USA TODAY International Edition
Investors should be ready for spending to rebound
A tip of the hat to my fellow Americans. You are a resilient bunch. These past months have been grueling, and our hearts go out to those who have lost loved ones, businesses and livelihoods. We will rebuild, of course, with time and determination. There is, however, a bit of good news. The American consumer is in surprisingly good shape, and investors should take note. • Consumers are 2/ 3 of economy. As the country reopens, retail spending will likely increase. Look for beneficiaries of spending as American’s hit the road, the restaurants and retail establishments. Select companies with brands you know and trust. Again, consensus earnings estimates for consumer discretionary stocks in 2021 are expected to rise over 100%. Near- term earnings disappointments may provide an entry point if you find a company you like.
• Hunker down. Stocks are marked to market every millisecond. This causes investors to focus too intently on near- term moves. A willingness to hold stocks for three- to five- years is realistic and reasonable. When you buy the stocks of great companies, over the long- term you will be happy with your return.
• Avoid tempting risk trades. Hertz is the perfect example of a risk trade. Here is a company in bankruptcy who petitioned the bankruptcy court to issue 247 million new shares that the company concedes “might wind up worthless.” The stock rallied almost 40% on the day. If, like me, this doesn’t make sense to you, don’t bite. These kind of trades rarely end well. i Remain humble and alert. Investing is like body surfing. Riding the waves in temperate waters is a pleasure but can lead to complacency. When the inevitable monster wave explodes on the scene complacency can be fatal. Don’t be reckless and drift too far into risky, deep value names. Quality companies in times like these provide a ballast in turbulent waters. Be safe.