So don’t ditch your COVID plays just yet. My head hurts – a lot – but even that level of brain bust would not convince me to buy a re-opening play like Carnival Cruise Lines (CCL) . You would have to be nuts to go on a cruise now. Absolutely nuts. The reason the market is rising is because COVID is going to be eliminated by vaccines… or something like that. This virus is strong… and mutating. The fact that the vaccine roll-out has been horribly botched in certain states, including my home state, New York, is just icing on the cake. I am not nuts. That doesn’t mean I am any better than the average commentator at predicting this market’s ever-changing moods, but it does mean that I don’t buy stock in companies with clearly worsening fundamentals.
The issue is when the data conflict with the prevailing narrative. We are in such a position now. The market seems to be pricing in some kind of miraculous economic recovery from COVID, egged on by cheerleaders like JPMorgan’s (JPM) Jamie Dimon. Do you think it’s better for JPM to have a rising or a falling stock market? You must know the answer to that. I have said it before, and I will say it again: Stocks are crypto, man. Spare me the lectures on fundamentals and intrinsic value. I have spent the majority of my adult life studying that stuff, and I know how it works.
Meanwhile, COVID is not showing any signs of letting up. As I mentioned in my RM column Monday, I am a current victim. I appreciate all the well-wishes I received in response to that column. I am doing fine, and, obviously, still working while in a strict quarantine, but, trust me, you don’t want this. Who decides this? Computers that are programmed by people who have zero idea how to properly value a stock and move the market based on one factor, and one factor only: sentiment.
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Your portfolio will thank you in the long-term. In the short-term I thank you for all the get-well wishes. I am not going anywhere! Here’s an idea. Forget the memes, and don’t waste your time figuring out which “play” to make. Stick to companies that earn economic returns above their cost of capital and return those excess profits to shareholders via dividends and buybacks. That includes Big Tech names like Apple (AAPL) and Microsoft (MSFT) (though clearly not Tesla (TSLA) ) just as much as it does “old economy” names like Exxon Mobil (XOM) , Johnson & Johnson (JNJ) and JPM.
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