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Feb. 11, 2020, 6:10 a.m. EST

Goldman Sachs says impact of coronavirus will be ‘limited,’ and these are the stocks to buy if it’s right

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By Callum Keown


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A worker sprays disinfectant in a subway train compartment in Beijing.

Companies, economists, analysts and investors have been trying to count the cost of the full impact of the virus as it continues to spread.

Goldman Sachs analysts said the economic impact will be limited and investors should look to cyclical and value stocks.

Goldman analysts said the virus would hit U.S. economic growth by up to 0.5 percentage points in the first quarter, but the drag would be recouped over the next two quarters and the global damage could be as low as 0.1 percentage points over the full year. “The impact of the lower global and U.S. economic activity on 2020 S&P 500 earnings per share will be limited,” they said.

“Investors who believe the economic consequences of the coronavirus will be limited should increase exposure to cyclicals and value stocks,” Goldman Sachs analysts, led by David Kostin, said in a note.

The bank’s sector-neutral dividend growth basket of 50 stocks has “declined sharply” alongside cyclicals and trades with depressed valuations.

“If fears of global pandemic are allayed, the basket should outperform,” they added.

The basket’s stocks set to outperform the most are semiconductor company Skyworks /zigman2/quotes/201417573/composite SWKS +5.82% , IT services provider DXC /zigman2/quotes/200279350/composite DXC +2.27% , hotel and casino operator Wynn Resorts /zigman2/quotes/208845907/composite WYNN +6.53% , technology company Broadcom /zigman2/quotes/200646538/composite AVGO +2.65% , and manufacturer of construction equipment Caterpillar /zigman2/quotes/203434128/composite CAT +4.78% , the note said.

Goldman analysts said barring a “significant change” in circumstances, the impact of coronavirus on U.S. equities would be focused on a select group of companies most exposed to China — including restaurant owner Yum China /zigman2/quotes/208495167/composite YUMC +0.22% and component manufacturer Qorvo /zigman2/quotes/209919828/composite QRVO +2.00% . When it comes to sectors, airlines and gaming will be the most affected, due to travel restrictions and U.S. casinos operating in Macau — particularly as the Lunar New Year is the most lucrative time for gaming, it added.

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June 5, 2020 4:00p
P/E Ratio
29.53
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1.29%
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Rev. per Employee
$402,989
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$ 18.00
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N/A
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0.00%
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US : U.S.: Nasdaq
$ 101.61
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N/A
Dividend Yield
0.00%
Market Cap
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$258,372
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$ 317.08
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Market Cap
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$1.42M
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US : U.S.: NYSE
$ 135.12
+6.16 +4.78%
Volume: 5.59M
June 5, 2020 4:00p
P/E Ratio
14.30
Dividend Yield
3.05%
Market Cap
$69.80 billion
Rev. per Employee
$526,173
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/zigman2/quotes/208495167/composite
US : U.S.: NYSE
$ 49.72
+0.11 +0.22%
Volume: 1.85M
June 5, 2020 4:00p
P/E Ratio
34.88
Dividend Yield
0.00%
Market Cap
$18.67 billion
Rev. per Employee
$18,700
loading...
/zigman2/quotes/209919828/composite
US : U.S.: Nasdaq
$ 115.67
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Volume: 1.71M
June 5, 2020 4:00p
P/E Ratio
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Dividend Yield
N/A
Market Cap
$13.01 billion
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Callum Keown is a Barron's Group reporter for the Europe, Middle East and Africa region. He writes for MarketWatch, Barron’s, Penta and Financial News.

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