The coronavirus outbreak has caused global stocks to tumble … oil prices to crater … and countries to isolate millions of their own citizens. In the U.S., the number of known cases is soaring, and deaths are rising.
And the markets haven’t been immune, either. The Dow saw a quadruple-digit plunge last week. Definitely not a ride for the faint of heart.
But there are a few opportunities amid this volatility. You just have to know where to look.
If you watch the news, you’ve seen videos of people in China and elsewhere wearing those masks. Tradeable companies make those masks. And you can protect your portfolio — and potentially profit — by giving them a look.
Allied Healthcare Products (NASDAQ: AHPI) soared 74% in premarket trading Feb. 28 to extend the four-fold rocket ride (up 322%) in the previous session. All while most stocks plunged. This protective gear maker was a $1 stock a couple of months back!
Alpha Pro Tech (NYSE: APT) is spinning up production of its N-95 face mask. The company said on Feb. 27 it had booked $14.1 million in orders since Jan. 27 (maybe that’s why shares spiked 64% the next day). Trading volume averaged less than 20,000 shares in mid-January. In late February it topped 40 million!
Lakeland Industries (Nasdaq: LAKE) popped up a stunning 86% late last month. This maker of advanced protective clothing (including masks) has given back a lot of those gains. But it could resume its long-term uptrend soon.
3M (NYSE: MMM) — a diversified manufacturer that also makes face masks — rose 0.8% even as blue chips sank 1,100 points. It is well off its highs but could be making a bottom.
This next company doesn’t make masks. But if there’s anything that’ll kill a virus … it’s bleach. That bodes well for Clorox (NYSE: CLX). Clorox was actually positive while the Dow was dropping 1,000 points and the world appeared to be ending. Plus, it has raised dividends every year for a quarter-century.
With panicked people self-isolating, companies that provide at-home services reaped huge benefits during the market rout. They could continue to outperform.
First, because everyone still has to eat … online grocery shopping is climbing. Case in point …
Americans were already buying more groceries online. But in the last 30 days, a surprising 21% of all U.S. consumers placed orders from sites like Amazon Prime, Walmart Grocery, Uber Eats, Fresh Direct and Stop & Shop’s Peapod.
Ordering out is also up.
GrubHub (NYSE: GRUB) is the leading meal-ordering and delivery app, with over 155,000 restaurant partnerships in the U.S. and United Kingdom. Among some of its partners are Burger King, Papa John’s (Nasdaq: PZZA), Shake Shack (NYSE: SHAK) and Chick-fil-A.
The stock trades for barely a third of its old 2018 highs. But has been trending higher since October.
Domino’s Pizza (NYSE: DPZ) is one of the best stocks of the last decade, and it’s still flying high. Shares blasted off Feb. 20, rallying about 28% in a single session on a better-than-expected quarterly report.
With all this talk about food, what could be better for a flu-like illness than a hot bowl of Campbell Soup (NYSE: CPB)? There are a number of reasons to consider CPB in this environment.
First, worried shoppers are likely to stockpile canned goods like Campbell’s soup if the outbreak worsens. Second, packaged food stocks like CPB are already considered “defensive” by investors.
It’s worth noting that on the day the Dow dropped more than 1,000 points, Campbell Soup’s stock finished the day in the green.
And where can you get those facemasks and cans of Campbell soup? Well, from the next company primed for profits as self-isolation becomes more widespread.
Amazon.com (Nasdaq: AMZN) was already taking over the world before the outbreak. Whether it’s a new computer, clothing or even your weekly groceries, chances are you can buy it on Amazon … and at a decent price.
The bull case as it applies to COVID-19 is fairly straightforward: If more and more people opt to avoid crowded public places, Amazon stands to benefit in a big way.
However, Amazon won’t get through this totally unscathed:
Disruptions to its supply chain in China could create problems. But AMZN is taking steps to mitigate any issues. We’ll see how well those steps work.
And then there’s “mini-Amazon” …
Shares in Etsy (Nasdaq: ETSY) took off after the company delivered a beat-and-raise fourth-quarter report fueled by a strong holiday season. The online marketplace posted a whopping 35% increase in revenue.
The market is also bullish on the company’s new Offsite Ads feature. Basically, Etsy partners with sites like Google and Facebook to promote sellers’ listings.
Etsy has been one of the best stocks since the start of the correction with a nearly 9% gain. If consumers avoid brick-and-mortar amid the crisis, Etsy could be set up for more upside.
Another bright spot among so-called “FAANGs” is Netflix (Nasdaq: NFLX). If we see more countries implementing lockdowns, subscriptions should spike higher. Few pastimes are more pandemic-proof than binge-watching Netflix in your pajamas.
Twitter (NYSE: TWTR) This is the most news-oriented social media platform. Stories will often break on Twitter before they do on CNN or Fox News.
It’s not hard to imagine Twitter engagement spiking during the current scare. And we’re also in the middle of a particularly brutal election cycle. That will increase engagement even more.
Opportunity in China
Investing in China right now may seem like a minefield. China is, after all, ground zero for the outbreak.
But for Alibaba Group (NYSE: BABA), any weakness in the share price due to the scare should be viewed as an opportunity.
Alibaba is China’s most dominant e-commerce company by far.
While it’s been called the “Amazon of China” … it’s also similar to PayPal in that it offers an online payment system. And the way it populates merchants’ ads when users search on Alibaba’s Tmall and Taobao sites is like Google.
And just like Amazon, Alibaba offers cloud computing and video streaming services.
The company has projected a coronavirus-related hit to earnings this quarter. But Alibaba will emerge from the scare battle-tested and better able to compete outside of China.
In the Workplace
At a time when people might be reluctant to shake hands to close a deal, DocuSign (Nasdaq: DOCU) — the most widely used e-signature system in the world — makes a way to close deals remotely.
Whether you’re buying a house, opening a brokerage account or signing an employment contract, DocuSign has made the process easy as pie. DocuSign has already been growing like a weed. Its revenues were up 40% in Q4, and its customer base is up 24%.
Beyond how we conduct business, the outbreak is bringing the slow-burning remote work revolution to the forefront of business practices.“We could see a longer-term acceleration in enabling information worker productivity outside the traditional office environment,” Citi Research analyst Walter Pritchard wrote last week.
Amazon is telling its employees to avoid nonessential travel. And that’s where video conference provider Zoom Video Communication (Nasdaq: ZM) can help.
Zoom functions more or less like Skype. But it works better with large groups. The company’s communications tools become even more important if workers are spread across multiple locations.
Like many of the stocks I’ve mentioned, Zoom traded higher on Feb. 24, even while the world was ending. And it’s been rocketing higher ever since December.
Consider taking advantage of the downdraft to buy shares of any of these companies.
All the best,