By Philip van Doorn, MarketWatch
The COVID-19 pandemic has taken the U.S. economy from near-record-low unemployment to mass layoffs and firings.
It’s too soon to predict a rebound, but there are quality companies available now at discounted prices, setting up money-making opportunities for patient investors. Michael Kagan of ClearBridge Investments provided three examples.
Kagan co-manages the $5.1 billion ClearBridge Appreciation Fund /zigman2/quotes/207774359/realtime SHAPX +0.49% . The fund’s Class A shares are rated four stars (of five) by Morningstar. ClearBridge is a subsidiary of Legg Mason based in New York with $155 billion in assets under management.
Here are the three companies Kagan discussed in detail during an interview on April 3:
|Company||Ticker||Total return - 2020 through April 2||Total return - 2019||Total return - 3 years|
|TJX Cos.||/zigman2/quotes/203136811/composite TJX||-33%||39%||10%|
|Medtronic PLC||/zigman2/quotes/206816578/composite MDT||-24%||27%||14%|
|Ball Corp.||/zigman2/quotes/209031515/composite BLL||-4%||42%||74%|
‘Given the implications for small business, color me skeptical about us being at a bottom.’
Michael Kagan, portfolio manager at ClearBridge Investments
Kagan was quick to say he thought investors were going to see another significant decline for stocks.
“Compared with previous recessions, this is a mild decline for the stock market,” he said. If you look back to the end of 2018, the S&P 500 Index /zigman2/quotes/210599714/realtime SPX +0.56% is up slightly, with reinvested dividends. “Given the implications for small business, color me skeptical about us being at a bottom,” Kagan added.
Here are his comments about the three companies listed above:
TJX /zigman2/quotes/203136811/composite TJX +1.85% operates T.J. Maxx stores, along with Marshalls and Home Goods. It is the largest off-price retailer and “is the only one of the top 10 retailers that has been adding footage in recent years,” according to Kagan. “It’s one of those companies that gets expensive when everyone is enthusiastic about it. Every so often the market gives you and opportunity to buy it, and this is one of them.”
He called Ross Stores /zigman2/quotes/202639496/composite ROST -0.74% and Burlington Stores /zigman2/quotes/203203718/composite BURL -1.09% “imitators” of TJX, but said he was impressed with both, especially Ross.
Getting back to TJX, Kagan said the company turns over its retail merchandise 11 times a year, “unlike most traditionally retailers, who change inventory twice a year.” He added that TJX’s buyers are “fantastic” at making selections that bring customers back frequently to see what’s new. “You can get great brands like Prada there,” he said.
The obvious question for any retailer, while stores are closed, is how long can the company survive? According to ClearBridge’s retail industry analyst, TJX has a strong enough balance sheet to operate for 14 months “without selling anything,” Kagan said.