The past seven weeks have been unprecedented for both Wall Street and Main Street.
The coronavirus disease 2019 (COVID-19) has, of this past Wednesday, April 8, been confirmed in 1.5 million people worldwide, and has led to almost 88,000 deaths. With more than 1 in 4 cases originating in the United States, we've witnessed most states order the closure of nonessential businesses and issue stay-at-home mandates for their residents.
While this a necessary move to lessen the loss of life and slow the transmission of COVID-19, these disease-mitigation factors are exacting a massive toll on American workers' pocketbooks. In two weeks, approximately 10 million Americans have filed for unemployment benefits, shattering the previous two-week record of 1.4 million jobless claims, dating back many decades. And, in the process, these uncertainties wound up pushing the equities into bear market territory at the fastest pace on record.
It's not been easy for many people -- but brighter days lie ahead.
If you have spare cash, now is the time to put it to work
For instance, researchers around the globe are hard at work on treatment options and antivirals for the coronavirus.
Additionally, the stock market has shown time and again that corrections and bear markets are always, eventually, erased by bull-market rallies. Investors who purchase great companies and hold them for long periods of time, thereby allowing their investment thesis to play out, tend to make money. That's why the stock market has proved to be the greatest wealth creator, even with corrections and bear markets mixed in. This means if you have disposal income to spare, now would be the time to put it to work.
Understand, though, that you don't need to be Warren Buffett to make money in the stock market. If you even have $5,000 in disposable cash that you won't need for bills or your emergency fund, you have more than enough to buy a stake in some of the greatest publicly traded companies. Since mega-cap stocks -- i.e., those with market caps of at least $100 billion -- are often visible, time-tested businesses, they're perhaps the most attractive way to put your capital to work right now. Here are five mega-cap stocks that smart investors are buying right now.
I'm sorry, but I'll never get tired of beating the drum on Amazon (NASDAQ:AMZN), which in my view is a value stock. Although Amazon's forward price-to-earnings ratio would disagree with that assessment, the company's cash flow potential suggests otherwise.
You see, even though Amazon is best-known for its e-commerce dominance, the combination of Prime memberships and retail sales doesn't equate to very exciting margins. Instead, Amazon's future rests with the growth of cloud-services provider Amazon Web Services (AWS). AWS is growing at more than twice the rate of its e-commerce operations, and margins for cloud services are light years higher than retail. This means that as AWS grows into a larger percentage of Amazon's total sales, its cash flow is going to skyrocket.
Between 2010 and 2019, Amazon's was consistently valued at 23 to 37 times its cash flow. But with cash flow per share expected by Wall Street to nearly triple by 2023 to around $201 per share, Amazon could easily be a $5,000 stock if it simply kept within its historic valuation range.
As you might expect, credit-service providers have been among the hardest hit during the coronavirus crash, with the expectation being that consumer purchasing will drop off and credit delinquencies will rise. But if there's a credit processor that we've witnessed consistently outperform during brief periods of economic contraction, it's Visa (NYSE:V).
Visa does so exceptionally well because it holds the lion's share of credit card network purchase volume in the United States. Between 2008 and 2018, Visa actually managed to increase its share of U.S. credit card network purchase volume by more than 10 percentage points, and saw the dollar amount crossing its network nearly triple to just shy of $2 trillion a year. Given how consumer-centric the U.S. economy is, Visa is in prime position to rebound quickly in the post-COVID-19 environment.
Also, don't overlook the fact that Visa is a payment facilitator and not a lender. Since Visa doesn't lend money, there's no direct threat from a rise in loan delinquencies. This is another reason its operating margins remain so robust.
Bristol Myers Squibb
Within the healthcare space, you're probably not going to find a cheaper pharmaceutical mega-cap stock than Bristol Myers Squibb (NYSE:BMY). And in case you're wondering what "cheap" means, how about less than 8 times Wall Street's forecast earnings per share next year.
One of the biggest near-term catalysts for Bristol Myers is the recently completed acquisition of Celgene, whose portfolio revolved around multiple myeloma blockbuster Revlimid. A combination of label expansion opportunities, growing demand, longer duration of use, and strong pricing power, may put Revlimid on track for $12 billion in sales this year alone. With a flood of generics not expected until the end of January 2026, Revlimid should remain a key cash flow generator for Bristol Myers Squibb for the foreseeable future.
On a longer-term basis, label expansion opportunities for cancer immunotherapy Opdivo and oral anticoagulant Eliquis (which is co-marketed with Pfizer) are worth eyeing. Opdivo is particularly intriguing, with Bristol Myers' key immunotherapy involved in dozens of ongoing clinical studies. In my view, Opdivo has the potential to top $10 billion in peak annual sales.
Even though most Americans are stuck at home in an effort to flatten the curve and slow the transmission of COVID-19, it hasn't stop Facebook (NASDAQ:FB) from experiencing near-term ad weakness. But these short-term pains are the perfect entry point for investors looking for long-term gains.
Ultimately, social media comes down to eyeballs, and there isn't any platform that even comes close to competing with Facebook. We're talking about a company that ended 2019 with 2.5 billion monthly active users and 1.66 billion daily users. Advertisers are going to be more than willing to pay up if means access to this many eyeballs.
Furthermore, Facebook is behind four of the seven most-visited social platforms: Facebook, WhatsApp, Facebook Messenger, and Instagram. Although Facebook and Instagram are being monetized with ads, the company hasn't even begun scratching the surface yet with regard to monetizing Messenger and WhatsApp. In other words, there's a more robust growth runway with Facebook than you probably realize.
Lastly, if you've got $5,000 in spare cash, riding Warren Buffett's coattails and buying into Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) would be a great idea. Note, I'm specifically referring to the B-Class shares here (BRK.B), since the A-Class shares go for about $287,000 each.
Why Berkshire Hathaway? The simple answer is that you get Warren Buffett as your portfolio manager. Buffett and his team are currently overseeing a portfolio of 52 securities, and Berkshire Hathaway has acquired roughly five dozen businesses from a variety of sectors and industries over many decades. Between 1964 and 2019, Berkshire's per-share market value has increased by more than 2,744,000%. That compares to a 19,874% gain for the S&P 500, including dividends, over the same period. This is what Buffett brings to the table for investors.
Buying into Berkshire Hathaway also provides some level of diversification, without having to pay expense fees to a manager. Although Buffett tends to favor financials, information technology, and consumer staples, Berkshire's many acquisitions have given investors access to many facets of the U.S. economy.