With the markets in turmoil and the end still nowhere in sight to the worldwide coronavirus outbreak, investors may be thinking that now’s the time to steer clear of high-valuation names like those in tech’s FAANG group of stocks.
Maybe so, but you’d be missing out on a golden opportunity when it comes to Amazon (Amazon Stock Quote, Chart, News NASDAQ:AMZN), says Jon Vialoux of CastleMoore Investment Counselling, who argues that COVID-19 will push more consumers towards e-commerce.
Amazon was one of a number of companies named yesterday as a contributor to a Seattle-area COVID-19 relief fund, one aimed at helping at-risk populations in the region such as workers without sick leave, people without health insurance and healthcare workers. Hosted by the Seattle Foundation, Amazon is said to have donated an initial $1 million for the cause.
And as the US economy prepares to take a hit from the outbreak, stocks in the tech sector have been plunged into negative territory for the year. Apple is now down four per cent for 2020, Alphabet is down six per cent and Facebook is down 12 per cent. Amazon is an outlier here, as the stock’s healthy gains over the month of February have kept it in the black for the year, currently up 1.5 per cent.
But even with its light pullback relative to other names, Amazon should be in your sights, said Vialoux, who appeared on BNN Bloomberg Monday to talk about the opportunities now presenting themselves in the market.
Vialoux, associate portfolio manager for CastleMoore, called Amazon one of his Top Picks for the next 12 months, saying, “You want to be buying things that have growth potential behind them — everything you wanted to buy before that you could not, that had obscene valuations such as Amazon. Amazon still has an obscene valuation, let's be honest, but the fact that it’s outperforming the market in this downturn shows you there’s a buying demand behind it.”
“The fact that it could qualify as that stay-at-home play, the fact that everyone’s going to be going online to be buying their groceries or whatever they're buying, shows you there’s a demand,” Vialoux said.
Amazon had touched above $2,000 per share a couple of times over the last two years but the stock seemed to have truly broken through over February, where it stayed above that mark up until the market-wide pullback took over during the last week of the month.
Vialoux said Amazon is seasonally strong right now, as well.
“[The] optimal seasonal holding period is between the end of March all the way through to July. It tends to outperform the market over that timeframe, so you want to be buying this. You want to be buying things that you couldn't get into before and what is showing relative strength,” Vialoux noted.
“Don’t be buying the things that have been just torn to shreds where nobody's buying. Buy the things that people are buying. And that's the bottom line,” he says.