By Jeff Reeves, MarketWatch
That strategy may work as a swing trade, as Schlumberger is up about 60% from its March lows and Haliburton has surged almost three-fold from the low $4 range to back over $12 a share. However, depending on this run to continue seems a dangerous strategy.
Part of the coronavirus response, particularly in Europe , has been tied to "green" stimulus efforts and not simply a bailout of the old economy. Furthermore, countless think pieces have been written about how the pandemic has once and for all established telework as a permanent model . And don't forget that electric car adoption continues to steadily kill gasoline demand,.
It's hard to find any certainty in the energy sector these days as a result of these trends. But Cheniere Energy Partners /zigman2/quotes/202508290/composite CQP +1.80% seem to hold less risk than most right now. Cheniere is a midstream natural gas player, a glorified "toll taker" that charges to transport and store natural gas, which is seen by many as a bridge to a clean energy future thanks to its low cost and comparatively cleaner status. There's admittedly not a ton of growth in this stock, but there's reliability — and a generous 7.3% dividend as a hedge.
4. Buy Visa, not Wells Fargo
The stock market rebound is partly due to optimism that the admittedly steep job losses this spring will quickly be reversed as the U.S. economy begins to reopen in earnest. So what better way to play this recovery than via financial stocks?
Wells Fargo & Co. /zigman2/quotes/203790192/composite WFC +1.37% has started to attract some attention among bargain hunters, as the $110 billion bank looks to turn the page on past missteps over the last few years with a new CEO and new structure , including a dedicated focus on small businesses. Trading at less than 70% of its book value, this stock seems quite interesting to many right now.
But the past scandals of Wells are only the beginning of what should worry investors. A bigger challenge is the wholesale decline of traditional banking in the digital economy. If investors really want a recovery play tied to spending and lending, they should look at payments giant Visa Inc. /zigman2/quotes/203660239/composite V +0.88% as a true financial leader of the future.
Remember, Wells Fargo has seen its revenue grow by an average of about 2% over the past five years — a sign that there's more going on here than just headlines about fake accounts. Over the same period Visa's revenue growth rate has topped 20% on average. As the push towards cashless and mobile payments continues, this processor will continue to thrive. As the economy revives, more payments means more profits for Visa.
5. Buy Nike, not Campbell Soup
As quarantine life forces people to cook at home, shares of Campbell Soup Company /zigman2/quotes/202107764/composite CPB +1.60% have surged an impressive 25% from the March lows. Yet this short-term trend can't counteract the longer-term challenges that have been holding this stock back — namely, an aging brand lineup that doesn't connect with younger consumers at all.
Campbell Soup has made a few big moves in the last year or two, including unloading international businesses to pay down debt and fund the acquisition of North American snack food brand Snyder's-Lance. But that's not a long-term plan for growth, and neither is depending on coronavirus to keep people buying your products instead of dining out.
In stark contrast to Campbell is Nike Inc. /zigman2/quotes/203439053/composite NKE -0.42% , a sports behemoth with one of the most valuable brands on the planet. The stock not only has a powerful name but a powerful and growing online presence that allows it to sell directly to consumers and enjoy juicy margins. When you consider that Nike’s March earnings report boasted 36% year-over-year growth in its digital sales model, it's easy to understand the potential here.
Remember, Campbell Soup has suffered chronically shrinking revenue in the past few years. Unless you expect coronavirus to last or condensed soup to make a big comeback, then it may not be wise to favor this stock over a growing consumer brand with a decent e-commerce footprint.
Jeff Reeves writes about investing for MarketWatch. He doesn’t own any of the stocks mentioned in this article.