Following years of a slow but steady climb for the stock market, Wall Street has been firmly reminded over the past 7 weeks that equities can, and will, move in both directions. Since Feb. 19, we've witnessed:
- The steepest decline into bear market territory from a recent high in history.
- The quickest descent to a 30% decline from a recent high for the broader market (30 days versus an historic average of 336 days) in history.
- Two of the six largest single-day percentage declines for the benchmark S&P 500.
- Ten of the 13 largest single-session point declines in the S&P 500, along with the seven-biggest single-day point gains of all time.
We've also witnessed truly unprecedented unemployment data in the wake of the coronavirus disease 2019 (COVID-19), with weekly jobless claims totaling 10 million over the past two weeks. The previous two-week record, dating back many decades, was 1.4 million jobless claims.
Suffice it to say that investors are having their resolve tested like never before.
However, it's also a potential once-in-a-generation opportunity to put money to work in a market with considerably more attractive valuations. After all, every single correction and bear market in history has eventually been erased by a bull-market rally. Patient investors who give their investment thesis the time to play out are often handsomely rewarded.
The thing is, with brokerage commissions largely eliminated, you no longer have to be sitting on a mountain of cash to make money in the stock market. Even taking $100 in disposable cash (i.e., money you won't need to pay bills or for your emergency fund) and opening a position in the following four stocks right now could put you on a path toward financial freedom.
Even though bank stocks are probably toward the bottom of most investors' buy lists at the moment, I don't believe now is the time to turn a blind eye to the most efficient big bank in the entire industry, U.S. Bancorp (NYSE:USB).
Without question, banks are expected to see a reduction in net interest income given that the Federal Reserve moved its federal funds rate back to an all-time low. They'll also likely see a modest rise in loan delinquencies with more people out of work due to COVID-19. But these aren't long-term worries for a historically conservative bank like U.S. Bancorp that's avoided risky bets and has almost entirely leaned on loan and deposit growth to bolster its bottom line.
Among big banks, U.S. Bancorp is consistently at the top when it comes to return on assets (ROA), and it's done an excellent job of pushing members to use digital banking and mobile applications. This digital push has allows U.S. Bancorp to close some of its branches, thereby lowering its noninterest expenses and upping its ROA. With this stock now cheaper than it's been in over a decade relative to its book value, now is the time to pounce.
For the past year, marijuana has been an absolute dud of an investment, especially in Canada where regulatory issues have created everything from shortages of product to huge supply bottlenecks in key provinces. But if there's a clear-cut winner of the pot industry in Canada, my money is on OrganiGram Holdings (NASDAQ:OGI).
Perhaps the biggest advantage OrganiGram brings to the table is that it's only operating a single facility (in Moncton, New Brunswick). Having only one cultivation and processing center means it's a lot easier for the company to manage supply chain expenses and adjust production to meet domestic demand.
It also doesn't hurt that OrganiGram's projected peak output is around 230 grams per square foot. That's roughly two to three times higher than its peers. This has to do with the company utilizing a three-tiered growing system at Moncton, thereby maximizing the close to 500,000 square feet of available cultivation space.
The ride could be bumpy in the near-term, but as the only Canadian licensed producer to have generated a no-nonsense operating profit to date, it deserves to be in investors' portfolios.
There's no denying that oil stocks have been rocked in 2020 by the freefall in demand for crude and the subsequent price war between Saudi Arabia and Russia. But integrated oil and gas giant ExxonMobil (NYSE:XOM) is built to survive relatively short-term shocks to the energy market.
One of the keys to ExxonMobil's success is its integrated operations. Although it makes the bulk of its margins from its upstream operations (drilling and exploration), the company's downstream operations (refining and chemicals) act as a hedge. Typically, when the price of crude declines, it becomes more profitable to refine petrol products. Once we're passed the worst of the COVID-19 pandemic, these downstream operations will come in particularly handy for ExxonMobil.
This is also a company that has plenty of levers it can pull in the cost department. Having initially set a capital expenditure budget of between $30 billion and $33 billion for 2020, it would not be difficult for ExxonMobil to shave billions off of these capital plans. It also paid out more than $14.6 billion in dividends in 2019 and could consider shrinking its payout to conserve cash.
In short, ExxonMobil has the tools to be a long-term winner in fossil fuels.
Investors should also consider taking $100 and opening a position in companion pet insurance provider Trupanion (NASDAQ:TRUP).
The insurance industry is far from sexy, but it's very good at making money given the typically strong pricing power of insurers. But the companion pet market offers a truly unique scenario given that it's relatively untapped. Only between 1% and 2% of North American pet owners currently has medical insurance on their four-legged family members, opening the door for an exceptionally long runway of growth.
What's more, companion pets are increasingly thought of as "family" by their owners and not simply as pets. This means owners are willing to spend somewhat liberally to ensure the well-being of their four-legged family. Last year, Americans spent $95.7 billion on their pets, according to the American Pet Products Association, with over $29 billion alone on veterinary care and product sales.
With Trupanion about to turn the corner to recurring profitability, and staring down a major opportunity, now is the time to buy.