New Variant of COVID-19 Could Punish Stocks

A new variant of COVID-19 that emerged in South Africa could impact global stocks.

| More on:
Coronavirus 2019-nCoV Blood Samples Medical Concept

Image source: Getty Images

Global stock markets fell on Friday, as a new variant of the COVID-19 virus is on the rise. The B.1.1.529 variant (also known as the Nu variant) first emerged in South Africa and has been reported as far as Belgium. 

Experts say the new variant is far more infectious and much more resistant to existing vaccines. However, experts at the World Health Organization said it could take weeks and many more samples to fully understand the new variant’s characteristics. However, fear and uncertainty are never a good mix for stocks. 

The FTSE 100 and Nifty 50 dropped roughly 2.9% today. This morning, Canadian stocks are plummeting too. The Canadian stock market could also dip when it opens this morning. Investors are worried that a new vaccine-resistant variant could plunge us back into lockdown and strict border controls. The economic recovery could be suspended yet again. 

What should investors do?

The best way to survive the previous stock market crash was to focus on high-quality stocks with low valuations. Relatively safe blue-chip stocks have delivered double-digit returns since March 2020. If we’re facing another virus-driven bear market, these stocks could be the best bet. 

Rogers Communications (TSX:RCI.B)(NYCE:RCI) is an excellent example. The stock took a brief dive during March 2020 but quickly recovered its value. The stock surged 45% to $67 a share by mid-2021. However, it is now trading lower due to the drama playing out in its boardroom

The selloff has come at the back of squabbles on who will lead the company in the proposed merger with rival telecommunications company Shaw Communications.

Family disputes have permeated into the stock price leading to a significant loss of value. At stake is whether CEO Joe Natale should remain at the helm and spearhead the merger push. With Edward Rogers resuming control following the court ruling, there is some hopes that the squabbles, which have hurt the stock sentiments, could soon end,

The selloff creates an opportunity for investors. Since the valuation is so low, the risk of Rogers dropping during a panic is far smaller. Meanwhile, high-flying tech stocks with unreasonable valuations could see a deeper correction. 

The company is fundamentally sound, which makes it an ideal safe haven. 

Rogers fundamentals

The telecom giant delivered solid third-quarter results characterized by a positive adjusted EBITDA of $33 million. The company also delivered subscriber additions of 175,000, affirming that the company’s wireless solutions are resonating well with customers in the highly competitive landscape.

Compared to rival telcos, Rogers Communication offers a favourable dividend yield of 3.3%, perfect for generating passive income. The stock is currently trading with a favorable price-to-earnings multiple of 18. The 11% pullback from all-time highs might as well offer an exciting entry point as a merger with Shaw Communication will only strengthen the company’s growth metrics and long-term prospects.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends ROGERS COMMUNICATIONS INC. CL B NV.

More on Coronavirus

tech and analysis
Stocks for Beginners

If You Invested $1,000 in WELL Health in 2019, Here is What It’s Worth Now

WELL stock (TSX:WELL) has fallen pretty dramatically from all-time highs, but what if you bought just before the rise? Should…

Read more »

Hand arranging wood block stacking as step stair with arrow up.

2 Pandemic Stocks That Are Still Rising, and 1 Offering a Major Deal

There are some pandemic stocks that crashed and burned, while others have made a massive comeback. And this one stock…

Read more »

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

1 Growth Stock Down 15.8% to Buy Right Now

A growth stock is well-positioned to resume its upward momentum in 2024 following its strong financial results and business momentum.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Stocks for Beginners

3 Things About Couche-Tard Stock Every Smart Investor Knows

Couche-tard stock (TSX:ATD) may be up 30% this year, but look at the leadership and history of the stock to…

Read more »

Plane on runway, aircraft

Can Air Canada Double in 5 Years? Here’s What it Would Take

Air Canada (TSX:AC) stock has gone nowhere since 2020. Can this change?

Read more »

Senior housing
Stocks for Beginners

Home Improvement Stocks Are Set to Fall (When They Do, Buy These Like Crazy!)

Home improvement stocks are due to drop further in the coming months. But with solid underpinnings for the sector, it…

Read more »

An airplane on a runway

Forget Boeing: Buy This Magnificent Airline Stock Instead

Boeing (NYSE:BA) stock is looking risky right now, but Air Canada (TSX:AC) stock? Much less so.

Read more »

Man considering whether to sell or buy
Stocks for Beginners

Goeasy Stock: Buy, Sell, or Hold?

When it comes to smart buys, goeasy stock (TSX:GSY) is up there as one of the smartest money can buy.…

Read more »