More than 90% of the U.S. population, along with billions more people around the world, remain on lockdown as we try to protect the most at-risk from COVID-19 and keep our hospitals from being overrun, which would put even more people at risk of dying simply because they couldn't get adequate care. This approach is, of course, crashing the economy, with more than 20 million Americans newly unemployed and millions more expected to follow as more companies are forced to cut back.
But not every business is at risk of shutting down, and as often happens when the economy falls into recession, you can find high-quality stocks on sale, even when their businesses aren't really in trouble. Three in particular that are set up for success even if the coronavirus lockdown lasts longer than expected are AT&T (T 1.24%), Brookfield Asset Management (BN 0.04%), and NextEra Energy (NEE -2.03%).
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Keep reading to learn why these three companies are built to ride out the downturn just fine, and then prosper when we finally beat this virus and start going back to a more normal way of life.
A cash-cow business people need more than ever
Telecom giant AT&T has made some acquisitions in the past few years that haven't exactly been ideal. It bought DIRECTV in 2015, close to the peak for the pay-TV industry, and has seen its subscriber count steadily fall in recent years. The 2016 acquisition of Time Warner, a nearly $110 billion total investment, was widely considered a massive overpay.
Yet despite these flubs, AT&T is still a solid business that should continue to generate strong, steady cash flows through the coronavirus recession. People will rely on their mobile devices, broadband internet connections, streaming services, and even cable and satellite TV services more than ever under "stay-at-home" orders.
And even with the struggles of a declining pay-TV business, the market has more-than-adequately discounted AT&T's stock. It's down almost 28% from the five-year high, and the dividend yield of 6.6% at recent prices is very generous and should prove well-within the company's ability to maintain.
A business built to profit during economic downturns
The cause of the 2020 recession is a global viral pandemic that's killed tens of thousands and infected millions, causing the world's economy to brake hard. And while Brookfield isn't built to profit from people's suffering, it is a business that has proved adept at acting quickly to invest in assets at bargain prices.
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Brookfield Asset Management is one of the world's biggest alternative asset managers, with holdings in real estate, infrastructure, energy, and others. Brookfield has several publicly traded subsidiaries it owns a stake in, but also manages over $500 billion in assets for institutional, sovereign, and high-wealth clients. It has tremendous liquidity that it can deploy in market downturns and economic recessions, when high-quality assets can be acquired for discounted prices.
Moreover, in times of stock market uncertainty, large investors will move assets into alternative investments, and Brookfield's reputation should make it an attractive manager for those with large amounts of money to invest.
Its own shares are discounted right now down about 26% from the 2020 high, erasing almost all of its gains over the past year. If you're looking for an opportunistic investment in a business that's built to profit from economic uncertainty, Brookfield Asset Management should be on your list.
A dominant utility at a bargain price
With its stock price up almost 30% over the past year, NextEra Energy may not seem like a bargain. But this company, which is the largest electric utility in the U.S. and one of the biggest in the world, is worth buying at recent prices. To start, electricity is still in high demand, even though industrial and commercial consumption has fallen sharply. It's also the kind of service that people will continue to pay even during periods of economic recession. That makes NextEra a little safer to buy now and hold through the downturn.
But what really makes NexEra worth buying is its long-term prospects. Not only is it one of the best-run utilities in the world, but it has made renewable energy and lower-cost natural gas a big part of its growth plans. The company's operations are primarily Florida, one of the fastest-growing states, and that helps underpin the company's long-term prospects to grow faster than the utility market.
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Today's share price may be up pretty big over the past year, but it's still down 13% from the 2020 high. It's a good price to pay for the best utility in America, in terms of both high-quality operations and its prospects for many years of growth to come. The dividend yield around 2.1% may not look that impressive, but management says it plans to keep growing the payout 10% or more annually in the years to come.
NextEra Energy has been a market-beating stock for many years; its future prospects and track record make it worth buying today while it's on sale.
