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How I’m investing in shares because of the coronavirus

The share market is finally reflecting the rising risk of global economic disruption because of the coronavirus.

The ASX 200 (ASX: XJO) is down another 1.6% at the time of writing and the S&P 500 (INX) fell 3.3% overnight.

Where are we supposed to invest in times like this? Gold is meant to be a protector in times like this, but even gold miners like Evolution Mining Ltd (ASX: EVN), Resolute Mining Limited (ASX: RSG) and Northern Star Resources Ltd (ASX: NST) are down over 2% so far today.

The one area seeing stability is bonds, Vanguard Australian Government Bond Index ETF (ASX: VGB) and Vanguard Australian Fixed Interest Index ETF (ASX: VAF) are both slightly in the green.

Where I’m looking to avoid

Hopefully there is no large economic impact from the coronavirus, but the longer the spread continues the more likely it is to cause a hit to the economy.

It’s not the time that I want to be holding heavily indebted, cyclical businesses. These types of businesses could need to raise capital at beaten-up prices, or may not survive a relatively short amount of disruption to their revenue. 

It’s the profitable companies that have strong balance sheets with net cash positions that will be well positioned to ride through any problems.

Where I’m looking to invest

Altium Limited (ASX: ALU) has a very strong balance sheet with no debt. It’s certainly not cheap yet, but the valuation keeps getting better and I may be interested in buying more if it gets to $30 or below.

Some of the shares that I’m looking at have seen their share prices fall, they have good levels of cash on hand for protection & opportunities, good records, diversified holdings and quality management. It’s shares like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), WAM Microcap Limited (ASX: WMI) and Magellan Global Trust (ASX: MGG) that could be very well placed to take advantage of those opportunities.

The coronavirus is a one-off event. Whether it’s two months, four months or even more, eventually this storm will pass. So, the shares that are particularly suffering like Webjet Limited (ASX: WEB) and Qantas Airways Limited (ASX: QAN) could be the ones to bounce back the strongest when the worst has passed.

Foolish takeaway

I think the next few weeks could prove to be a much better time to buy shares than we have seen over the past year. I’m getting ready to buy some shares, but I also expect to see more volatility over March and perhaps into April if the coronavirus isn’t contained by then.

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Motley Fool contributor Tristan Harrison owns shares of Altium, MAGLOBTRST UNITS, WAM MICRO FPO, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of Altium. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.