(New York)

There have been all kinds of predictions for how COVID will affect real estate. The virus’ implications for commercial real estate are clearly bearish, at least in the short-term, but residential is a different story. While viewings are done, supply of housing is so tight that prices in April actually rose from last year despite the huge disruption to the economy. Home owners don’t want to move right now, so either aren’t putting their homes on the market, or are taking them off.

FINSUM: The other key thing to bear in mind is that home equity/leverage was in a very healthy place as this crisis unfolded, so homeowners are not underwater like they were in the last big crisis. Thus, there is a lot less pressure to fire sale.

(New York)

The stock market is looking rough right now. The trend has been remarkably more bearish over the last couple of weeks than the 35-40% run higher we saw in the previous five weeks. With that in mind, here are some good stocks to ride out the storm: Morgan Stanley, United Rentals, Baxter International, Iqvia Holdings, Boeing, Whirlplool, Twitter, T-Mobile, Western Digital, and Peloton.

FINSUM: We want to take a moment to focus on Peloton, which has been an incredible business. Peloton’s growth since the lockdown has been enormous, and they have a low churn subscription business. Gyms are going to be unappealing for some time, so Peloton looks like a great buy.

(New York)

The market has fallen a couple of sessions in a row and is looking weak today. It is sort of feeling like the decline many have been forecasting is finally grabbing hold as the reality of a long recession grips the psyche of investors. JP Morgan published an interesting report this week, saying that markets could fall significantly but that there are two divergent scenarios that could take place. In the bull case scenario, the re-opening of the economy works, with social distancing measures keeping a second wave from occurring (especially as summer arrives and holds COVID at bay). They describe the bearish scenario like this, saying “The other option is that overly complacent consumers bring down the guard too quickly, a second wave of infections hits, and the world is forced to rethink the optimistic timing of the new normal”.

FINSUM: The big question in our minds is whether a middle ground exists between these two scenarios. Maybe there are some isolated second waves with certain cities getting locked down. The market might just drift from here until the situation becomes more clear.

(Chicago)

The early thinking about grocery stocks was that the big surge in demand at the start of the COVID lockdown was just a flash in the pan. However, as earnings and guidance is emerging from companies in the space (like General Mills), it is becoming apparent that demand for groceries because of a heightened preference for home cooking seems likely to stick around for a while.

FINSUM: We agree with the fundamental thesis here. Until we cure COVID, people are going to stay worried about public spaces, including restaurants. The trick to picking stocks is to understand where each company is getting its revenue. For instance, General Mills does a lot of sales through grocery stores so its stock is rising, but Molson Coors does a large share of its sales through bars and restaurants, so its stock is falling.

(Seattle)

The biggest aircraft maker in the country just put out a dire prediction (although not a surprising one)—that there will be a major airline bankruptcy this year. The airline industry has been wounded as never before, with demand falling more than 90% since this time last year. Most analysts think it will take until the end of year for demand to even rise to 50% of the year prior. Credit default swaps—a proxy for the odds a company will default—are very high right now. For instance, markets are putting a 54% chance that American Airlines defaults.

FINSUM: This is an odd comment from a company that is talking about its biggest clients. It speaks volumes.