Shares to survive Covid’s second wave

THERE ARE STILL SAFE BETS WHEN IT COMES TO INVESTING IN THE MARKET

Anew wave of COVID-19 sweeping across Australia and the world has sharemarket investors on edge. Investment specialists are divided about the market’s outlook – some expect another fall while others say it’s fair value. But all agree certain stocks and sectors will do better than others during the crisis.

Now is a time for patience, sticking to long-term plans, and making the most of opportunities if you can handle the risk, they say.

CMC Markets chief market strategist Michael McCarthy runs his own self-managed superannuation fund and said much of its money was now sitting in cash because he expected “another major leg down for the Australian sharemarket” before December.

“When the selling starts, even unaffected businesses are caught in the downdraft – for investors, it’s a time of caution,” he said.

“I see a once-in-a-lifetime opportunity coming. I believe sharemarkets will fall and those with an investment time frame of 10 years or more have an enormous opportunity to build wealth.”

Mr McCarthy said there had been a rush of new sharemarket investors in recent months.

“Anecdotally, people who couldn’t bet on sports have decided to bet on markets,” he said.

Speculating differs from investing, which is typically long-term and looks past the volatility we have seen this year.

“For people investing with a 10, 20 or 30-year horizon, I would be looking to those businesses where people don’t have a choice,” Mr McCarthy said.

“We all need to buy food – Woolworths and Coles will still have a business. Their share prices might suffer but they’re not in danger of going out of business.”

Biotechnology giants CSL and

Cochlear were strong companies too, but could fall sharply in any new sharemarket crash.

Catapult Wealth director Tony Catt said people who could stomach a high-risk, high-return strategy could consider targeting good companies that were weakened by COVID-19, such as Sydney Airport or Treasury Wine Estates.

“It’s going to be a very unpredictable ride over the next six months,” he said.

Mr Catt said a safer option could be to use exchange-traded funds to invest in an entire index, but he suggested avoiding the technology sector after its massive growth in recent months.

“Be careful you are not buying very high priced or overpriced stocks,” he said.

Big banks, popular among Aussie investors for decades, should hold up, Mr Catt said. “I think what the Victorian situation has done is delay the recovery – I don’t think it’s made it indefinite.”

Mr Catt said the agricultural sector “should hold pretty well over the next 12 months as well”. Lightbulb Wealth Management director Heinrich Jacobs said people could consider specific sectors that were benefiting from Covid such as global gloves maker Ansell, up 95 per cent since March. The world’s rapid shift online had benefited online retailers, and Mr Jacobs favours cybersecurity stock and funds too. “We think that has a long growth runway ahead of it,” he said.

Speaking of runways, Mr Jacobs also likes Sydney Airport: “These are assets that are really beaten up right now but will be huge beneficiaries when travel does come back.” “Investing in individual securities is inherently risky,” he said. “But the riskiest place to be long-term has been in cash.” Cash delivered many people a negative return after the impact of inflation and income tax, Mr Jacobs said. “Getting professional personal advice is important.”