Fat Pitches Hit During the Initial COVID-19 Market Crash

This Spring was mentally one of the most challenging times of my investing career. As the COVID-19 pandemic started to spread through the United States, I was not fully prepared for the dramatic changes that would hit the entire globe. I had a close family member that sheltered in place in one of the European hot spot locations and I had a grandparent pass away just as travel restrictions started up. Thankfully, all my friends and family members have remained healthy during this health crisis.

While returning from my grandmother’s funeral, I realized how serious the situation really was when I drove through New York City. I had never seen the roads so empty in the New York area before. I spent the rest of the drive back to the Washington, DC area thinking of all the potential changes that were going to occur and the economic implications of those changes. I realized that I needed to prepare for a long period of sheltering in place and that I should invest much of the cash that I was holding in preparation for a market downturn.

My first thought was to acquire some shares of excellent companies that as a value investor I normally found a bit too richly valued to buy.  My first buy was McCormick & Company (MKC) on March 25th for an average price of $124.40.  This company is the key retailer of spices and they seem to dominate that shelf space at just about every grocery store I’ve been to. I assumed that consumers would shift to home cooking with the shutdown of restaurants. That definitely turned out to be the case. On several grocery trips over the past month I noticed many of McCormick’s key spices were sold out. The stock has been up over 40% since my purchase.

Next, I knew that no one would want to handle dirty cash money for transactions given the risk of the virus. Also, online transactions were booming. I wanted to start a position in one of the major credit card companies. I picked up shares of Visa (V) for $156.99 per share also on March 25th.

I also decided to pick up shares of Verizon (VZ) for $50.15 given the need for internet service, extra bandwidth for teleworking, and television for entertainment. I really couldn’t live without my Verizon services.

Thinking of entertainment, I picked up shares of Disney (DIS) on March 26th for $102.55 per share. Their newly launched Disney+ service and the likelihood that their theme parks would recovery quickly once the pandemic passed seemed like a good long term play. I also felt that their cruise ships would recover a bit better than some of the more foreign owned cruise ships, but I’m not really so sure now.

After I picked up shares of Disney, I started to think I really wanted to pick up shares of an online travel website. Tripadvisor (TRIP) was one of my favorites, and I felt that it could weather this storm. I picked up shares on April 13th for $18.01, and I added to my position on April 21st at $17.27 per share.

I was also remembering all the Corona jokes and the trend in virtual happy hours. Unfortunately, alcohol consumption often increases in these difficult times. Constellation Brands (STZ) distributes Corona beer, wine and other spirits in the U.S., so I was definitely interested in the fundamentals of this company. They looked pretty solid and the company was trading at a good price. I bought shares on April 3rd for $134.01. I also picked up shares of Ambev SA (ABEV) on April 15th for $18.01 per share for similar reasons.

In terms of retail, the landscape looked terrible. The only bright spot was the health care retail company, CVS Pharmacy (CVS). This company provides an essential service in distributing medicines, personal protective equipment, sanitation products, and a wide variety of staples and comfort foods in local neighborhoods across the country. Their ability to provide testing services and vaccinations might even become more important as this crisis evolves. I picked up some shares for an average price of $55.85 per share on April 6th.

Finally, I had a limit order in for OTC Markets Group (OTCM) for weeks. I finally upped my limit price a bit and bought shares for $26.55 per share on April 22nd. I really wanted to start a position in this wide moat financial market provide for small stocks that are traded off of the main stock exchanges. I think as this health and financial crisis evolves, many companies will find themselves falling off the Nasdaq and New York Stock Exchange and other small companies will be looking for equity investments to survive in the short-term and in the long-term many new companies will enter the public markets to obtain capital and start the recovery process.

I’m sure I’ve made some mistakes along the way, but I’m hoping that jotting down these notes of my trades now will help me remember these challenging times.  I don’t plan on picking up any additional positions, unless the market declines dramatically again within the next few months.

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