Invest in winners the virus taught us we can’t do without...
From Netflix to Ocado, firms that can deliver boost to your portfolio
YOU don’t have to be a financial genius to notice that while there are many economic losers from the current situation, there are winners as well. With more than half the world currently under some form of lockdown due to Covid-19, the businesses that are still able to serve our needs are reporting increased profits and moving into new markets.
Many of the coronavirus winners are technology companies, either responsible for delivering online content and services or providing the systems for delivering physical items in a socially distant way.
‘The last few weeks in lockdown have made people realise in many respects what they can and can’t live without,’ says Ryan Hughes of wealth manager AJ Bell. ‘The ridiculous initial stockpiling of toilet paper is an obvious starting point which benefited both the manufacturers and the retailers. But this has now moved on to services such as Amazon and Netflix which were already integrated into many people’s way of life, yet have become even more embedded.’
Investing in these companies is not only for short-term opportunists. Investment experts believe that the changes in customer behaviour due to coronavirus are simply an acceleration of trends that we were seeing anyway.
‘Political, economic and social disasters can accelerate existing trends – tendencies that may otherwise have taken years to really take off,’ says Darius McDermott, managing director of investment fund specialist Chelsea Financial Services. ‘I’m under no doubt that the coronavirus could be such a catalyst.’
Whether it’s web conferencing, online food delivery or at-home entertainment, here are some of the companies and investment funds that could spice up your portfolio, as well as improve your lockdown experience.
WITH the vast majority of us working from home, attention has turned to the technologies that allow us to do so, the owners of which have sometimes seen the value of their listed companies soar.
Richard Hunter is head of markets at wealth manager Interactive Investor. He says a classic example of a company that has thrived since the coronavirus outbreak is US based Citrix Systems. Its share price has risen 36 per cent this year.
He adds: ‘Citrix Systems has become known as one of the work-from-home stocks, since it not only enables solutions for the workplace, but also facilitates homeworking even without the need for office laptops to be brought home.’
Other listed companies that have benefited from our need for work-from-home solutions include Microsoft and Alphabet, Google’s parent company. As well as its applications for home working, Alphabet is the brainchild behind Google Classroom, which is helping teachers to educate children remotely.
McDermott says Microsoft has also benefited. He explains: ‘Microsoft’s cloud solutions – in particular communication tools such as Skype – are allowing workers to find the flexibility that the current environment demands. Many have used these new productivity tools for the first time, and I suspect that usage will persist.’
He also mentions TeamViewer as a strong performer in recent months. Listed on the Frankfurt Stock Exchange, the company provides cloud-based technologies to enable online remote support, including remote desktop services.
The company reported that sales for the first quarter of this year would be up more than 60 per cent year-on-year. The company’s shares were valued at almost €25 on March 16 – but are now at over €40.
Meanwhile, Zoom Video Communications, the video conferencing tool now being used for everything from piano lessons to Cabinet meetings, has seen its value more than double since the beginning of the year despite concerns over privacy. UK investors who want to get exposure to tech stocks have a variety of options. Interactive Investor’s
Hunter points out that many big winners in the current environment are Nasdaq stocks, listed on the US tech-focused secondary stock market exchange.
Investors can buy exchange traded funds or index tracking funds that track the performance of the Nasdaq index. These include Lyxdor Nasdaq 100, which has risen in value by nearly 20 per cent over the past year. As its name implies, it tracks the performance of the top 100 Nasdaq companies including Zoom and Citrix. For investors who
Systems helping us to work from home
like to invest via funds or investment trusts, Microsoft is a top holding in fund Brown Advisory Global Leaders as are Alphabet and medical testing group Roche.
TeamViewer is a holding in fund RWC Continental European Equity. The fund also has a stake in Hello Fresh, the meal box business that is currently benefiting from the lockdown.
Investment trusts with a technology bent include Polar Capital Technology and Allianz Technology.
Companies profiting from at-home leisure
SINCE we can’t go out, companies that can bring the things we need and want to our doors or screens are also doing well.
Netflix, another Nasdaq-listed company, has hit new share price highs as the nation binge-watches its way through lockdown while Amazon’s shares are also close to record levels. Interactive Investor’s Hunter says: ‘Amazon’s shares are up 30 per cent this year and it’s very much in growth mode as seen by its recent decision to hire an extra 100,000 staff to fulfil demand.’ Then there’s groceries deliverer Ocado which is regarded as being a technology company as much as a supermarket retailer. Its shares have risen by 26 per cent this year.
Chris Ford is manager of investment fund Smith & Williamson Artificial Intelligence. He says: ‘We suspect that consumers’ habits will change. For those grocers that have not invested in a robust e-commerce solution, we suspect that Ocado will be the supplier of choice.’
The Smith & Williamson fund, which has holdings in Ocado as well as Microsoft and Alphabet, has generated a return of nearly 20 per cent over the past year.
Douglas Brodie is an investment manager with Baillie Gifford and runs investment trust Edinburgh Worldwide. The £650million trust also has a stake in Ocado. He says: ‘Online shopping generally, and Ocado’s superior proposition specifically, should be clear beneficiaries of these consumer trends.’
Healthcare technology firms in the spotlight
WITH companies racing to create the next ‘corona tracing’ app, technology that relates to our health is in the spotlight.
David Coombs, of investment fund Rathbone Strategic Growth Portfolio, says: ‘The future will be about smart medical devices that can collect data on our health through smart phones – and virtual visits to the doctor.’
One company that is benefiting from this focus on healthcare is Teladoc Health, an American company with a video-conferencing facility that can be used by doctors to ‘see’ patients without them going to a doctor’s surgery. The shares have risen from $83 to more than $169 this year.
Healthcare-focused investment trusts include Polar Capital Global Healthcare and Worldwide Healthcare.