Safe stocks to own in a coronapocalypse

Currently, the stock market is in a weird situation where most stocks have exposure to the systemic risk of COVID-19.  As it is highly likely that social distancing will become the new norm, a long list of businesses will be badly hurt: airlines, restaurants, movie theatres, music events, conventions, lenders, etc.

If the COVID-19 situation drags on for 3+ years, you don’t want your portfolio to blow up because of it.  It would make sense to put a good portion of your portfolio into less risky investments that will survive.  Because individual stocks can blow up, it is a good idea to diversify (e.g. 10-30+ stocks).  It’s also a good idea to avoid owning too many stocks with similar risks (e.g. stocks in the same industry, too much COVID-19 risk, etc.).


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Visa: A wonderful business with a strong moat

Visa is basically a technology company in the payments processing industry.  Network effects and economies of scale contribute to the duopoly enjoyed by Visa and Mastercard.  Both companies should grow earnings as they are toll bridges on the secular trend towards electronic payments.

Unfortunately, the valuation remains a little high so this is not one of my best ideas.

Adjusted TTM P/E: 23.47 (source: Yahoo Finance / Capital IQ)
Forecasted earnings growth: “Mid to high teens” (source: Q3 investor presentation)

*Disclosure:  Long Visa.

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Digital River (DRIV) and payment processing (V, MA, GOOG, EBAY)

Digital River is a company that offers:

  1. Payment processing.  For (very) small software vendors such as myself, Digital River competes with Paypal (owned by Ebay), Google Checkout (now Google Commerce), and others.
  2. E-commerce / online store.  This relates to automatically letting the user download the product once payment is received, product updates, etc. etc.  I use E-Junkie for this service.

Digital River has a lot of unhappy customers because it was upselling its customers’ customers.  The software vendors are unhappy since they can’t opt out of the upselling (nor do they profit from it) and some of their customers are turned off by the upselling practices.  Digital River doesn’t seem to understand its software vendors and has a terrible reputation among them (Google around… here is one example).  I will never do business with Digital River as a software vendor.  And I wouldn’t go long the stock.

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