Owing to the panic caused by the Coronavirus , shares globally have been hammered and are now trading at the lowest level in years. The connected world, fueled by social media, has created a snowball effect on spreading the news, and therefore, panic, which has led to a landslide sell-off. There are companies that I am currently steering clear of, even though their share prices have dropped enormously. The reason for this is that I believe the global panic is not completely over, and that these companies might still feel the impact over the next few months as fear continues to loom.
People aren't attending large events or social gatherings at this time – such events are where much of their sales come from. People are also becoming more health conscience in these times and looking to avoid (albeit temporarily) anything that might affect their immune system. Some liquor companies also struggle with a lot of debt on their balance sheets, which is a worrying factor.
Travel and leisure companies:
Flights, events, and holidays are still being cancelled globally as I am writing this letter. People are staying indoors at the place they feel the safest and once again, the longevity of the panic and uncertainty will continue to impact these companies, temporarily.
Small businesses like restaurants, hair and beauty salons, and privately-owned shops are struggling during in this time and we may begin to see some of them closing as people avoid these crowded places. This will lead to tenants not being able to pay rent, which will affect real estate companies, especially those who have a concentration risk in commercial property. We are especially avoiding companies with high debt levels.
Bear in mind that once the fear of the Coronavirus and its effects start to settle, these companies may be very attractive at the low levels they are currently trading at; this for the long term, as people will always go to restaurants, hair and beauty salons, shops, and will continue to go on holiday and travel again.
I will be staying updated with the news regarding vaccinations against the Coronavirus. The brave might benefit greatly from these companies in the future as they will soon offer great value for long term investors.
How to buy?
Nobody knows what the extent of the Coronavirus will be, so nobody knows when the market will turn. It is impossible to plan perfectly and time the market, so the best is to start nibbling. I have started with my favorite shares and started buying small amounts of shares over the next few months to ensure a good average purchase price for when the market bottoms.
For example, I tell friends in my network to split the money that they want to invest into five (5). Then, for the next five months, buy 20% of the total investment that they want to invest each month in equal amounts.
You want to be in the market once this “bear” market turns in a “bull” market.
So, don’t panic; be patient.
These uncertain times have the ability to also create amazing opportunities! Stocks go up and down, but the patient investors will be rewarded.
Higgo van Biljon
Easy user, Founder & CEO FinMeUp
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