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How to benefit from an unpredictable market

May 20, 2020
Blake Reid

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How to benefit from an unpredictable market

COVID-19 has not only caused fear, shock and volatility to rip through the market, but has also pulled the carpet out under most businesses. Many, if not all have been impacted by the crisis to some degree. Some have been able to get away with reinventing themselves slightly by  reorganising employees to work remotely and conduct meetings online. The hospitality industry is offering take-away only and others have been forced to completely reconsider what they do. Many have lost the very premise of their existence with no other option than to close for good. 

COVID-19 has not only caused fear, shock and volatility to rip through the market, but has also pulled the carpet out under most businesses. Many, if not all have been impacted by the crisis to some degree. Some have been able to get away with reinventing themselves slightly by  reorganising employees to work remotely and conduct meetings online. The hospitality industry is offering take-away only and others have been forced to completely reconsider what they do. Many have lost the very premise of their existence with no other option than to close for good. 

Among those that have survived so far, some won’t exist in a few months’ time, while others could be well-positioned to make it. The crisis is putting extreme pressure especially on small and medium size businesses, but even large companies that are unable to adapt will struggle if they fail to prepare for the changes in operation that COVID-19 is bringing about. It will depend on a companies’ ability to adapt to the new normal after the crisis. 

Most companies have struggled since the beginning of the crisis, but some are doing well and may continue to do so.

Amazon has for example come out as a winner during COVID-19. Although their profit fell 29% from a year earlier and they are planning to spend an additional $4bn on COVID-19 related expenses, they are doing better than others and are well-positioned to grow post-COVID. While many retail businesses have had to close their physical stores and lay off workers, Amazon has faced an unprecedented demand forcing them to hire large numbers of new staff to keep up.

US investment bank Cowen wrote, “Amazon has seen an enormous increase in demand as shoppers are forced to stay home, essentially creating an extended Prime Day/Black Friday type of situation.” 

More than 197 million people around the world visit amazon.com each month. In the first three months of 2020 the company made a revenue of $75.4bn and their sales are up 29% higher than the same time last year. 

Video conferencing companies such as Zoom are also doing well. Zoom’s share surged about 50% in March and are now up to around 173 USD from about 70 USD in February. In the first two months of 2020, Zoom gained 2.2 million new monthly users and their market value has more than doubled, sitting at roughly US $42 billion.

Lockdown has forced workers and schools to use these services but the demand for video conferencing technology could extend well beyond the scope of the current crisis. Nearly 43% of full-time American workers said they would like to keep working from home and around 20% of them said their employers are actively making plans for how to incorporate remote work an option in the future according to a survey published by getAbstract

The pandemic is also changing the way we think about contamination and cleanliness leading to hand sanitiser, social distancing and face masks becoming the norm rather than the exception. This has benefitted several manufacturers of health products such as Clorox, who make about half of all the disinfectant wipes in the US. Clorox is a known, trusted name and consumers tend to opt for what they know when it comes to their health rather than buying cheaper products which they might perceive as less reliable.

When the crisis ends some businesses will fight to keep afloat, while others will have already adapted to prosper in a post-COVID world.

While it’s easy to stay clear of certain industries and companies, it can be challenging to determine which direction specific stocks will go. 

We’ve introduced a new investment designed to give you exposure to a highly diversified basket of global stocks that have performed well historically such as Microsoft Corp, HSBC holdings and Amazon.

This investment capps down side risk while offering an uncapped earning potential on the upside. The investment can act as a hedge for those fearful of a potential second COVID-19 drop and can equally perform if the market continues to rally. The basket of stocks is monitored by expert fund managers and have been carefully selected to capture both sides – which we think is important during times of uncertainty. 

Click here to read more or download the Investment Memorandum.

 

 

*Past performance is not a reliable indicator of future performance.

Reach Markets are the advisors assisting with the management of this offer and may receive fees depending on whether an offer is taken up by investors.

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