Yes, we are currently in a global crisis that has caused all sorts of havoc on the stock market, but it’s important to keep a cool head with your investments
There is no denying that COVID-19 will continue to change the world as we know it, and such uncertainty can often lead to panic. Nowhere is this feeling better personified than in news reports from all over the UK that cell towers are being vandalized, while telecommunications engineers are harassed for doing their jobs.
Why, you may ask?
Because of a completely unfounded rumor that 5G, the fifth generation of mobile internet, is the source of the coronavirus pandemic. I won’t go into the details of this nonsensical rumor as it holds as much validity as ‘flat earth’ and Bigfoot.
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However, it does highlight a real problem — and not just that American Tower (NYSE: AMT) needs to beef up its security. The problem lies in the fact that people are reading about these things on the internet and taking action from such information. While seemingly stupid, it is far from harmless and can be detrimental to an investor’s long-term strategy.
Don’t base investment strategy off of the media
The likes of Facebook (NASDAQ: FB), Twitter (NYSE: TWTR), and Google (NASDAQ: GOOG) have vowed to combat fake news and false COVID-related information, as it is the right thing to do. However, what about non-fake news? Many investors track their favorite companies on the likes of CNBC, Reuters, Bloomberg, or the countless other sites out there. While these are reputable sites and bring us quality journalism (most of the time), they can also cause panic to investors.
Much of the time, each will bring you the same story, but often they can be ‘baity’ and downright overreactive. A recent example is Zoom (NASDAQ: ZM), which has fallen 28% from last month’s record highs, but is still up 74% year on year. Its recent drop comes following reports of security concerns on the teleconferencing app, which has boomed in popularity during this crisis.
This is concerning, but not unprecedented as many journalists would seem to believe, with many of these product types experiencing hacks in the past. At the height of its fame, Microsoft-owned (NASDAQ: MSFT) Skype was the subject of numerous hacks, while another app, Houseparty, may have recently been hacked. Don’t even get me started on the disaster that was ChatRoulette.
A company with solid financials (revenue of $622.6 million for fiscal 2019), which has gone from 10 million to 200 million daily users in 3 months and has immediately allocated resources to fixing its privacy concerns, is still a good investment. Even analysts are succumbing to the panic, with Credit Suisse (NYSE: CS) urging investors to dump Zoom stock.
That’s just one of many examples of the media pushing stock sell-offs out of proportion. Some other stocks I might consider ‘oversold’ in the recent pandemic sell-off are Apple (NASDAQ: AAPL) and Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B).
The media goes both ways…
It’s not just negative media coverage that can be a bad influence. We have had a tough number of months as a species, it’s true, and yesterday’s respite was a welcome one. The Dow (NYSEARCA: DJI) closed 1,627.46 points higher, or more than 7%, at 22,679.99, while the S&P 500 (NYSEARCA: VOO) rose 7%, with the Nasdaq (NYSEARCA: QQQ) jumping 7.3%.
Today, Tuesday, April 7, is also looking positive, with the Dow set to open up 500 points. However, don’t get dragged into any claims of a market rally or return to the bull market highs of December and January.
Firstly, one big day, even yesterday’s monster, does not mean the market is out of the woods. In fact, most of the biggest one-day increases occur during bear markets as it tries to correct recent losses. Secondly, the optimism comes due to seemingly declining coronavirus-related deaths, which is wonderful news in itself, but hardly a solid basis for an investment thesis. We don’t know what the future holds, and it’s too soon to tell.
Boeing (NYSE: BA) jumped 19% on Monday, the same day it was forced to halt 787 production in its U.S. factories. Boeing is a long way off being secure, and coronavirus optimism should not be driving its stock up when it is still competing with a litany of issues, to put it lightly.
Buy and hold…
Time and again, here at MyWallSt, we encourage investors to ‘buy and hold ‘til they’re gray and old’, and we mean it. Downturns such as this should not be detrimental to one’s overall investment strategy, especially with a diversified portfolio and long-term plan in mind. When investing in any company, you should already have a solid understanding of its fundamentals, including how it’s run, who is running it, its mission statement, historical performance, and if you even believe in it.
Just look at our stocks’ performance versus the S&P 500:
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.