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The gathering storm: should I ditch all my shares?

According to the BBC last Thursday, UK health officials are moving towards the second phase of their response to the COVID-19 coronavirus outbreak – the delay phase.

Citing chief medical adviser Prof Chris Whitty, the BBC reported that the government will aim measures at slowing down the spread of the virus. Although what those measures will be remains unclear (at least to me!)

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Economic disruption

But one thing seems certain: we’re going to see a lot more economic disruption before COVID-19 eventually fades from public consciousness. This thing looks like being a long job. And casualties such as Flybe, which plunged into administration last week could start piling up.

Indeed, one of the special measures the media and others are talking about is that the government could restrict usage of public transport in an effort to control the virus. That may not happen, of course, but if it does, several publicly-quoted businesses could suffer badly.

For example, I wouldn’t want to be holding shares such as those of Wizz Air, Go-Ahead, Dart, National Express, easyJet and Stagecoach. Those stocks have already dropped, maybe with very good reason and not just because of investor sentiment. It seems to me that all firms in the travel sector face the real possibility of significant disruption to their businesses in the months ahead.

If you are a contrarian-minded investor, you could be interested in scouring the sector for potential bargains, but I’d rather look elsewhere. And my main area of interest would be the shares of companies that I consider to have a high degree of defensiveness in their businesses. In other words, for me, they need to be cash-generative and less susceptible to the ups and downs of the macro-economy than more cyclical shares may be.

Some of the shares I like

I’m thinking of companies such as Unilever, SSE, Smith & Nephew, Sage, Reckitt Benckiser and GlaxoSmithKline to name but a few. I’d keep a close eye on companies like those and be ready to pounce at opportune moments, such as if we see another general downwards lurch in the markets.

One way of thinking about such investments is by leading with the shareholder dividend. I’d ask myself whether it’s sustainable and whether it has the potential to keep rising a little each year. So I’d be considering things like the strength of the incoming stream of cash flow and how much debt the company carries. Indeed, the interest on borrowings is in direct competition with the shareholder dividend for the company’s cash flow!

Am I worried about COVID-19. Yes, on a human level, I am. But I’m still investing and haven’t yet succumbed to the temptation to stock up with extra food. Although I did linger longer than usual at the baked bean shelf on my most recent visit to the supermarket!

Are you prepared for the next stock market correction (or even a bear market)?

It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.

But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?

Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!

It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...

It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.