Coronavirus Rocks Wall Street

he Market’s Long Nap Comes to an End While This Company Raises Dividends For a 37th Straight Time

The stock market got rocked this week as fears of Coronavirus finally spooked traders. On Monday, the S&P 500 had its worst day in more than two years, and the heavy selling continued into Tuesday.

What’s interesting is that until now, Wall Street had been remarkably calm. In fact, the S&P 500 went a good part of the fourth quarter with only a few days of market drops more than 0.4%. That’s not much at all.

It seems that investors got lulled to sleep by the market’s calm upward rally.

What’s really happened is that we’ve gone from very low volatility to somewhat moderate volatility. This kind of market action really isn’t that unusual. Since 1950 there’s been, on average, three market drops of 5% or more.

Most of the time, these pullbacks don’t amount to much. Sometimes they do. The market doesn’t seem so concerned with the virus itself. Rather, it’s the knock-on effects of the virus. Global travel and trade routes are being upended. South Korea just announced that consumer confidence had its biggest drop-off in five years.

Travel stocks have been hit hard. Even shares of Disney (DIS) have felt the sting of the Coronavirus. Fewer travelers means lower attendance at their parks. Cruise stocks have been especially hard hit.

What’s done well? Bonds! The 10-year Treasury yield just hit an all-time low.

But not only bonds. A few weeks ago, I highlighted shares of Alpha Pro Tech (APT), a company that makes surgical masks and other protection gear. The shares nearly tripled in just a few weeks.

Barron’s even said that shares of Peloton (PTON) could do well as gym rats would stay at home. Hmm… I’m not sure about that one.

Not to be outdone, The Wall Street Journal reported that Moderna (MRNA), a biotech stock, is working on a Coronavirus vaccine. We’ll see.

But what’s caught my attention is the growing gap between High Beta stocks and Low Volatility stocks. By this, I mean the difference between the bouncy stocks and the more stable stocks. Recently, the stable stocks have been performing much better than the rest of the market. This tells me that traders have become afraid of risk. Well, I don’t blame them.

At a time like this, investors want something that’s safe and secure. One of the safest and most secure is AFLAC (AFL), the company best-known for its duck commercials. AFLAC is a lot more than ducks.

The Duck Stock Raised Its Dividend for 37 Years in a Row

What exactly does AFLAC do? The company provides supplemental life insurance. The idea is to soften the financial stresses during periods of disability or illness.

Aflac sells supplemental health and life insurance policies. This includes coverage for accidents, intensive care, dental, vision and disability. It also includes specific conditions like cancer. AFLAC is particularly big in Japan.

If you’re curious, AFLAC standards for the American Family Life Assurance Company. The duck ads started to run about 20 years ago. Now AFLAC is a household name. Not only that, but it’s a very profitable business.

A few weeks ago, AFLAC (AFL) announced it Q4 earnings. For the quarter, AFLAC earned $1.03 per share which beat estimates by one penny. Currency exchange added two cents per share. AFLAC also increased its quarterly dividend from 27 cents to 28 cents per share. This is their 37th annual dividend increase in a row. There aren’t many companies that can boast a track record like that.

For 2020, AFLAC is looking for earnings of $4.32 to $4.52 per share. That assumes an exchange rate of 109.07 yen to the dollar (which was the average for 2019). That’s pretty conservative guidance. It also means AFLAC is going for a little over 10 times this year’s earnings.

This is a wonderful company that’s going for a good price. When the market gets rough like this, it’s always good to own a safe and stable stock and AFLAC fits the (duck) bill.

I currently rate AFLAC a strong buy up to $57 per share.

Three Stocks Powering the 5G Revolution

How 5G Technology Is Changing Our World

We’re in the midst of a communications revolution. The current phase, known as 5G, refers to the fifth generation of wireless communications. This is a world-altering event and investors need to understand how and why the world of communications is changing. There will be some big winners, and naturally, some big losers as well.

First though, let’s run through the previous four generations. First generation were the old cellphones of the 1980s. They were definitely cool, but they could do little more than make a phone call. How ironic is that today the telephone feature is one of the least-used applications of cellphones.

With the second generation of cellphones you could actually a text message and even some pictures. Sure, it wasn’t great, but it got the job done. But one important feature of 2G was that it used a lot less power than 1G. That meant smaller batteries which meant smaller phones. A lot smaller.

Next came 3G. This was when you can finally stream video over your phone. Or I should say that you could stream reliably. This is important because the age of 3G coincided with the tech boom of the late 90s and early 00s. We had tons of investment happening at once.

I won’t go much into 4G LTE, (LTE stands for Long Term Evolution and refers to the technology used to arrive at 4G speeds) because you’re probably using 4G LTE right now to read this. But the important point is that 4G gave user a ten-fold increase in speed over 3G.

The arrival of 4G has changed so much of how we live. For example, Uber only makes sense in a 4G world. Just about any company you can think of in the “gig” economy owes its life to the high speeds of 4G.

The fact to understand is that there are lots of technologies out there, but they only make sense with improved communications. That’s where 5G comes in.

Investors need to understand that 5G does three things.

  1. Faster speeds
  2. Lower latency
  3. Connects more devices

Let’s break these down. Faster speeds are self-explanatory. Users can move more data thanks to faster download speeds. Some folks are talking about 5G being 100 times faster than 4G. Honestly, I think five to ten times faster is more likely. This means that a high-def movie can be downloaded in a matter of seconds instead of minutes.

Lower latency is a fancy term for meaning more responsive. Have you ever missed a turn because your map software didn’t update fast enough? Or missed a stock trade because the price moved away from you before you could execute the trade? That can be an annoyance for you. Now imagine what it could mean for something like a self-driving car. This is why the lower latency of 5G is such a big deal.

5G will allow for many more connected devices. Without getting too technical, 5G uses a much higher frequency than 4G, and as a result the bandwidth—and the amount of traffic that can flow through the network—is much higher.

Related: Three Growth Stocks Tackling 5G’s Big Data Problem

This means being able to send a text or video when you’re at your favorite team’s stadium or at a concert. The high bandwidth, combined with technology that allows users to efficiently take advantage of that bandwidth. In other words, this means a low fewer spinning icons on your cellphone when trying to call that Uber, or tell your family you’re near home.

Who Are the Winners?

There are several sectors already benefitting from 5G. Application and software companies may be the greatest disruptors born out of 5G. One company, which is already benefiting from its software position in the 5G build out, is VMWare (VMW).

VMWare provides carriers with software that allows them to run multiple 5G networks on the same hardware. In other words, VMWare is making money by making 5G networks more efficient. Revenues have tripled in the past five years and should continue on a steep upward trajectory.

This is an especially good time to give VMWare a look. The next earnings report is due out on February 27. The company has beaten Wall Street’s estimates for at least the last 11 quarters in a row. Look for another strong report.

Anything in your home that could be connected in order to relay valuable information. Those could all be revenue generators for these companies. There are a number of hardware suppliers that will benefit from 5G deployment, but one of the leading candidates is chipmaker, Xilinx (XLNX).

For 5G, Xilinx technology is helping solve capacity, connectivity, and performance challenges. Over 50 billion connected devices are expected by end of this year. Xilinx is heavily concentrated on future 5G deployment.

For its last earnings report, Xilinx beat expectations by 8.5%.

Qualcomm (QCOM) will be another large beneficiary of 5G deployment. After settling a major intellectual property suit with Apple, the company is poised to provide 5G chipsets for Apple 5G phones for the next several years, with the opportunity to prove itself for continued future chipset offerings.

Qualcomm has an impressive IP (intellectual properties) portfolio of 5G offerings and will be a major provider of the “picks and shovels” for the 5G build out.

Qualcomm is expected to grow its earnings by more than 25% per year over the next five years.

Bonus Stock

Some of the obvious plays are the telecom carriers. For example, Verizon Communications (VZ) is a major holder of 5G spectrum in key population areas. As 5G takes hold, VZ can expect a huge increase in connected devices. This should drive revenue growth, as well as provide new opportunities for the carrier to deliver new 5G services.

Verizon is also a good stock for income investors. The current yield is over 4.2%. Verizon is a strong buy here.

President Trump’s Secret 5G Stock Nod?

President Trump is now officially on the record as saying…

“The race to 5G is a race America must win, and it’s a race, frankly, that our great companies are now involved in.”

But here’s what Wall Street and the media won’t tell you…

The great companies Trump is referring to are NOT just Verizon, Sprint, or AT&T.

New evidence suggests Trump may have been referring to this secret 5G company. It’s not a household name… but experts say it’s ready for “Amazon-like” growth.