U.S. Bancorp (USB)
U.S. Bancorp is down 38% year-to-date as a heavy reliance on mortgages and wealth management have led to the bank being one of the worst performing large cap banks in the S&P 500. U.S. Bancorp is the fifth-largest U.S. bank and is well capitalized with a CET1 ratio of 11%. 

While home buying and mortgage application understandably dropped sharply in March, the MBA US Purchase Index has already recovered to above 2019 levels. Wealth management now accounts for roughly 15% of U.S. Bancorp’s revenue. This creates sensitivity to global equity markets, but as the S&P 500 and Nasdaq are now both positive on a total return basis for 2020, we believe this will boost earnings for the second half of 2020.  We believe 4% dividend is currently safe, which adds to the long-term benefit of owning USB.

Tyson Foods, Inc. (TSN)
Tyson Foods is down 33% in 2020, as food service company demand has shrunk and contaminated hog farms were forced to terminate product.  In the long run, we believe overall meat consumption should not be meaningfully impacted by Covid-19. We expect 2020 earnings to be $4.50, and at 14.50 times forward earnings, we see Tyson as a tactical relative value investment. Long-term, we believe that the commodity-based meat industry will continue to see margin pressure, and therefore, we would buy Tyson as a short-term recovery play.

With the recent recovery in the S&P 500, we believe that the overall market has become overvalued, and it is important to be aware that not all companies will recover as the economy recovers. Consumer behavior has drastically changed over the last few months, and many companies will be forced to close their doors. However, we believe these five companies have stable business models and will recover quickly as the economic threat of the pandemic begins to fade.

Gregory Hahn, CFA, is president and chief investment officer at Winthrop Capital Management in Indianapolis.

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