Stocks doing good during pandemic will reward their investors

Crises can make or break businesses. While some boards have reacted to coronavirus by firing staff and preserving their own salaries, others have been more charitable.

But is there a correlation between the firms that do the right thing and future performance?

LVMH, which owns champagne producer Moët & Chandon, and Pernod Ricard, the company behind Absolut vodka, have swapped from making high-end alcohols to hand sanitisers – the latter for free – while retailers Gap and Canada Goose are redirecting their workforces to make face masks and gowns for healthcare workers.

David Coombs, manager of Rathbones multi-asset portfolios, said that shareholders should not be concerned that the companies they invest in are changing their business, or even doing non-profit work during the coronavirus crisis, but they should see it as a positive. “It massively enhances the value of their brand and shows they are in tune with what the public cares about,” he said.

Mr Coombs added that being able to offer free work indicates that a company has strong cash reserves and can survive the crisis. “The firms that have the resources to do good at this time are generally the large companies that are at low risk of going bust, so it’s a sign they’d make a good investment anyway,” he said.

Online marketplace eBay has put in measures to support its sellers. It has deferred fees from traders, increased free listings and said it will protect sellers’ ratings if they have trouble with their supply chain. It is also attempting to help businesses that have no digital presence to set up an eBay shop.

Chris Elliott, co-manager of the Evenlode Global Income Fund, said these actions are expected to cost the company more than $200m (£160m). “But this may prove a good investment in exchange for increased customer loyalty. If this can be achieved, profits should increase,” he said. Cisco Systems provides tools for video conferencing, online meetings and webinars. It decided to offer some of its services for free in response to the virus outbreak – which drew in 240,000 new subscriptions within 24 hours, said David Osfield, co-manager of the Amity International Fund at EdenTree Investment

Management. The firm is also helping to facilitate meetings for the French, Canadian, German, Colombian governments and others around the world, and has committed $225m in cash and services to support the fight against coronavirus.

Sportswear brand Nike is repurposing material for trainers to make personal protective equipment (PPE). It has also invested heavily in advertising encouraging people to stay at home. “You’d expect the message to stay indoors would hurt profits, but it shows the firm is reacting responsibly to the crisis,” Mr Coombs said.

The amount that eBay is spending on helping retailers through the coronavirus crisis