Crisis and Opportunity: The Top Stocks to Own on the Excessive Fear

Investors are fearful of the coronavirus outbreak.

It’s why the Dow Jones pulled back in recent days.  It’s why Starbucks, Estee Lauder, Yum China Holdings, and Royal Caribbean all pulled back.  All because they have exposure to China.

To date, 4,515 people have been infected, with a nurse in Wahun saying up to 90,000 people may actually be sick. Up to 106 people have died. Chinese hospitals are reportedly overwhelmed. Lunar New Year celebrations have been canceled.

Multiple cases have now been spotted in Hong Kong, Macau, Taipei, Thailand, Vietnam, South Korea, Singapore, Malaysia, Japan, Australia, France, Nepal, Cambodia, and the United States. In fact, in the U.S. the CDC confirmed its fifth case in Arizona.

The CDC just issued a Level 3 warning, advising travelers to avoid non-essential travel to China.

In fact, according to the CDC:

“CDC recommends that travelers avoid all nonessential travel to China. In response to an outbreak of respiratory illness, Chinese officials have closed transport within and out of Wuhan and other cities in Hubei province, including buses, subways, trains, and the international airport.  Additional restrictions and cancellations of events may occur. There is limited access to adequate medical care in affected areas.”

Investors have gone into panic mode over this, selling everything.

It’s creating a “blood in the streets” buy opportunity.

“Whenever there’s a new virus outbreak, people are egged on by the media echo chamber, which latches on to the story and repeats it ad nauseum, drilling fear and concern into the minds of investors and the general public alike. The same thing happens on social media, where rumors can spread unchecked,” notes MarketWatch.

Remember, as Baron Rothschild would tell investors, “The time to buy is when there’s blood in the streets, even if the blood is your own.” He knew that very well, considering he made a small fortune buying the panic that followed the Battle of Waterloo against Napoleon.

Sir John Templeton would tell investors to buy excessive pessimism.

Warren Buffett still advises that a “climate of fear is your friend when investing; a euphoric world is your enemy.”  And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”

In short, investors may want to use fear as an opportunity to buy beaten down stocks.

“If history is any guide, the weakness in Royal’s stock could present a compelling buying opportunity as consumers have been fairly quick to shrug off illness outbreaks in recent years,” says William Blair analyst Sharon Zackfia, as also quoted by MarketWatch. The cruise industry actually did better after the SARS outbreak and “more recent outbreaks such as Zika or Ebola have had no discernible impact on cruise demand.”

Other stocks that should recover are Nike, Starbucks, Estee Lauder, Walt Disney, IMAX, Wynn Resorts, Las Vegas Sands, and Marriott International.