This week, we’re in the teeth of the earnings announcements for the quarter ended March 31. So far, stock price reaction has been muted even for miserable reports and weak guidance for the June period and beyond. The truth is that no one knows what’s going to happen as businesses reopen in the U.S. If you’re a digital company, you may be okay. If you’re an analog firm — that is, you heavily depend on foot traffic — you may be screwed even after COVID passes. Do you remember my last update, posted last week; A Recent Look At Technology Companies And The Stock Market By Paul Meeks, check out that article to learn more about American Business 2.0
I’m blessed to be a technology investor who’s squarely in the digital camp. I’ll repeat this comment although I sound like a broken record: I like my sector here. I feel as strongly about its fundamentals as I did riding the Internet wave during the glory days in the late 1990s. We may be better positioned now because the earlier era featured too many crappy companies that should have never been brought public. I think that it’s easier now to separate the wheat from the chaff. But, as always, it’s a stock-pickers game. Even some technology companies aren’t suited for the post-COVID world, so they should be avoided.
I’m encouraged by the market’s continued rebound — my technology mutual fund is even up in 2020 — but I’m still worried that the consensus view that our economy will rebound so quickly and strongly later this summer and into the fall is wrong. Other countries have gone back to work, but their economies are still limping along. I know that the market is a discounting mechanism, so it doesn’t matter as much as what’s happening today as what the environment will be in six months. The trouble is that I’m not confident enough in the outlook for the rest of 2020. In the meantime, I encourage investors to hold extra cash and continue to digitize your book by repositioning your portfolio to embrace American Business 2.0 better because I think that there’ll be permanent changes to the landscape.
Stay tuned for my next post because by the end of this week all of the major technology companies, including Facebook (FB), Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), and Amazon (AMZN), report their quarterly financials and should provide guidance for the rest of the year.