Last week I pointed out the irrational prices of some high-flying tech stocks and mentioned that even though I love tech in the long run, I questioned whether it was worth what Wall Street was paying. Stocks, at some point, will usually return to a reasonable level based on value. I was glad to see Wall Street took my advice as tech fell back closer to earth, giving investors more reasonable pricing. So at the risk of starting another run on the market (of course I am teasing here), I would like to point out another area that is getting my attention.
As I mentioned last week, much of the market gains since March can be attributed to a handful of high-tech stocks. What is surprising to me is how many well established traditional companies have been left out of the stock market rally. They have been hidden in the shadows as the focus has been mostly on the tech stocks that have driven the rally. This could possibly indicate an opportunity for investors to rotate a bit out of tech and take advantage of more value oriented stock plays.
Given my diverse audience, it would be improper to make specific stock recommendations, but I am happy to mention a few things for consideration. One analytical tool I often use is to consider what products or services I think I personally will be using in the years to come. This is especially relevant during the current crisis with so many companies operating at reduced capacity. I ask myself, “Will these industries ever come back, and if so, which ones are likely to be the survivors?”
An example would be the travel industry. With travel way down, airlines are struggling, but do we really believe this will be permanent? What about hotels? They were shut down for a time but are now starting to come back online. The financial numbers for the year are going to look pretty dismal, leading to poor returns and weak stock prices, but do we believe people will no longer stay in hotels or travel?
What about the oil and gas industry? There is very weak demand now, but will Americans start driving and flying again, and when they do, how will that affect energy prices? Are there energy companies out there with low stock prices that might benefit from a recovery?
Theme parks, entertainment companies, sporting events, restaurants, auto manufacturing, and dozens of other industries are suffering severe setbacks during this difficult time and all fall under my main question. Do we really think these things are down forever or will we one day return to using their products and services as we once did? And when that day comes, which companies stand to benefit?
High-tech has stolen the Wall Street headlines for six months, but hundreds of other overlooked companies, whose stocks have not yet seen their own recovery, may be the next investing opportunity.
Hi, I'm Dan. I'm a CFP® Professional.
Securities and advisory services offered through Commonwealth Financial Network®.
Member www.finra.org / www.sipc.org , a Registered Investment Advisor. Wyson Financial, 375 E Riverside Dr, St. George, UT 84790
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