By Gordon Pape, Editor and Publisher
Dr. Anthony Fauci was quoted recently as saying life likely won’t get back to normal until late next year. Those were discouraging words for many. Most of us are suffering from COVID fatigue. No one wants to cope with another year of this.
But look at it this way: at least America’s top specialist in infectious diseases is willing to put a timeline on a return to something resembling the world we knew. That’s somewhat encouraging even if it is more than 12 months away.
But when Dr. Fauci talks about a return to normalcy, he is speaking medically and socially. The investing world will still be a long way from where we were in 2019 by the time we reach the autumn of 2021.
Interest rates will remain extremely low, as central banks use monetary policy to stimulate the economic recovery. That means investors looking for safe places for their money will continue to be frustrated with the miniscule returns offered by bonds, GICs, and high-interest savings accounts. I don’t see that changing in the foreseeable future.
By default, many of these people are looking to the stock market, despite the higher risk. But which stocks? Technology issues have been the market leaders since the pandemic began, driving Nasdaq to a new all-time high. However, they’re looking expensive at this point, as the recent pullback shows.
Here are three non-tech stocks I like and that I believe will perform well throughout the pandemic and beyond. Talk to your financial advisor before making a purchase decision.
Clorox (NYSE: CLX)
It’s always nice to be in a position where there is more demand for your products than you can meet. That’s the situation with Clorox right now. Everyone wants its wipes and sanitizers, to the point that, even working 24/7 shifts, its factories can’t keep up.
The demand is so high that the company has a front-page feature on its website titled: “Where are the Clorox wipes?” The answer is that they are being snapped up as quickly as they are produced. The company shipped 100 million more disinfecting products in the first six months of this year than in the same period of 2019. It wasn’t enough.
Clorox says it is pushing as hard as it can to expand production and expects continued improvement in output through to next year. But the reality is you’re unlikely to find Clorox wipes on your supermarket’s shelves any time soon.
The company recently reported fourth-quarter and fiscal 2020 year-end results (to June 30). Net sales growth for the quarter was up 22 per cent over the same period a year ago. Not surprisingly, the company’s health and welfare division was the major contributor with a 33 per cent advance.
Fully diluted net earnings were $2.41 per share (U.S.), up 21 per cent from $1.88 last year.
As of the time of writing, the stock was up about 42 per cent year-to-date, although it is off from its all-time high in August. The shares pay a monthly dividend of $1.11 ($4.44 per year) for a yield of about two per cent.
The demand for sanitizers will drop when we get an effective coronavirus vaccine. In the meantime, Clorox will sell as much product as it produces.
Franco-Nevada (TSX: FNV)
Inflation is coming. Be prepared by owning some gold or gold stocks. Yes, I know the consumer price index is barely moving these days. The CPI was only up 0.1 per cent year-over-year in July, according to StatsCan. But things are going to change. They have to, given the huge increase in the money supply and the unprecedented deficits governments are incurring to keep the economy afloat.
When it happens, don’t expect our central banks to intervene. Both the Bank of Canada and the U.S. Federal Reserve Board have indicated they will no longer fixate on a two per cent inflation figure. Instead, they will take an averaging approach over time. Given the low inflation we’ve had in recent years, that suggests the Banks may be willing to tolerate inflation rates of up to 4% before they start to consider raising interest rates. Rising inflation has historically boosted gold prices.
Another reason for owning some gold is that it is a traditional safe haven in difficult times. I believe there is more economic bad news to come before we start to see a sustainable recovery.
FNV is a good choice because of the nature of its business. This is a royalty company that finances mining firms by buying a small percentage of the output of their properties. This means it doesn’t have to carry the cost of finding, developing, and operating new mines.
Adjusted second-quarter net income was $0.48 per share (the company reports in U.S. dollars although it is based in Canada). That was up 41 per cent from last year.
The stock is up almost 45 per cent this year as of the time of writing, although it is down from its July high.
AT&T (NYSE: T)
When the government orders us to stay home we rely on telecommunications companies to keep in touch with family and friends. AT&T is one of the largest such companies in the U.S., offering steady cash flow and a strong balance sheet.
The company can trace its history back 144 years, to the invention of the telephone by Alexander Graham Bell. At one point it was deemed to be a monopoly by the U.S. government and broken up, but it reorganized and has since expanded into the media business with the acquisition of Time-Warner (now called Warner Media).
The media side of the business took a hit on advertising and content revenue in the first half of the year, but AT&T was still able to report second-quarter consolidated revenue of $41 billion (U.S.) compared to $45 billion last year. Adjusted earnings per share were $0.83 compared to $0.89 a year ago. The quarterly dividend remains steady at $0.52 per share ($2.08 annually) to yield 7.1 per cent at the recent price.
That’s a very attractive payout, especially these days, and the dividend is well covered by the adjusted earnings. This is not a stock that is likely to generate large capital gains but if you’re looking for steady U.S.-dollar cash flow and limited downside risk, it’s a good place to stash a few dollars.
This article originally appeared in The Toronto Star.