While the coronavirus pandemic has been a terrible and stressful situation, it has produced some compelling opportunities for investors to put their money to work for the long term. I've been doing quite a bit of buying over the past few months and continue to gradually add to my portfolio.
With that in mind, here's why I bought U.S. Bancorp (USB -0.20%), Planet 13 Holdings (PLNH.F), and Simon Property Group (SPG 0.96%) in recent weeks as the pandemic continues.
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A top-quality bank at a rock-bottom price
I've been wanting to add U.S. Bancorp to my portfolio for some time, but its valuation has always been a bit of an obstacle. At the start of 2020, the stock traded for roughly double its book value, which is actually par for the course for U.S. Bancorp. Thanks to its strong asset quality and history of responsible management, U.S. Bancorp has long boasted a significantly higher valuation than other big bank stocks.
USB Price to Book Value data by YCharts
Now, I'm not saying the premium wasn't justified or that the bank has necessarily been overvalued. To illustrate just how strong U.S. Bancorp has been, consider that it remained profitable throughout the 2008-09 financial crisis -- how many other big banks can say that?
Fast-forward to the current situation. The COVID-19 pandemic has hit the stock prices of commercial banks especially hard. Many of U.S. Bancorp's peers -- such as JPMorgan Chase (JPM 1.44%) and Bank of America (BAC 1.70%) -- have investment banking operations that do quite well in volatile markets. On the other hand, U.S. Bancorp operates like a traditional savings and loan, and therefore is more susceptible to a prolonged recession.
While the bank's profitability could certainly suffer in the short term, U.S. Bancorp remains a top-quality institution and I'd go so far as to call it the best-in-breed large bank in the United States. At its recent valuation of slightly less than book value, I couldn't resist.
The first marijuana stock I've ever bought
Marijuana stocks have been a hot topic among investors for several years now, but I've avoided them until this point, choosing to stick with more time-tested industries instead. But I recently decided to finally pull the trigger and add Planet 13 Holdings to my portfolio.
If you aren't familiar, Planet 13 operates a so-called "cannabis superstore" in Las Vegas that is about 112,000 square feet in size. And while the concept is still relatively new, the early results have been quite promising. The pandemic has certainly hurt sales (most of Las Vegas has been closed and tourism is virtually non-existent in the market right now), but in January, monthly revenue was the company's highest ever after posting 100% year-over-year growth in the fourth quarter. I completely expect the company's first- and (especially) second-quarter results to be pretty weak, but that's not a long-term concern.
The real reason I love Planet 13 for the long term is that the business is unique and scalable. The company expects to expand to its first non-Vegas location later this year and has a goal of at least eight superstores in top-tier U.S. markets within five years. As management says, "If a city is affluent enough to support a major sports team, Planet 13 is interested in opening a premium cannabis store."
Given the clear trend toward marijuana legalization in the U.S. and Planet 13 Holdings' one-of-a-kind approach to creating cannabis facilities that are so much more than just dispensaries, the company could have a massive growth opportunity.
Quality retail companies could emerge even stronger
The third, and final, new stock I've added to my portfolio in recent weeks is real estate investment trust Simon Property Group, the largest mall operator in the United States. Simon operates top-quality malls under the Mills brand name among others, and also has the country's largest outlet mall portfolio under its Premium Outlets brand.
Simon's stock price has been more than cut in half since the beginning of the COVID-19 pandemic, and it's easy to understand why. Malls have been closed, and many tenants haven't paid rent during the shutdown. Plus, with the recent bankruptcy filing from J.C. Penney and the struggles of other major retailers, there are justifiable concerns that mall operators will face a surge in vacancies.
However, Simon isn't just any mall operator. The company's mission is to create the best shopping destinations in the market, and it has the financial flexibility to do it. About 50% of Simon's malls have already reopened and the company could even emerge from the pandemic in a stronger market position as weaker regional mall operators might have trouble making it through. To be sure, there are still some big unanswered questions, but at less than five times 2019's FFO, Simon could end up looking like a steal once the economy starts to normalize.
What I expect from these stocks
Of the three, U.S. Bancorp is by far the largest investment I've made recently, as it's a rock-solid company that I have no real worries about when it comes to survival, or even profitability. The other two are more speculative investments, so I've only put small amounts of capital into each one.
With all three, however, I'm expecting quite a roller-coaster ride as the COVID-19 pandemic and the economic turbulence it has caused continue to play out. The market is likely to experience some volatile swings in the short term, so before you invest in these (or any other) stocks, be sure that you're comfortable with the oscillations that will almost certainly occur over the months to come.
