Investing

Worried About Coronavirus? 5 Stocks to Buy With Zero China Exposure

Back when Saturday Night Live was in its heyday, and arguably much funnier, the late Gilda Radner played a character called Rosanne Rosannadanna, who would lament and comment on current situations, both locally and nationally. Her go-to phrase was “It’s always something.” Long-time investors are well aware of that, and were reminded last week after the news of the latest coronavirus outbreak in China started to hit the tape.

Coronaviruses are a group of viruses that cause diseases in mammals, including humans, and birds. In humans, the virus causes respiratory infections that are typically mild, but in rare cases they can be lethal. In cows and pigs, they may cause diarrhea, while in chickens it can cause an upper respiratory disease.

Due to the spread of the virus, China is all but locked down now, and the government has halted stock trading and extended the lunar new year celebration from January 30 to February 2. Reports have indicated that a lockdown now affects 56 million people, and it may have come too late, which could make the situation worse.

One thing is for sure, investors concerned over the potential fallout may want to move to shares of companies with very little or no exposure to China. We found five that make sense now, and all are rated Buy at Merrill Lynch.

Allegiant Travel

This low-cost carrier flies to many cities, but none of those destinations are in China. Allegiant Travel Co. (NASDAQ: ALGT) has a unique business strategy: flying where other airlines do not. The company connects 136 city-pairs and typically flies each leisure route only a few times a week, using older planes with low capital costs. An early unbundler, the company generates more fees per passenger than any U.S. airline. Allegiant’s largest market is Las Vegas, followed by Orlando and Phoenix.

The company recently announced the largest service expansion in its history, which includes 44 new nonstop routes, including 14 routes to three new cities: Chicago, Boston and Houston. This major addition to service is driven by Allegiant’s goal of connecting leisure travelers in underserved cities to popular destinations around the country. Most of the 44 new routes are non-competitive, with no other airline providing service between those airports.

The Merrill Lynch price target is $197 for the shares, while the Wall Street consensus target is slightly higher at $198.78. The stock was last seen trading at $166.69 per share.

American Electric Power

Merrill Lynch recently add this to its US 1 list of top stocks. American Electric Power Co. Inc. (NYSE: AEP) is one of the largest electric utilities in the United States, delivering electricity to more than 5.4 million customers in 11 states. It ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the United States. It also owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

The addition to the US 1 list was somewhat of a contrarian call as the utility sector as a whole has had a huge run over the past few years, as interest rates have plummeted again. The Federal Reserve went back to cutting rates and using “short-term” quantitative easing.

American Electric Power offers shareholders a solid 2.75% dividend. The $106 Merrill Lynch price target compares with the $99.80 consensus price target, as well as the most recent closing share price of $101.78.

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