The coronavirus may be grinding the world economy to a halt, but of Wall Street’s most well-known long-term bears, David Rosenberg, is striking a more positive tone.
“There are some segments of the market that I actually really like,” Rosenberg said, pointing to those corners of the market that offer opportunity in the form of dividends and strong cash flows.
“I want the yield,” Rosenberg continued. “So, I like utilities. I like telecom, at least the ones that have financial depth. I actually like residential REITs. I still like consumer staples and I barbell that with gold.”
But beyond that, the former Merrill Lynch chief economist also named two well-known stocks that he likes now.
Rosenberg argues that Microsoft (NASDAQ: MSFT) “has almost become a utility.”
“You can look at Amazon (NASDAQ: AMZN) [in the] same sort of way,” the economist added. “There are some companies here that you would think of as being cyclical in orientation, but actually emerged here as things that we need.”
The coronavirus is, in effect, reshaping the economy and accelerating trends that greatly benefit both stocks. As employees shift to working from home amid the pandemic, and shoppers shift to buying almost exclusively online, both Microsoft and Amazon have become purveyors of essential goods and services in a world of remote everything.
Last week, Microsoft disclosed that in April it saw a peak of more than 200 million Microsoft Teams meeting participants in a single day, generating more than 4.1 billion meeting minutes. The Teams app also now boasts more than 75 million daily active users. And Amazon, for its part, reported a massive surge in grocery sales last quarter as the pandemic accelerated the rise of e-commerce.
Microsoft CEO Satya Nadella put it best when he said last week while summarizing the tech giant’s latest quarterly results, “As COVID-19 impacts every aspect of our work and life, we’ve seen two years’ worth of digital transformation in two months.”
And this digital transformation is reflected in both companies’ stocks, with both up by double-digits since mid-March. Since the World Health Organization declared COVID-19 a global pandemic on March 11, Amazon shares are up 30% and Microsoft is up 19.5%.
But even with Rosenberg softening his tone and turning bullish on these two stocks, he still says the economic recovery following the global shutdown will likely be a long and rough road.
“It’s reasonable to assume the eye of the storm is this quarter, and that we’re going to get a recovery in fits and starts probably for the next year,” Rosenberg warned. “It’s going to be a very feeble recover, and I think what happens is the market will run ahead of itself.”
However, there is one thing that could turn Rosenberg bullish on the market in an instant: a vaccine for the deadly coronavirus.
“This big bear would turn bullish in a heartbeat if a vaccine were right around the coroner,” he said. “We get a vaccine, it’s a total game changer.”