Today's Market Update: Blue Chips

Caroline Mark
Today we list six stocks that we believe can keep paying dividends through the current shut down. This is an exceptional trait when a lot of industry is temporarily closing in this period of coronavirus induced distress.
 
DON’T PANIC
The banks are the boiler room in any economy and they’re better capitalised now than they’ve ever been.
 
Unlike the Financial Crisis of 2007-9 there have been no runs on financial institutions and the financial sector’s starting point overall is very different to the start of the last crisis. The financial sector should be much more resilient to withstand bad debts.
 
This means, however, that you are looking for companies with strong balance sheets and whose cash flow has not dried up or is not in the process of rapidly drying up.
 
The S&P/ASX All Ordinaries has fallen almost a third since mid-February, which reflects that investors are rebasing their expectations for future earnings.
 
As we have been consistently saying, this fall provides opportunities for investors with 3 to 5 year return time horizons. But once again, we emphasise to buy in small parcels and to not chase stocks. Certainly, we are doing this, and we are taking a breather having spent 20-25% of our available capital.
 
THE RISK
Governments had two relatively simple jobs in the Financial Crisis: bail out and support national banks and inject fiscal stimulus. Of course, this was on top of central banks cutting interest rates.
 
This time, the decision variables are much more complicated. It depends on the politicians’ decisions, but also, and more crucially, on the decisions of politicians in other nations, and on the behaviour and responsibility of your fellow citizens. We are all socialists in this fight.
 
There is no point going hard if other countries don’t do the same! Their ability to “flatten the curve” is limited. No government is going to tell its citizens they can’t come home. All politicians can do is ensure as many people as possible get tested, until there is a vaccine, which as we keep hearing, won’t be for 12 months or longer.
 
GETTING BACK TO STOCKS
The market overall is getting its head around how long we’ll be in a zero to negative growth environment.
 
But as we are finding there are companies that are doing better than others and have less financial risk. Those are the stocks Under the Radar is focusing on.
 

About the Author

Caroline Mark

Caroline Mark is the Founder and Publisher at Under the Radar Report, which provides independent ASX share research to help build investor’s share portfolio. Under the Radar Report is licensed to give general share financial advice only (ASFL: 409518). The author is not licensed to give personal financial advice and this commentary is for general information only.

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