It is hard to find a silver lining in the coronavirus crisis, but what is make-or-break for many business sectors – including travel, tourism and hospitality – might turn out to be a chance for others.
With many people working from home, there is a huge opportunity for businesses that offer anything from online gaming to video streaming, remote conferencing, food delivery and even remote gym classes.
A captive market of potentially millions worldwide means you may be able to find value – in among all the market turmoil – in companies catering for lockdown.
Welome sight: Ocado is so busy delivering food it’s refusing new orders
Weeks of panic-buying show no sign of abating as people, especially the elderly, face the prospect of several months indoors. Stock market quoted retailers Tesco, Sainsbury’s and Morrisons are all seeing unprecedented demand for their food delivery services, with many not having free slots for weeks.
Ocado, which last year sold a 50 per cent stake in its business to Marks & Spencer for £700million, is so busy it has had to refuse new orders.
The boom in online buying will not be restricted to grocery retailers. Richard Hunter, head of markets at wealth manager Interactive Investor, says: ‘Obviously the supermarkets are currently seeing goods flying off the shelves, but conceivably clothing retailers could, too. The jewel in Next’s crown, for example, has long been its online offering.’
Even those who several years ago predicted the rapid rise in food delivery companies would not have foreseen the boost to business.
Quoted companies such as Just Eat, Uber Eats (part of Uber), Delivery Hero and longer-established fast food delivery chains such as Domino’s Pizza and Papa John’s are high on people’s speed-dials as official advice is now very much to avoid going out to eat.
But, says Hunter, these businesses are not immune to the problems caused by coronavirus. He says: ‘There may be complications if staff and drivers have to self-isolate.’
There are also food services tailored towards older customers who are particularly vulnerable to coronavirus disruption.
Quoted companies such as Just Eat, Uber Eats, Delivery Hero and longer-established fast food delivery chains such as Domino’s Pizza and Papa John’s are high on people’s speed-dials
One such company is Parsley Box, providing easy-to-store, ready-meals via delivery aimed at the elderly market and which is backed by the Mobeus Venture Capital Trust.
Online giant Amazon seems set to take advantage of the new lifestyle restrictions as self-isolating people are forced to shop online rather than in stores.
It is taking on an additional 100,000 staff worldwide to cope with the increase in deliveries. But aside from pure retail, the giant is also one of the media companies expected to receive a boost from the increase in people watching films at home rather than in cinemas.
New subscriptions for its Amazon Prime entertainment are booming while Netflix was reporting record subscriber gains outside the US even before coronavirus turned into a pandemic.
With customers able to stream and watch drama series or films whenever they like, Netflix, Amazon and the new Disney+ are well-placed to be a central part of quarantined life. Scottish Mortgage, a FTSE 100-listed investment trust managed by Baillie Gifford, has Netflix, Amazon, Alibaba (the world’s largest e-commerce group), Tencent (the world’s largest video game company) and Delivery Hero among its top ten holdings.
Technology is the clear winner from the current outbreak
Ben Yearsley, Shore Financial Planning
Unsurprisingly, there has been a reported boom in China in the downloading of apps and games as people look to occupy themselves in the confines of their homes.
Interactive Investor’s Richard Hunter notes that UK stock market-listed Frontier Developments – the Cambridge-based computer games developer behind the Elite games series – is well-placed to do well from self-isolating gamers with plenty of time on their hands.
However, he cautions that global recession could cause affordability issues for some people.
Investment fund VanEck Vectors Video Gaming and eSports provides exposure to a global portfolio of companies operating in the video gaming and eSports industries.
While BT is likely to benefit from increased internet use, BT Sport is likely to suffer from the cancellation of prime sporting fixtures
Leigh Himsworth, a portfolio manager with investment house Fidelity International, believes computer gaming software writers will be heavily in demand, especially when ‘streaming’ is introduced. He says: ‘The UK has at least three great names here, Codemasters, Frontier Developments and Team17.’
There is going to be a huge surge in demand for home broadband as people work from home. This could benefit internet providers such as BT, TalkTalk and Vodafone.
But there have been concerns that some companies may not be able to cope with the spike in demand. While BT is likely to benefit from increased internet use, BT Sport is likely to suffer from the cancellation of prime sporting fixtures.
Investment fund Dow Jones Internet provides exposure to a basket of shares comprising the 40 largest US internet companies.
With people increasingly working from home, there will be greater use of video-conferencing services. Jason Hollands, of wealth manager Tilney, says companies that could benefit include US-listed Microsoft, owner of Skype and other software and applications key to working from home.
Other beneficiaries will be telecom companies and manufacturers of handsets, laptops and tablets. Also, enterprise software firms, such as US-listed Dell Technologies which owns VMware, a software company providing cloud, networking and digital workspace solutions.
French-listed Thales Group could also benefit – it owns SafeNet, an ID authentication service used by work computer systems that enable staff to log in securely to work servers.
Ben Yearsley, a director of Shore Financial Planning, says: ‘If this proves employees don’t need to be physically in an office so often, then technology is the clear winner from the current coronavirus outbreak. So, my advice is to buy a technology investment fund. Investment trust Polar Capital Technology is a fund I would look at as a long-term investment.’
Parents could use online tutoring as schools are closed
Ben Yearsley, Shore Financial Planning
With the huge disruption to schooling, many parents might be inclined to top up their children’s education with online tutoring.
Tilney’s Hollands says: ‘There are a few UK firms operating in this area, including some backed by venture capital trusts. For example, trust Northern owns Tutorful, a Sheffield-based business that provides online classrooms. Trust manager Mobeus has also backed MyTutor that provides one-to-one tuition via a digital platform.’
Russ Mould, investment director at AJ Bell, believes Belfast-based listed company Kainos could be a winner from the increased demand put on the National Health Service.
He says: ‘One of Kainos’s key revenue streams is helping the NHS with workflow and digitising medical records. With the NHS set to receive additional Government funding, and potentially facing an influx of patients, Kainos could be a helpful partner.’
And finally, with gyms shut, US-listed Peloton Interactive could be a share to watch. While not immune from coronavirus fallout, it should pick up custom from locked-out gym bunnies desperate to keep active in the comfort of their own home.
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