The COVID-19 pandemic is likely to have profound and long-lasting effects on the global economy. Who is best positioned to benefit from the changes to come?
As both the world and the stock market are hit hard by the COVID-19 pandemic, it is easy to give in to the ambient sense of doom and gloom, particularly if one consumes too much media. However, recessions come and go cyclically under even normal conditions.
Added to that is the adjustment currently underway in the stock-markets is arriving at the end of the longest-running bull market in history, and it is not so shocking. In this article, we will be looking at three sectors that stand a chance of booming in the wave of relief that will come when the virus subsides.
Vaccinations: order of the day
Stocks like Medtronic (NYSE: MDT) which are manufacturing lifesaving equipment such as ventilators are doing very well at the moment. But when the worst of the crisis passes, the focus of our newfound awareness of the importance of public health is likely to shift to the preventative side of the story. COVID-19 will only stop being a danger then herd-immunity emerges. That means that 60% of the population requires resistance, either by infection or by vaccination. Whilst scientists agree that it could be 18 months before a vaccine is ready, current conditions more or less guarantee a huge demand for the vaccine when it will be ready, never mind what the anti-vaxers might say.
Novavax (NYSE: NVAX) is working in partnership with the University of Oxford to develop a vaccine and has just been awarded $4 million by Coalition for Epidemic Preparedness Innovations (CEPI) to accelerate the development of a vaccine for COVID-19. These are very encouraging signs, and unlike other major producers of vaccines, Novavax is not part of a major conglomerate. Some of the biggest producers of vaccines are subsidiaries of GlaxoSmithKline, Sanofi, Pfizer, and Merck & Co., but the scope of their operations and portfolio of products means that conglomerates like these are exposed to a broader range of market forces that a specialist company is not.
Companies that make working from distance easier are likely to be big hits on tomorrow’s stock-market, and indeed, many are bucking current trends and are full-steam ahead. Slack (NYSE: WORK) was already present in many offices before the pandemic. Zoom (NASDAQ: ZM) has quickly entered the lives of millions, establishing itself as the go-to provider of quality video-conferencing tech. One might be tempted to look at their success as a flash in the pan, so to speak. However, even before the outbreak, employers were under pressure to allow their employees to work from home. Now that the bulk of the workforce is experiencing just how many meetings can, in fact, be emails, this pressure is likely to grow and become a cultural norm, making remote working and project-management tools more essential than ever.
Furthermore, we cannot ignore the potential for mutations of the virus or future outbreaks before a vaccine is mass-produced, making working from home a feature of our lives for the foreseeable future.
Travel, a human instinct
Tourism is probably the worst-hit sector in the current crisis. The International Air Transport Association (IATA) has claimed that only 30 of the world’s 700 plus airlines are capable of weathering the storm that COVID-19 represents. Therefore, it’s unlikely to look like a hot investment at present. Except for the fact that people love to travel, and once the crisis passes, it is probably one of the first things they will want to do after being cooped up so long.
Many businesses may in the meantime collapse, many hotels, airlines and so on. Those airlines such as United (NASDAQ: UAL), Delta (DAL), have signaled that they possess the cash reserves and have taken the actions necessary to weather the storm, will find themselves in a strong position, relatively free from competition once the pandemic subsides.
The Marriott (NASDAQ: MAR) hotel group is likewise in a strong position to bounce back. A very profitable business ($1.90 billion in 2018), the group also has a strongly diversified portfolio of accommodations, giving it access to all sections of the market.
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