even during a downturn, I moved quickly to load up on them all.
A fortress of a balance sheet and a bright future
The solar panel industry goes through regular and somewhat abrupt cycles. Demand can be especially up and down in the utility-scale sector, where First Solar is a leader. It's also the kind of high-growth, relatively volatile business that adds even more volatility to stock prices, and that's led to First Solar being a particularly hard-hit stock, down more than 36% in 2020 as of this writing.
And I think it's fallen into deep-value territory as a result. The company has a long track record of generating positive cash, and looks likely to continue with that track record in the years to come as demand for solar power increases and the company moves beyond a 2019 that required significant spending to upgrade to its newest products.
At recent prices, the market values First Solar at $3.6 billion. That's for its entire solar business, which has averaged about $500 million in operating cash flows over the past decade and $1.8 billion in net cash. That's a bargain-basement price, so I backed up the truck.
2 top stocks driving the future of advertising
At this writing, Alphabet and Telaria have seen their shares fall 24% and 54%, respectively.
There's little I can write about Alphabet that hasn't already been written, but the reason I bought was plain and simple: I've never bought nearly as much of it as I have wanted, and I wasn't about to let the recent market crash pass by without making it a bigger piece of my portfolio. Moreover, it has more than $120 billion in cash and equivalents, meaning that it has enormous resources to ride out a likely downturn in ad spending this year and to act aggressively if management sees opportunities to invest during the next year.
Telaria is a speck of a company compared to Alphabet, but it's also a leader in the world of advertising. While Alphabet and its investors have seen enormous gains from the growth in ad revenue on the internet, Telaria is primed for the next shift, away from cable and broadcast TV to streaming and connected TV platforms.
With its upcoming merger with The Rubicon Project moving ahead quickly, Telaria could prove one of the best growth stocks to own over the next decade. I was able to pick up shares for 60% off the 2020 high; at recent prices it's still down by half.
Some risk, a lot of reward
In general, real estate investment trusts, or REITs, are considered to be on the safer side of stocks. That's because their values are underpinned by the properties they own, and the steady cash flows they generate.
Fast-forward to 2020, two kinds of real estate nobody wants to own are nursing homes and hotels. As a result, that has sent shares of CareTrust REIT (skilled nursing and retirement properties) and Ryman Hospitality Properties (hotels) down hard and fast:
Even after rallying sharply over the past week, they're still down 31% and 62%, respectively, since late February.
It's easy to see why investors are worried about Ryman Hospitality. The company counts on about 70% of its bookings from groups, including convention business that probably won't begin to recover this year. Moreover, Ryman has suspended operations at all five of its properties, so it will earn essentially no revenue for some time to come.
But with almost $1 billion in cash and liquidity, it isn't at significant risk of insolvency, for at least a few quarters, and would likely be able to secure additional liquidity if needed: Its Gaylord Hotels are some of the most valuable convention and leisure properties outside Las Vegas.
Investors have been scared out of CareTrust along with many of its skilled nursing peers due to a large number of deaths at nursing homes from COVID-19 in Washington state. As a result, one of the best-run REITs out there is trading at a bargain price, and paying a dividend (it was just increased 11% on March 12) that yields over 6% at recent prices.
I've more than doubled my investment in CareTrust in the past three weeks, and it's on my list of stocks to consider buying more of if it remains so beaten down. While investors see a lot of risk, I see an important business with a massive tailwind for growth in the years ahead.
You haven't missed out
History makes it clear that investors who seize on rare 30% market drops come out far ahead in the long term. I'm not expecting any quick gains -- frankly, there's a good chance we could see stocks fall again in the weeks ahead as COVID-19 cases continue to rise and the full economic impacts become more apparent.
But even if every one of these 15 stocks is cheaper in a week or a month, I am fully confident that five years or a decade from now, today's prices should prove to be absolute bargains.