Just as the lockdown is affecting each of us in different ways, businesses have experienced very different impacts from the coronavirus crisis.
Here’s Moneycube’s survey of four sectors which are well-positioned to perform for investors in Ireland through the coronavirus and beyond.
1. Healthcare and pharma
There are two reasons healthcare and pharmaceutical stock are insulated from recent stock market falls.
Firstly, for obvious reasons, these industries remain open for business – in fact, they’re in demand like never before.
But there’s a longer-term rationale too: it seems highly likely that higher spending on healthcare in future will be one of the outcomes of the coronavirus crisis. There’s a sense that it will no longer be acceptable for countries to run their health systems at max capacity under normal circumstances, and rushing to build field hospitals if a crisis breaks out.
So drug companies like GlaxoSmithKline, and healthcare companies like UnitedHealth Group are finding their share price roughly flat compared to the start of the year, when the global outlook was more optimistic.
2. Ethical/ ESG funds
Funds run on strong ethical, social and governance principles have been out-performed the wider market over recent weeks.
Bloomberg reported at the end of March that 60% of European ESG funds outperformed the European index.
There’s one big reason for this, and several smaller ones.
Firstly, most ethical funds avoid oil and gas investments. That means they have been insulated from the recent collapse in oil prices.
But there are more subtle reasons too. For example, a lot of ethical funds have a strong exposure to technology businesses, which have had an easier time trading through the lockdown than bricks-and-mortar companies.
There’s even a suggestion that more ethically-run businesses have had greater regard for their supply chains, employees, and the wider community – and that that will make them more sustainable in a post-coronavirus world.
3. Food, alcohol and supermarkets
Consumer staples seem set to weather the current storm better than most.
This category includes food and drink, and household goods like soap and shampoo. The shops that sell these goods have a similar dynamic.
If anything, these industries are seeing increased demand, as consumers are spending more time, and eating more meals, at home.
And some consumer staples are basically immune.
For example, although you won’t find them in any self-respecting ethical fund, tobacco companies have stated that they see little or no impact on sales from the coronavirus measures governments have taken. Their product is just so addictive that customer demand has stayed steady.
4. Telecoms and tech
This one is easy – just ask yourself how many Zoom calls you’d ever joined before March 2020.
In a social isolation world we’re more reliant than ever on tech-driven businesses.
Many of these companies have been able to stay open for business, or have even seen increased demand for their services. As a result, tech-focused funds like this favourite of ours are actually up in value since the start of the year (over 10% in this case).
Of course, the big tech companies like Facebook and Google are seeing a short-term dip in advertising sales. But over the medium term it seems likely that many of these players will step into the gap as people have reduced appetite for face-to-face interactions.
What does it mean for me?
As ever with investing, balance is required here. The flipside of businesses that are resilient in a downturn is that they may be less well-positioned to capitalise on an upturn. So investment funds should remain the cornerstone of most investor’s portfolios.
Building that portfolio offers some great opportunities to select some sectors for growth in a post-coronavirus world.