From the web to the pharmaceutical industry, from automation to wellness, how to invest in stocks and bonds to beat the coronavirus crisis: investment advice from analysts focuses on innovation, long term and low risk.
In the stock markets during the pandemic, the giants of the web (the so-called FAANG), the large-scale retail trade (large-scale distribution) and the pharmaceuticals were the ones who saved themselves and this will continue for a few months (see the article Anti-coronavirus companies stocks to invest in now). This was highlighted by the Mediobanca study area last week, noting how fashion, airlines and the oil sector were the most affected by the market and consumption crisis. Electronic payments are also good.
But now we are already wondering “what will the world of the economy and investments be like after the covid crisis?” and how will the economic recovery in 2021, after a year, the current one, which will mark the worst contraction of the Gross Domestic Product (GDP) since the Second World War. Investors are warned: if some economic sectors do not recover or do so with great difficulty (see the analysis Sectors and stock that will not recover after the coronavirus crisis), there will be others that will be the pillars of economic recovery and investment.
Investments and covid-19 crisis: sectors analysis and risks
Double-digit returns impossible? Not really, if you look at internet giants: Facebook, Apple, Amazon, Google, the “FAANG”. This was determined by the research by Mediobanca (italian investment bank, one of the main in Europe), which showed that, if you look at the turnover for the first three months of the current year, this is on average unchanged compared to the first quarter last year. The certainty is that the so-called “websoft” are the multinationals that grew the most, + 17.4% compared to the first quarter of 2019, followed by large-scale distribution (+ 9.1%), by pharmaceutical companies (+ 6.1%), by the electronic payments (+ 4.7%), from electronics (+ 4.5%) and from food (+ 3.4%).
On the other hand, Mediobanca highlights, the sectors most affected by the coronavirus crisis are aircraft manufacturers, less 22.1% compared to the first three months of 2019, followed by the energy sector, less 15.9%, and by fashion, less 14.1%. And in the latter sector, the impact of the covid-19 pandemic is already making itself felt, just think of three ninety pieces in the United States that went belly up, that is, J.Crew, J.C. Penney and Neiman Marcus.
Then there is another aspect to consider. As Schroders multi-asset analysts Ben Popatlal and Dorian Carrell point out, “for many years, especially in Europe, the income generated by risk-free assets such as government bonds has been practically non-existent, prompting investors to move towards assets at higher risk such as equity and credit with lower ratings, in search of more attractive returns”. But taking more risks during a pandemic may not be the correct choice.
Popatlal and Carrell explain that “this problem, in the midst of the global coronavirus crisis, is going to get even worse. In the short run, for example, our profit forecasting models in the US indicate a slump in profits due to temporary business closings. We expect the scenario to be similar in the UK and Europe too”.
To protect the portfolio, therefore, it is better to focus on who is reacting better to the pandemic crisis. Or, go to the investment sectors that will be most popular in the long run.
Investment advice and strategy: focus on innovation and long-term investments
This is the case in the health and wellness sector, according to Anu Narula, head of the equity division of Mirabaud AM. “We believe that a certain attitude towards well-being is starting to permeate the awareness of the global consumer, influencing people’s daily decision-making process” explains Narula. This shift, he continues, “is driving growth in the global health and wellbeing market, which, according to the Global Wellness Institute, has become a $ 4.2 trillion industry, where personal care and beauty account for a quarter of total spending, equal to 1.083 billion dollars”. And, within the sector, Mirabaud analysts believe that there are interesting opportunities in two segments: food supplements and prevention.
The best investment strategy is to look to the long run, also considering volatility. Patience and calm, therefore. Opinion also shared by Mark Haefele, head of UBS investments, who explains how to approach the markets that will be.
“Following the crisis, companies and governments will probably try to diversify the logistics chains, bringing them closer to the national territory”, says Haefele, who thus concludes: “This trend should favor companies in the automation and robotics sector, and in particular those in automation of the warehouse, which according to our estimates undergo structural growth in parallel with the increase in online purchases”.
Economists and analysts are convinced that the Covid-19 pandemic will bring more innovation, including on the industrial processes front. And it is on this point that rational investors must look. Always with a long-term perspective.