What would be in your pandemic fund?
The magnitude of the financial crisis caused by the COVID-19 pandemic has taken the whole world by surprise. Markets across the globe suffered their worst single day falls in decades as the whole world ground to a standstill. Who would have though only a month ago that whole nations across the globe would be placed in total lockdown?
It’s inevitable that such drastic measures would put pressure on multiple sectors of the economy. Naturally, airlines and other companies in the leisure and travel sectors have been hit the hardest as millions have had to cancel planned holidays and postpone flights. Equally, it’s no surprise that restaurants, cinemas and other entertainment venues have been pushed to the edge of existence as everyone stays at home.
The implications of the lockdown for economies are wide-ranging and devastating. But while headlines tend to focus on the losers from this pandemic, there are in fact a number of winners. If you were to create a fund to weather future pandemics, these are the companies and sectors you would want it to invest in.
According to ACI Worldwide, e-commerce is seeing a massive boom as a result of people being locked indoors with no way to spend their money on the high street. In March, transaction volumes in the retail sector jumped 74% compared to the same time last year.
Online retailers have seen a rise in transactions across the board, with home furnishings, DIY products and gardening essentials all particularly popular. Transaction volumes in this area are up 97%, 136% and 163% respectively, as the UK embarks on a massive nation-wide home improvement project.
Unsurprisingly, online gaming has also seen transaction volumes nearly double in March compared to the same time last year, as millions of Brits dust off their PlayStations and stock up on enough games to get through the open-ended lockdown.
Equally, Netflix is already experiencing higher app downloads in areas hit the hardest by the coronavirus crisis. After all, this is a chance to catch up on all those TV shows none of us had time to watch when we could go out and see other humans.
Although Netflix did experience a share price fall in the first half of March, at $370 its share price is up 24% from the trough on 16 March, and year-to-date it is one of the few stocks in the black with a 12% rise.
With many vulnerable and sick people unable to leave their houses and forced to resort to food delivery, demand for this service has exploded. Anyone living in Britain knows that most supermarkets have been completely unable to cope with this onslaught.
Nevertheless, Ocado has been one of the winners in this pandemic, with its share price jumping 22% from its lows on 12 March. Other online food delivery companies, such as Deliveroo, as well as meal kit companies like HelloFresh and Home Chef, also stand to benefit where supermarkets are struggling.
Toilet paper makers
As surprised as I still am by this, for some reason people have been sweeping toilet paper off the shelves ever since the pandemic hit. Toilet paper makers, such as Georgia Pacific which makes Angel Soft and Quilted Northern, have been inundated with orders.
I will never truly understand why everyone feels they are suddenly going to run out of toilet paper in particular, but there it is: a good investment choice during a global pandemic.
I’m convinced it won’t be long until someone launches a pandemic protection fund to help investors navigate future pandemics, which lets face it may well come more often the future. What else would you expect to see in one of these funds?