The economy has never been more turbulent than following the global pandemic. GDP fell over 30% in the second quarter, blowing away historical records.
Stock market investing felt like a gamble as even established companies file for bankruptcy protection. It’s hard to know where to invest $10,000 in stocks with everything so uncertain.
However, not every company was destroyed by the novel coronavirus pandemic. In fact, many companies are on track toward record profits and market value.
If you’re seeking a safe place to store your money, here are some ideas of where to invest $10k right now. These are just four investments opportunities that have upside according to traditional valuation analysis – focusing on cash flows.
Bausch Health Upside Is 40% (Valuation)
Bausch Health (NYSE:BHC) tops our list with an approximately 40% upside using a discounted cash flow analysis, and you may not be familiar with this Canadian pharmaceutical brand.
If you are, it’s either from their former name – Valeant Pharmaceuticals – or the Bausch & Lomb subsidiary it spun off in August 2020.
Of course, it’s a different company right now (at least that’s what it wants everyone to believe) than it was when it lost 95% of its value and investor Bill Ackman was questioned by Congress.
In 2016, a damaging report showed rampant price fixing in the pharmaceutical industry. Questionable accounting practices were also revealed, hinting at a companywide culture of fraud. It wasn’t long before then-Valeant CEO and chairman J. Michael Pearson was removed from his post by the Senate Special Committee on Aging.
He’s now suing the company for wrongful removal to the tune of over $30 million, which could add to the nearly $30 billion in debt Bausch is shedding in 2020.
All the company needed was the Bausch name, and it’s returning to its core businesses of neurology, dermatology, and gastroenterology.
If shedding all nonessential businesses works out, the company stands to make back the nearly $4 billion its former eye care subsidiary brought in. Bausch is worth a fraction of what it used to be, but that means it has plenty of room to regrow.
Could Allstate Rise By 30%?
Allstate (NYSE:ALL) has about a 30% upside and is recognized across the investment world as a strong buy for the fall of 2020.
Insurance is a tough business, and tech-based startups like Lemonade are disrupting the market while traditional insurers are slow to catch up.
Allstate, however, is pushing to diversify its assets to stay ahead of both its legacy competition and fresh upstarts. This gives investors hope for the future.
We saw this in its 2017 purchase of smartphone and appliance insurer SquareTrade in 2017, along with its 2018 purchase of PlumChoice, which provides technical support and cloud services.
It also maintains strong balance sheets and is known for working with mortgage and auto insurance lenders via electronic transmission of insurance documents, saving a lot of overhead versus bulk physical mail.
These types of forward-looking steps help Allstate maintain its profitability in 2020 while others are struggling. Its income in the second quarter of 2020 generated nearly 50% higher profits than the prior quarter with $1.2 billion, despite the COVID-19 shutdowns.
Allstate’s exposure in life, health, and critical illness insurance products does give it exposure, but it has a large enough volume of policies in place across a wide enough range to withstand a period of potentially higher loss ratios.
Fewer ER Visits Helping Anthem Profit Margins
Allstate isn’t the only one making large profits off health insurance during the pandemic. Anthem (NYSE:ANTM) has an estimated 20.3% upside based on its Blue Cross Blue Shield Association health insurance offerings in 14 states.
It’s not because of the coronavirus deaths and infections themselves, but rather because patients are avoiding traditional healthcare and doctor visits in droves. Emergency room visits, for example, were down 42% in April 2020, the peak of the coronavirus crisis.
This may not be good for our overall state of health, but insurance providers no longer have to pay extravagant patient care prices set by pharmaceutical companies and hospitals.
That’s great for Anthem’s profit margins, as it reported in its Q2 earnings report that put investors in a good mood about its prospects.
Skipping elective procedures isn’t bad, but a lot of health concerns may end up worsening when left untreated. This could put insurers like Anthem in a squeeze down the road, but current profitability has a positive outlook for the near term. Of course, much of this hinges on Anthem’s commercial business.
As employers tighten budgets and cut expenses, healthcare remains a necessary expense. However, as these businesses fold due to the state-ordered shutdowns in the wake of the federal shutdown, the company has large B2B contracts at risk.
Standing as one of the only publicly traded company in the Blue Cross Blue Shield Association, Anthem is attractive for investors looking for a foothold in the sector.
Altria Group Dividend + Upside Are Attractive
Altria Group (NYSE:MO) has a 22.4% upside when analyzing its free cash flows as part of a discounted cash flow forecast.
The world’s largest tobacco company noticed trends in the summer of 2020 that halted its business declines for the past several years. It turns out the stress of coronavirus shutdowns, deaths, and stalled stimulus talks pushed people to revert to smoking in large enough numbers to be a highlight of Altria’s 2nd quarter 2020 earnings report. And the stock’s dividends have investors satisfied too.
While cigarettes long occupied a villainous throne in the public consciousness, e-cigarettes took over last year as teens began dying of popcorn lung and other terminal lung diseases. This caused some retailers like Walmart to remove vaping products from their shelves while still selling cigarettes, cigars, and other forms of tobacco.
Smoking and vaping aren’t the only vices Altria supports either – it has stakes in ABInBev, Chateau St. Michelle Wine Estates, JUUL, and Cronos Group, giving it exposure in alcohol and cannabis too.
Not resting on its laurels, the company even has an herbal tobacco vaporizer that’s a perfect median between smoking and e-juice vaping. This makes it a top stock to invest $10k.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.