Weekend thoughts: be careful out there

Just a very short (and unoriginal) weekend thought: be careful out there.

I don’t just mean this for the stock market (though it’s been a pretty brutal few months, so I guess I mean it for that too!); I just mean this for your general life. COVID is running absolutely rampant right now. I live in NYC, and on Tuesday / Wednesday my wife and I were texting friends to make plans for the weekend. By Thursday, I had no fewer than six friends text me back “hey, I’m out this weekend; I just tested positive for COVID.”

Fortunately, all of my friends are young and vaccinated, so they’re all experiencing very mild symptoms and will be fine in no time. But it’s crazy how quickly COVID is currently spreading. We’re not going back to March 2020 again; we’ve got vaccines plus lots of natural immunity and treatments for COVID…. but the current environment is giving off slight March 2020 vibes. Consider:

• Hospitals across the country are filling up again.

• On Thursday, everything was normal for the Rockettes. Friday morning, they cancelled all four of that day’s shows…. by Friday afternoon, they cancelled the rest of their holiday season.

• Sticking with NYC, dozens of restaurants are closing because of COVID outbreaks in their staff.

• Turning to sports, it’s a minefield. The NFL is delaying games, the NHL is playing some games without fans, and so many NBA players are testing positive that the league is having to enhance their health and safety protocols.

Again, this isn’t March 2020. The world isn’t going to shut down, and I am very hopeful we won’t need to start stuffing bodies into refrigerated vans again…. but it’s bad right now and the next few weeks are probably going to get worse. So, please, be careful out there. Go get vaccinated / boosted if you haven’t already. If you have, no need to stop living your life, but you may want to avoid big crowds in the near future. Personally, I’ve decided I’m still going to the gym (for now), but I’m not going into my office this week and I may make the ultimate sacrifice and wait to go see the new Spiderman movie until cases counts come down or it’s on streaming services (I know; I’m a hero. I’m surprised they haven’t cast me into the MCU at this point).

Anyway, the most important takeaway from this post is “be careful…..” but this substack is called yet another value blog, and I can’t help but talk about value real quick here. Honestly, I’m seeing a lot of it. The indices haven’t moved much over the past few months (as I write this, the Russell is down ~3.5% over the past three months and up ~10% YTD), but underneath the hood there is absolute carnage in the markets. Just about anything in person / travel related has been hammered recently. I just through the first ~five travel / retail tickers that popped into my mind in the chart below; obviously not systematic but this is what I’m seeing across the board. Just pure carnage.

Personally, I’d suggest that carnage represents (potential) opportunity. Yes, the near term outlook for a lot of these businesses is much worse than it was pre-Omicron….. but I doubt the medium to long term outlook for any of these business has changed at all. Heck, if you believe the goldilocks scenario that Omicron is super transmissible but much less deadly so that Omicron gets us to herd immunity without killing huge swaths of the population, then you could argue Omicron has actually improved the medium to long term outlook for these business. And, in general, anything that was affected by COVID has already raised plenty of capital, so they have the firepower to make through a rougher near term environment and get to that medium / long term outlook without having to destroy their balance sheets to get there.

I’m not saying all of the stocks that have been hammered by Omicron fears in the past few months are bargains….. but I do believe that the current environment has likely created a lot of opportunity if you’re willing to flip over a few rocks and find businesses with a little bit murkier short term outlooks that still look cheap on the medium / long term.

Stay safe out there!