Are all the chips down?

Shares that we are buying and avoiding:

It’s all about spotting the opportunities

 

Are the chips all down? Or is this the greatest investment opportunity we may see in our lives? Here at FinMeUp we believe there is a massive opportunity.

 

 

Owing to the panic caused by the Coronavirus , shares globally have been hammered and are now trading at the lowest level in years. The connected world, fueled by Social Media, has created a snowball effect on spreading the news, and therefore panic, which has led to a landslide sell-off. 

Is this a case where Warren Buffet cautioned to be "fearful when others

are greedy, and be greedy when others are fearful”?

That is after all how he made most of his wealth after the 2008 stock market crisis when he bought stocks at their absolute lows. Pandemics and crises like these have happened before, and markets always recover once global sentiment changes. 

 

“It’s not about timing the market, but about

time in the market”-Warren Buffet.  

 

The massive drop in share prices has opened up an opportunity for investors who are in it for the long-haul, as uncertainty will show continued volatility in the short-term. 

The question is:

What are we buying? And how are we buying? (Download the FinMeUp app to read more on this.)

 

As a global recession is virtually unavoidable, we have identified companies with three key traits that we believe will show resurgence. These companies have:

- lower debt levels, 

- higher cash levels 

- companies not directly negatively impacted by the virus and its consequences and, 

-companies with high growth potential, especially in the 4th industrial revolution.

 

We believe that the impact of COVID-19 will show prolonged effects, so in the meantime, we are buying into the following companies:

 

NASDAQ listed companies:

 

1.     Skyworks Solutions

This is our 5G play stock for this decade. 5G is the next-generation network and it is deemed to happen. They have a market cap of about 14.5 billion dollars (with much growth opportunity/potential ahead), PE ratio of 17.86(not too expensive) and a dividend yield of just above 2%. As previously mentioned, in these volatile times, balance sheets are extremely important. Skyworks Solutions have NO DEBT, with a cash pile of about 928 million dollars. They are therefore able to invest and focus on expansion. They have a lot of big customers including names like Amazon, Tesla, Toyota, Microsoft, Cisco, Apple, and the list goes on. All industries will make use of 5G in the near future. Skyworks has a good management team and FinMeUp is buyers.

 


2.     Tesla

 Tesla are lightyears ahead of their competitors in so many aspects and they are changing the world (Find out more via the FinMeUp podcast).

 

3.     Apple

Apple has a very strong balance sheet and market sentiment with a lot of cash on hand. Their 5G iPhone is expected to launch in the next few years (sooner rather than later). With their massive cash pile, they are able to make a number of effective investments now and therefore expand into new territories. 

 

4.     Visa/Mastercard

These shares barely ever dip as they are such great companies and play such a significant, yet sometimes hidden, role in peoples' everyday lives. We believe they will see a material increase in e-commerce payments, especially with people ordering products online and will continue to add to our portfolio if the market sinks even lower. 

 

 

5.     ARKK- ARK INNOVATION ETF

Innovative companies have proven to gain tangible momentum after global crises, and that is the Ark's focus - innovative and disruptive companies. The fund includes companies like Tesla, Illumina, Stratasys and Square who have all created small monopolies in their various industries and will continue to gain market share. 

 

6.     Amazon

More on this in the FinMeUp podcast where we cover and share our detailed research on Amazon.

 

7.     Dividend ETFs

This is a much safer bet for those with no risk appetite. Dividends are also a great passive income stream to have in your life, as it is “free money” that you receive. These ETFs focus on companies paying good dividends.

 

8.     Facebook

 A homebound society will ultimately be driven to our friends - Instagram, Snapchat, Facebook, Twitter, and the newbies. Facebook might just benefit from the new “stay-at-home” economy. Advertisements might be lower now, with small companies feeling the pressure, but at these low levels, we are starting to increase our shares on Facebook.

 

9.      Berkshire Hathaway

Managed by investment genius, Warren Buffet. Berkshire has a massive cash stack ready to be invested in companies at these low levels. They accumulated the cash over the years waiting for another great buying opportunity, so they can benefit really well once the panic is over and market sentiment changes.

 

There are a few more shares that we like! All available on our FinMeUp app.

 

 

JSE listed companies:

 

1.     Prosus

With their largest holding company being Tencent Holdings Ltd (Chinese multinational conglomerate holding company), we believe the recent pullback created a great buying opportunity, as people are increasing time spent online at home. This is a great business to own at any time for the long term.

 

2.     Adcock Ingram

If you go to pharmaceutical stores, you will see that health-related products are not collecting dust on the shelves. Adcock provides various products related to fighting the flu. The Coronavirus pandemic might impact their sales positively. They also recently bought back some of their shares which is always a good sign of confidence from management.

 

3.     Purple Group

Holding company of EasyEquities, GT247.com and Emperor Asset Management.

We especially like EasyEquities:

-Trade volumes increase in these volatile times 

-the number of clients continuously increase, with the company offering value to clients (simplistic, low fees, easy to use) and, 

-where there’s value, there is a good quality business for the long term.

 It is still a small company in terms of market cap, however, they have massive growth opportunities for the long term as they are changing the way people invest. Some people even call them the “Capitec of investing”.

 

4.     JSE Top 40

When one is uncertain of exactly which individual shares to buy, ETF’s are always great options as you buy a basket of shares, which is a “safer” option - essentially “Buying the market”


 

 Download the FinMeUp app to view the extended list of companies we are looking to buy into; and which to avoid. You will also receive regular stock picks, updates, and opinions.


 

There are companies that we are currently steering clear of, even though their share prices have dropped enormously. The reason for this is that we believe the global panic is not completely over, and that these companies might still feel the impact over the next few months as fear continues to loom.

 

Companies we are still avoiding:

Liquor companies:

People are attending large events or social gatherings at this time – such events are where much of their sales come from. People are also becoming more health conscience in these times and looking to avoid (albeit temporarily) anything that might affect their immune system.  Some liquor companies also struggle with a lot of debt on their balance sheets, which is a worrying factor.

 


Travel and leisure companies- Flights, events, and holidays are still being canceled globally as I am writing this letter. People are staying indoors at the place they feel the safest and once again, the longevity of the panic and uncertainty will continue to impact these companies, temporarily.

 

Property- Small businesses like restaurants, hair and beauty salons, and privately-owned shops are struggling during this time and we may begin to see some of the closings as people avoid these crowded places. This will lead to tenants not being able to pay rent, which will affect real estate companies, especially those who have a concentration risk in commercial property. We are especially avoiding companies with high debt levels.

 

Bear in mind that once the fear of the Coronavirus and its effects start to settle, these companies may be very attractive at the low levels they are currently trading at; this for the long term, as people will always go to restaurants, hair and beauty salons, shops, and will continue to go on holiday and travel again. 

Our advice is to remain updated with the news regarding vaccinations against the Coronavirus. The brave might benefit greatly from these companies in the future as they will soon offer great value for long term investors.

 

 

How to buy it?

Nobody knows what the extent of the Coronavirus will be, so nobody knows when the market will turn. It is impossible to plan perfectly and time the market, so the best is to start nibbling. Choose your favorite shares (in our opinion the above-mentioned) and start buying small amounts of shares over the next few months to ensure a good average purchase price for when the market bottoms. 

For example, split the money that you want to invest in five (5). Then, for the next five months, buy 20% of the total investment that you want to invest each month in equal amounts.

You want to be in the market once this “bear” market turns into a “bull” market. 

So, don’t panic; be patient. 

These uncertain times have the ability to also create amazing opportunities! Stocks go up and down, but the patient investors will be rewarded.

 

To view our regular updates on shares that we are buying, selling and holding; or for overall business updates and opinions, download the FinMeUp app, available on the App Store or Google Play.

 

Links to FinMeUp app:


App Store:

https://apps.apple.com/in/app/finmeup/id1494896959


Google Play:

https://play.google.com/store/apps/details?id=com.finmeup&hl=en_ZA

 

 

Disclaimer: All content published is of our personal opinion and should not be taken as definitive advice. Use your own discretion on all the above-mentioned input.

 

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