Look Beyond The Market Valleys - To Companies Like STAG

The two big issues today are COVID-19 and the economy. Fix the former and the latter will follow as night follows day.

Assuming Americans are not so stupid that we can all wear a mask, avoid close contact with strangers, and practice good hygiene for a finite period of time while various vaccines are approved for use and plasma transfusions become more common, then COVID-19, get thee behind me.

Once we have borne what seems to some to be the horrid trial and tribulation of being safe and healthy, we will be able to open restaurants and start and re-start businesses. I say it this way, distinguishing between start and re-start, because according to data from the U.S. Bureau of Labor Statistics, about 20% of U.S. small businesses fail within the first year. By the end of their fifth year, roughly 50% have faltered.

These are averages in a non-pandemic year. When you read scary headlines that x% of businesses have closed during the time of COVID-19, remember these numbers. Also note that losing a job has made tens of thousands of people who wanted to strike out on their own “just do it.” I expect for every business that fails, another will open. God bless entrepreneurial capitalism!

So, can we now move on to forgetting about all the ancillary scare news and talk about what the likelihood is of making money in the remaining weeks of 2020 and next year?

Yes, the stock markets - and the economy - will likely experience bumps in the road from time to time. But keep your eye on the prize! A physically healthy populace and a rebounding economy suggest the occasional volatility should not dissuade us from enjoying the fruits of the longer-term trend.

Post-COVID-19: Productivity will be the key to economic revival

Increased productivity is unlikely to be found by owning the COVID-19 winners like Zoom (ZM), Netflix (NFLX), and video games companies. These might hold their own, but it is the entire market with its materials, health care, energy and other sectors that will most likely benefit by rising once again. And they can still be purchased at reasonable prices.

We do not want to be out of this kind of market. I am willing to maintain my current cash position in my Growth & Value Portfolio during these next weeks of volatility, but I will be looking to buy at times of weakness.

I am particularly interested in the mid- and small-cap stocks, which have historically outperformed their large-cap brethren. Beginning in 2018, small-cap stocks’ performance cratered, and they have not recovered yet.

For the last two years, it has been all about the FANGs, FAANGs, FANGMANs, FANMAGs or whatever other silly acronym you want to use for the momentum darlings that attracted buyers for no other reason than because they are (or were) going up. At their current levels, these choices are at or approaching the valuation levels last seen in the dot-bomb of 2000.

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Disclosure: I am long STAG.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it ...

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