Bullet-Proof Portfolio - Top 10 Ideas; Trough Value, Big Dividends, And Weathering Coronavirus And Oil Tanking

Published Tue, 10 Mar 2020 10:31:52 -0400 on Seeking Alpha

The interest rate cut timing was arguably early as it won't modify behavior relative to the coronavirus. With OPEC faltering & fear peaking that we are head-on towards recession, opportunities abound.
The aggressive selling caused by the Fed cut and oil plunging produced some amazing opportunities for quality dividend materials, chemical and retail stocks already hammered by investors gravitating to perceived safety stocks.
With oil prices collapsing and panicked liquidation in many quality names that were already cheap, it's a great time to rotate into quality names trading at unsustainable valuations while collecting outsized dividend yields.
Chemical stocks – TSE, OLN, DOW, HUN, and Lanxess are all very compelling at the cheapest values they have ever garnered. Likewise, WRK is part of a corrugated packaging group that stands to benefit from the current turmoil.
Retailers CPRI, PVH and GES are all at unheard of valuations with underlying support and huge upside. While RACE provides a great short opportunity with a great risk/reward to the downside.

As has been said, the market mechanism appears broken and there is no rational price discovery being conducted. Machines, algos, bots, high-frequency trading and ETFs may seem great at times, but the resulting price dislocation is gut-wrenching. Just when fundamental analysis suggests that a stock price must be close to the bottom, and that historically "this is it," we then get another leg down. In most of the names listed in our TOP 10 Picks, they are trading at about 50% of trough during the 2008 banking downturn. Nothing compels investors more, to buy or sell positions very quickly than greed and fear. The lack of understanding surrounding the full consequences of the coronavirus has prompted fear and volatility reminiscent of the banking crisis. Add to that the Fed slashing rates by 50 basis points in an emergency move in between meetings, and investors understandably conclude things must... Read more