The Immune System

01042020---goldman

Image source: Sherry Yates Young - Shutterstock

What's going on?

In a recent report, investment banking giant Goldman Sachs picked a handful of stocks that should vaccinate investors against the coronavirus pandemic – and even some that could help them come out stronger.

What does this mean?

Goldman’s analysis splits companies into four categories. First, companies like Amazon and Procter & Gamble that should see ongoing demand for their products no matter how long the pandemic lasts. Second, those that should recover quickly when the economy stabilizes: Uber, for one, could see its ride-hailing and food delivery businesses pick up pronto. Third, those that should recover more gradually: FedEx, for instance, should benefit from pent-up global demand for restocked shelves. And finally, companies that should eventually recover, albeit over a longer period. That includes media conglomerate Disney, whose fairgrounds – which contribute half its annual profit – may take a while to ramp back up when they finally reopen.

Why should I care?

For markets: These are the dividend times.


Income-focused stock market investors will probably waste no time in analyzing the dividend yields of Goldman’s choices, but they might want to keep in mind another of its predictions. The bank expects US companies’ dividends this year to be 25% lower than last, as coronavirus-battered companies trim payouts to save cash (tweet this). Still, it reckons the biggest companies – those with the longest records of paying dividends and high yields – should largely be safe from the payout slowdown.



For you personally: A note of caution.


Picking one individual stock to back is risky because it exposes you to potentially unexplainable swings in value, regardless of your best analysis. Even the professionals only get it right half the time. A more balanced portfolio might manage that risk by buying a collection of companies via an exchange-traded fund (ETF). Whether you want a slice of the entire stock market or a specific industry, there are now more ETFs than there are individual stocks, so there’s bound to be something that suits.

Originally posted as part of the Finimize daily email.

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