Financial Focus: Uncertainty is the order of the day
By Michael E. Russell
As I sit here on Sunday morning pondering what I would recommend to readers, I find myself in a quandary.
Ukraine is in the forefront of the news, while Canadian truckers are being arrested and having their bank accounts taken due to their opposition to Trudeau and his position on masking and vaccinations.
Is it time to put money to work during these uneasy times? Emotionally an investor could think not. History says otherwise.
Once again, the reader only has to look back in time and realize that sound investment decisions can be made at any juncture. 1929, 1952, 1987, 2001, 2002, 2008. These dates were extremely stressful to the investor. Sell, hold or buy? DECISIONS, DECISIONS!
Today, it is more of the same. Companies that we have mentioned are still financially strong with solid balance sheets. Yet, they are being punished by this market! Do we sell shares in these companies while earnings are robust?
Is 5G now a passing fancy? Not so.
Increasing interest rates will bolster the balance sheets of many Money Center and Regional banks. It is fair to say that even though the ten-year treasury is now yielding 2%, our checking and savings accounts are still yielding close to 0%! Thus, bank earnings and balance sheets are stronger than ever.
I believe that based on past history, investors should think about adding or starting a position in some great companies. Dollar cost averaging is a smart way to start or increase your positions. Emotion should not play a part in selling a stock.
Banks need to watch their loan portfolios and manage the risk as to their non-performing loans.
We are all aware of the supply chain problems thus effecting the costs of goods and services.
With all of this in mind, we need to remember a basic tenet; try to have enough liquidity to cover 6 months of household and business expenses. It is especially important now to monitor your debt load due to higher interest rates.
Let us look at some stocks that have been mentioned before. Qualcomm is certainly a quality investment at these levels, even during this volatile market period. It is reasonably priced with a P.E. ratio of 14x forward earnings with a solid dividend. Morgan Stanley is another sound investment idea. The company is buying back $3 billion in stock each quarter while paying a 3% dividend.
Still a favorite is Nvidia. This company has exceeded even the highest expectations of forward guidance for earnings. A great CEO, Jensen Huang, has Nvidia positioned to take advantage in the growth of 5G. For those suffering from cabin fever, look at Disney. Increase pricing power and high occupancy rates at their theme parks suggest good earnings growth.
In closing, let us hope the people of Ukraine will be safe. By the time this article is published we will probably know if Russia has decided to invade.
Be safe and stay healthy.
Michael E. Russell retired after 40 years working for various Wall Street firms. All recommendations being made here are not guaranteed and may incur a loss of principal. The opinions and investment recommendations expressed in the column are the author’s own. TBR News Media does not endorse any specific investment advice and urges investors to consult with their financial advisor.
