The If-Then Conditional Statement

     In mathematics, a conditional statement is a form of logic that forms a hypothesis followed by a conclusion. Over my years of investing I have developed several if-then statements that could have yield big gains in one or more stocks. An example from long ago was that a particular tech company was experiencing large losses in a division outside of their main product line. My conditional statement read like this; "If company X sells off their PC division, then their earning and stock price will rocket up". I owned the stock but could have made lots of money by loading up on company X. I bring this up because at this time an opportunity may exist that could make some astute investors very wealthy. The U.S. economy is in the worst shape in its entire history by almost any measure, and some experts are saying that it is going to get worse before it gets better. We are experiencing the worst health crisis in over 100 years and the economic fallout may be even more damaging because of the corona virus. In this modern age of technology and medicine, we have become helplessly victimized in the space of just a couple of months. So what is this opportunity? What will return us to a more normal way of life where we can assemble in large crowds, board airlines, take cruises, and enjoy eating and drinking in restaurants again? In my opinion the answer lies in a safe and effective vaccine. I am looking at some of the hardest hit industries and setting a price that I am willing to pay for their stock. Before the latest earnings reports, some of the cruise lines, airlines, and gaming stocks were selling for bargain prices. Therefore my conditional statement looks like this; "If a vaccine is available this fall, then these companies will return to their previous valuations". I have counted over 10 large companies racing to develop this vaccine, with some in late stage large scale trials. I am betting that one or more will emerge with an effective vaccine. While any one of the pharma companies that develops the vaccine will be hailed as a champion, I have doubts about the financial gains such a cure will bestow on them. Holding all of humanity hostage for financial gain would be a reputational risk too large for most any company. Therefore the real beneficiaries will be those companies within industries hardest hit by this pandemic.

Light My Fire

     "Light my Fire" was recorded by the Doors and sung by Jim Morrison in 1966. It was released as an Album in 1967 and the single soon turned gold in Sept of 1967. The song was rerecorded by Jose' Feliciano in 1968 and it too rose to #3 on the Billboard Hot 100 chart. I've been thinking about this song because there are some stocks I own that need to have a fire lit under them. They just can't seem to get any traction in this hot market. One of these is Cisco Systems (CSCO). I have owned this stock for a long time but I will not give up on it. It is a core holding for many large mutual funds and ETFs. CSCO currently sells for about $46.5 and trades at a reasonable multiple of about 17X. It pays a decent dividend which yields over 3%. Cisco produces switching equipment for the communication industry and is recognized as a supplier of quality and reliable goods. They also are into cyber security software and video conferencing technology which is in great demand during this pandemic. One competitor in this space is Zoom Video  (ZM) which pays no dividend, sells for $276/share and trades at an astronomical 1525X earnings. Many people are using the free version of Zoom which from what I am hearing is a very good product. The hope is that at some point businesses will convert to the paid version and Zoom will increase profits  which should lower the PE ratio. The market cap for ZM is about 78 billion while CSCO's is 197 billion dollars. Remember, the market cap is the total number of shares times the share price. Cisco's market cap is supported by many years experience in telecommunications, software, hardware and security software. while Zoom's market cap is supported by a very bloated stock price. Who will win this video conferencing war? I wish I knew but I intend to hedge my bet on Cisco by picking up some ZM at a lower price in the future. This same scenario is playing out in other industries such as pharma, food, fitness, and many others where young upstarts threaten older, established companies. In my effort to concentrate my holdings to some low risk investments that pay rich dividends, I want the companies I pick to stay relevant even when this pandemic ends. Therefore, I will be adding to my position in Cisco in the hopes that some of the heat from the competition will ignite Cisco's stock.