The Co vid virus pandemic has just started in some countries and is not going to settle down soon with what we have already seen so far. The Oil wars have begun between Russia and Saudi Arabia, and we do not know when this would become any better. Times are tough, and countries are in lock-down mode and states are declaring it an emergency.
The financial stock markets are in freefall, and while we don’t know when it will reach the bottom and when a recovery will start, there might be some bargains to grab if you got cash and are willing to wait for a full recovery.
So what kind of stocks could be resilient in this kind of volatile market situation?
The most directly affected by the corona virus has to be the cruise lines, the airlines and the businesses directly connected or dependant on them.
Below are some
· Flight centre
· Corporate travel management
· Cruise lines
The cruise line companies who are mainly US, though are primarily operating from other countries wont be getting any US bailout money. Many companies have offshore bases to save on tax and avoid strict regulations. To staff their ships, many cruise companies rely heavily on foreign workers from the Philippines, Indonesia and India.
Carnival Corp., owner of the Princess cruise lines, is incorporated in Panama. Royal Caribbean is incorporated in Liberia, and Norwegian Cruise Lines in Bermuda.
The next stocks that would be affected would be the ones indirectly affected.
- Travel agents
· Online travel booking companies
· Hotels and Hotel booking companies
· Tour operators
· Retail companies’ dependent on goods from china or Hubei province.
Flight centre/ Corporate Travel Management/Webjet
Short traders service providers like CMC and others have banned shorting of some stocks like these because they know people will short it and it is already down in free-fall. The only way for this stock is down in the current market climate. No one is travelling, and companies and government are not recommending travel. This should take a while to recover
Online booking companies like webjet (WEB) are also in the same boat
The travel sector could take some time to recover as personal and holiday travel will not restart immediately due to lingering virus fears and countries are banning travel in and out of the country. Commercial transport could revive much quicker.
Cruise companies ( Mainly US)
Bound to be limited by travel restrictions, this one is going down and will take time to recover its markets. Some big cruise liners are not here in Australia, but Europe and the US listed. Carnival (NYSE: CCL) Norwegian Cruise Line (NAS: NCLH)
Funeral home operator InvoCare Ltd (ASX: IVC) might benefit from such situations, and it will be interesting to keep a watch on their prices through this period. Propel Funeral Partners (PFP) is also in the funeral business.
Both Propel and InvoCare have fallen substantially less than the broader share market over the past three weeks
Airports & Airlines
Tourism has crashed with lock downs in place all over the world, and people are not travelling, so Airlines are not flying as much as they usually do and airports are not busy anymore. These stock prices are sure to wind down and remain there for a bit.
Stock in this sector – Qantas (QAN), Virgin Airlines (VAH), Sydney Airport (SYD)
Med Tech companies can sometimes do well in these times. Ansell Ltd which sells medical instruments and supplies is one such company
FMG/BHP [Bluechips Miners]
This one a tough one, it has fallen and risen through the volatility of the markets, yet it could be a bargain at the right price in falls. When the virus is under control again in china, they will need the iron ore again to start manufacturing, and this will eventually rise.
COL/WOW/ IGA (METCASH) [ Retail]
These two has been + hammered with massive sales due to people wanting pasta, toilet paper and all in between and so the pandemic favours these stocks right now. Not so sure about Bunnings though.
These two tech stocks have a very indirect relation to the current virus and so should not have got sold down and so will recover. We just don’t know when a full recovery will happen as every stock is in free fall right now.
Everybody drives a car here and used parts will become handier rather than new parts. In such situations, when jobs are lost, and business is suffering , money is scarce and second hand motor vehicle parts become more apt. This should be a no brainer.
We need rare earths and this one has good potential to rise again to its highs once some stability is back. The US could lend us some support with some of the stocks in this sector, to secure their stash of our rare earths.
What about Resources and Banks?
So how can the banks and resource miners fare in such times? The banks have already been on a decline for some time, and the lower interest rates are not making it more attractive.
The miners like iron ore can have a downturn due to the leading industrial nation china currently going slow with manufacturing due to virus and thus reducing demand for ore and other commodities.
TOP BANKS: WBC, NAB, ANZ
TOP MINERS: BHP, RIO, FMG, NCM
Technology, which has also performed poorly over the last month, could lead the market post-COVID-19, given the sector now has much better valuations, long-term fundamentals and structural growth.
Resources are likely to have a quic rebound, post-COVID-19. Resources are currently the cheapest sector – balance sheets are strong, cash flows are still reasonable, and the sector has been significantly hit by the sellers leading into the corona virus pandemic.
We could very well see money re-enter the sector very quickly, especially if we see China undertake fiscal stimulus to get back as the big industrial manufacturing nation to the world.
Upswing for these shares in troubled times
The companies that could be more resilient or even profitable in the short term of this virus panic could be.
Below is a list of companies that could do well based on my personal views and it is recommended that you make your own decision based on your research.
- Gold Miners (NCM, Northern star)
- Pharmacy stocks
- Medtech companies (Fisher & Paykel Healthcare)
Supermarkets (Coles, Woolworths, Aldi, IGA(metcash) -[Toilet paper companies, Pasta Noodles companies, Hand sanitizer companies]
Gold miners on the ASX
Some value gold miners listed on the ASX is Newcrest Mining (NCM ASX), Northern star resources (NST ASX), RIO Tinto (RIO ASX), BHP (BHP ASX), AngloGold Ashanti (AGG ASX)and St Barbara (SBM ASX)
Pharmacy Companies in the ASX
Chemist Wharehouse, Terry White Chemmart (Sigma Healthcare ASX: SIG – Amcal, Guardian, Chemist King, Discount Drug Stores and PharmaSave) are pharmacy chains
Australian Pharmaceutical Industries (API), is also a wholesaler made up of independent chemists with revenues generated from Priceline, Soul Pattinson Chemist, Pharmacist Advice and Pharmacy Best Buys.
Terry White Group’s merger with Chemmart in 2016 was a vital element of a strategy for the Brisbane-based group to build sufficient scale to compete with the My Chemist Group.
Fisher & Paykel Healthcare (FPH ASX) make respirators so that they might have some upside with the current situation. Fisher & Paykel Healthcare Corporation Limited is a manufacturer, designer and marketer of products and systems for use in respiratory care, acute care, and the treatment of obstructive sleep apnea.
Super Market Related companies
Supermarket related products that are flying off the shelves currently like toilet paper, pasta and hand sanitisers, so these listed companies may benefit, but will ultimately benefit the supermarket chains with higher sales.
Working from Home
With more and more companies and government organisations encouraging people to work from home, the Telcos and Internet companies are bound to benefit.
Telstra, Optus, TPG Vodafone And RCL.ASX ( online learning platform- shares owned) might get some benefit from these developments.
Check out our latest post on >> Debt Free Company Shares in Australia to invest in.