Many things are uncertain, but one thing we know is that this pandemic will end someday and I believe in a bull market Promised Land on the other side of this pandemic. I think the economy will surprise everyone and boom beyond what most economists expect. We already got the bear market over with. Once we get this recession in the rear view mirror, it will be a new bull market. And it will be glorious.
But first, there are traps and pitfalls that lie ahead. Before we can wallow in the glory, we have to get through at least a few more months of serious funk.
As an investor, you may wonder whether you should play it safe or set yourself up for the coming bull market. Right now, it feels right to play it safe. But you don’t want to miss the likely rewards that lie ahead for more aggressive investors at some point in the next year or so.
Well, you don’t have to choose. You can do both. There are certain safe growth stocks that are not only terrific holdings for the ensuing volatility and uncertainty, but there are even better on the other side. These are rare have-your-cake-and-eat-it-too stocks that are ideal for this moment in time.
B&G Foods, Inc. (BGS) and Brookfield Infrastructure Partners (BIP)
New Jersey-based B&G Foods, Inc. (BGS) is an American food manufacturer that sells familiar shelf-stable and frozen foods in the U.S., Canada and Puerto Rico. In business since 1889, the company sells 50 well-known and popular food brands including Cream of Wheat, Green Giant Vegetables, Ortega, Dash, Accent, Crock-Pot and others.
As a seller of food, the ultimate consumer staple, the company has been able to generate stable earnings from which to pay a generous dividend. But the company has struggled to grow earnings. But the coronavirus changed everything.
Business is booming. During the lockdown, people have been confined to their homes and eating there. Many are stocking up on nonperishable items as they want to limit visits to the store. The new trend is right in B&G’s wheelhouse. How big of an impact is this having?
They’re killing it during the pandemic. What happens when it’s over? There is reason to believe the new habits will last. A recent survey conducted by investment firm Piper Jaffray found that two-thirds of respondents said they intend to eat at home more after the virus.
The survey also predicted a sustainable 15% lift in at-home food consumption. It suggests that, while the numbers we’re seeing during the lockdown will likely come down, a more permanent shift in food consumption is likely underway.
Who knows how long this pandemic will linger. The election could be a mess and roil the market for months. But BGS will be just fine. And when we finally get to the other side of the election and pandemic, B&G will be a much improved company with a high level of sustainable growth.
How is this playing out in the market? BGS has returned 64% YTD and 85% over the past year. You might think you missed the boat. But the stock is still cheap and selling well below its average five-year valuations. Currently 28 per share, this was a 50 stock back in 2016, and with far lower earnings than it has now.
Now let’s talk about Bermuda-based Brookfield Infrastructure Partners (BIP) who owns and operates infrastructure assets all over the world. The master limited partnership (MLP) focuses on high quality, long-life properties that generate stable cash flows, have low maintenance expenses and are virtual monopolies with high barriers to entry.
Brookfield operates a current portfolio of over 1,000 properties in 30 countries on five continents. It is well diversified geographically with roughly 25% in North America, 30% South America, 25% Europe and 20% Asia Pacific. The partnership operates four segments: Utilities, Transport, Energy Services and Data Infrastructure.
- Toll roads in South America
- Telecom towers in France
- Railroads in Australia and North America
- Utilities in Brazil
- Natural gas pipelines in North America
- Ports in Europe, Australia and North America
- Data centers on five continents
These are some of the most reliable revenue generating assets in the world. But it’s even better than it may seem. In addition to dependable revenue, of which over 90% is regulated or contracted, there’s solid growth.
The beauty of this company is that these assets earn reliable income in any economy, even the pandemic economy that has thrust the world into one of the most severe economic downturns ever. The company also forecasts year-over-year earnings growth for the full year.
It’s a great stock to own through the continuing turmoil and uncertainty. But, on the other side of the election and the pandemic, the stock should be even better. It has been able to make great acquisitions on the cheap during the recession that will boost earnings in the quarters and years ahead. And the environment is providing a huge tailwind.
The G-20’s global infrastructure hub estimates that a global investment of $94 trillion will need to be invested in infrastructure improvements over the next several decades. The private sector is an essential part as governments don’t have all those trillions lying around. Limited partnerships, giant sovereign-wealth funds, multilateral and development-finance institutions are raising billion of dollars a year for infrastructure investments. It’s almost becoming a new asset class.
Since its IPO in 2008, BIP has returned over 600% (with dividends reinvested). That’s about three times the return of the overall market during the same period. And there is good reason to believe the future will be even better than the past.
If you’re looking past the recession, these are two stocks with promise.