Author: Nikki-Lee Birdsey
Estimated read time: 3 minutes
Publication date: 31st Jan 2020 10:28 GMT+1
On Monday this week the Dow went down 450 points or 1.6%, the S&P 500 fell 1.6%, and the NASDAQ finished down 1.9%, marking the worst performance in months. Investor uncertainty is influenced by the coronavirus outbreak, originating in Wuhan, China, and which has spread to more than 15 countries including the U.S., Australia, Thailand, Vietnam, France and Germany, among others.
China is the hardest hit by the virus, and as of 27 January, reported the number of confirmed cases had doubled from reports a day earlier, to more than 4,500. As of 30 January, there were 8,000 cases worldwide, and the World Health Organisation declared a global emergency. Investors undoubtedly have the SARS virus outbreak in mind, which caused stocks to tumble in 2003 with over 800 deaths worldwide.
Travel stocks are down, and consumer stocks have also sinked. For example, Starbucks (NASDAQ: SBUX) had to close half of its stores in China until further notice. Investors are flocking to safe haven stocks, such as gold, amid the uncertainty. Oil prices have also fallen to 3-month lows upon the news, with U.S. oil prices settling 1.9% lower at $53.14 a barrel on Monday. On Thursday, the Commerce Department announced that U.S. GDP grew at a 2.1 percent annual rate between October and December, which is steady growth but slightly weaker than the previous year.
Here are two possible buys right now amid the market uncertainty.
Intel Corporation (NASDAQ: INTC) reported steady growth at the end of the last quarter, and is a well-known blue-chip stock with strong fundamentals. The chipmaker’s EPS is up 9%, and it increased its dividend by 5%. The data centred business is what is driving the growth, with volume up 12%. There is a high demand for products that demand chips and semiconductors as data use grows. Finscreener.com rates this stock as a Buy.
International Business Machines Corp (NYSE: IBM) is another blue chip stock that is a stock to watch right now. Guidance is strong, and growth is steady. Many investors attribute this good news to the acquisition of Red Hat, which experienced 25% growth last year. IBM acquired Red Hat for a landmark sale of $34 billion, firmly solidifying the company’s investment in cloud computing. Cloud computing is a growing industry, with the rollout of 5G expected this year only serving to bolster the capability of this tech. The P/S ratio, calculated by dividing a stock’s price with the company’s sales, is 1.64. This is lower than the industry’s average P/S ratio of 2.09, and makes IBM a possibly attractive buy for value investors as it is relatively cheap. IBM also has solid operating cash flow, with a P/CF ratio of 9.71. In the past 52 weeks IBM’s P/CF ratio has ranged from 9.82 to 8.40, according to Yahoo Finance.
Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.com. The observations he makes are his own and are not intended as investment or trading advice.
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