4 Stocks to Buy to Profit From This Panic

The Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger -- but recognize the opportunity. --John F. Kennedy Markets have seen their first significant selloff since last summer over the past week. The main trigger seems to be the coronavirus in China, which has already killed over a hundred people and spread to other countries. The outbreak has also caused Chinese authorities to quarantine several cities -- including the epicenter of Wuhan. This new scare also gave investors an excuse for a bit of overdue profit taking. All three major stock market indexes lost more than one and half percentage points on Monday, as confirmation of more cases in China over the weekend spiked additional worries for investors. Equities staged a decent rally on Tuesday. Particularly hard hit have been entities with close ties to Chinese demand, such as Macau casino operators like Las Vegas Sands and Wynn Resorts . Travel concerns like airlines and cruise lines have also taken their lumps, as has the entire energy sector thanks to a $10 a barrel decline in oil prices over the past three weeks. We have seen this movie before. The SARS outbreak of 2003 immediately comes to mind, as it revolved around another coronavirus, as did the MERS scare in Saudi Arabia. We even had a mini-Ebola panic in the summer of 2014, as one person brought back the disease from Africa to Houston. These sort of panics can be turn out to be lucrative opportunities for investors. Here are some things I have learned over the years around these events. First, this sort of news always triggers huge gains in some of the small vaccine makers. Look at the big weekly rise in Inovio Pharmaceuticals through Monday's close as one example. These rallies are almost never sustainable, so one should not chase them. If lucky enough to have caught these rises, I would be taking profits. Airline stocks tend to sell on this sort of news and then bounce right back up when the all-clear is sounded. I have added some shares to my stake in American Airlines this week. American has little exposure in China and to Asia overall. The company should also benefit from the fall in jet fuel prices. The company's capex should fall substantially over the next few years and it should also pay down a good chunk of debt, lowering interest costs as well. I have added to PBF Energy this week on the huge weakness in energy. The stock is still seeing big insider buying by a beneficial owner and refining will be less impacted by the fall in oil prices than the E&P space. The stock has fallen some 15% over the past week. I also did a few buy-writes on the Energy Select Sector SPDR ETF using just out-of-the-money calls for good measure. It is too early to go whole-hog on any of the Macau players, as they will be directly hit until this latest outbreak is contained. However, I bought a few shares in Las Vegas Sands on Tuesday. Unless this outbreak turns out to be a major pandemic, it is hard to see business being hit by more than a month or possibly a quarter in a worst-case scenario. With the recent decline in the stock, the shares yield nearly 5%, which could serve as a floor. And those are some quick thoughts on the latest panic du jour for the markets.

4 Stocks to Buy to Profit From This Panic

These sort of panics can be turn out to be lucrative opportunities for investors.

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