InvestNow News – 19th June – Antipodes – Investing in the wake of a pandemic
17 June 2020 –
We’ve witnessed dramatic fiscal and monetary responses to the COVID-19 pandemic by governments across the world. Now we must look at how that stimulus is likely to evolve and consider the longer-term outlook for stock markets in this context.
From an investment perspective, we can broadly view the evolution of the pandemic in three stages:
- Income stimulus
- The reopening
- Infrastructure stimulus
At stage one, as money has been transferred from governments to households, the major beneficiaries have been secular growers that have benefited from a world in lockdown – these are a narrow set of winners.
Stage one beneficiaries in Antipodes’ portfolio include social commerce and software incumbents such Facebook, Microsoft and Alibaba. As well as pharmaceutical stocks such as Merck, Roche and Sanofi. Lowes – which has benefited from increased DIY activity – has also rebounded with strength.
On the margin, however, we are of the opinion that now is the time to begin allocating away from stage one winners to stage two and stage three opportunities.
At stage two (the reopening) we are looking at dislocated category leaders that may come out of the pandemic with less competition.
At this point it is important to remember that in many areas of the market we don’t see the pre-COVID-19 status quo resuming. Businesses have learnt to do things with less – in particular, cost cutting will likely result in slower than expected employment recovery, reductions in business travel and easing office demand.
Strong retail banks and under-the-radar omnichannel retail leaders are among the stage two beneficiaries.