As long as the insidious coronavirus is still out there, all investors need to be prepared for another stock market crash. Few things are more unpredictable than biology. As such, even the most seasoned of economists aren’t going to be able to forecast the “shape” of the recovery, because it ultimately depends on when the coronavirus will be eliminated (or at least very well contained through extreme testing and social-distancing practices).
The socio-economic disruption caused by COVID-19 is unlike anything we’ve witnessed before. While it’s comforting to know that the Fed has our backs, one must not rule out more severe government-mandated shutdowns. Even though President Trump is reluctant to close the economy again, the decision to get the economy rolling ultimately lies in the hands of both the consumers and business owners, both of which may not feel so safe should infection rate re-accelerate over the coming weeks and months.
It’s a difficult time to be an investor. Uncertainties have arguably never been this great. But great investors invest. And don’t try to time the markets or the pandemic timeline. They play the hand they’ve been dealt to the best of their ability. And with another stock market crash more than likely, investors should be ready to swing at the pitches that Mr. Market could throw their way as we enter the second half of this brutal year.
The question that investors should be asking is not if or when the stock markets will crash (it’s going to happen, and nobody knows when), but how they’re preparing for the inevitable stock market crash and what they’re going to do when it finally does crash. Ready or not, another market crash is coming. So, get prepared with a shopping list and buy when the value arrives.
Once the market implodes again, instead of panicking, I’m going to look to pick up Restaurant Brands International (TSX:QSR)(NYSE:QSR) and Nutrien (TSX:NTR)(NYSE:NTR), two TSX stocks at the top of my shopping list.
Restaurant Brands International
When the markets meltdown, I like to look to battered businesses that have the most comeback potential. And while I wait for such a comeback to come to fruition, I want to be paid a bountiful dividend. Restaurant Brands International will probably take a brunt of the damage should further COVID-19-induced shutdowns come to be, and I’ll be buying more shares on the way down.
The company has deep pockets that’ll allow it to survive this crisis. Not just that, but a considerable chunk of Restaurant Brands’s mom-and-pop restaurant peers aren’t going to make it. That means less competition in the burger space, coffee arena, and fried chicken scene for Burger King, Tim Hortons, and Popeyes Louisiana Kitchen, respectively.
As sad as it is to play the demise of small businesses, one must understand that liquidity is a lifeline for all firms in this crisis. As Warren Buffett would say, those that don’t have sufficient liquidity will be the ones that’ll be swimming without trunks on as the tides go out.
QSR will be a major mover, and its dividend (currently yielding 4%) will be safe and sound, no matter how much it stands to swell.
Nutrien
Nutrien is an agricultural commodity giant that’s been putting up with massive industry headwinds for many years now. While there’s no telling how much more pressure COVID-19 will have on the demand for various fertilizers, I think that Nutrien represents a “moaty” play that will come roaring back once the tides inevitably turn.
There’s no telling when agricultural commodities will recover. Still, given how cheap Nutrien shares have become of late and how bountiful the dividend has become, I’d be willing to wait for years, if not decades.
Today, the stock sports a 5.7% yield. The dividend commitment will fall under a bit of pressure, but I believe it will hold, even under a bear-case scenario. At a wide 15% discount to book (0.85 P/B), Nutrien is also priced with the expectation of nothing but gloom. That leads me to believe that there’s a wide margin of safety to be had in the name today, and should shares pull back further on a stock market crash, I’d load up on the name, as this margin widens further.
