With the coronavirus COVID-19 pandemic slamming markets worldwide, investors have seen their gains of the past few years slip away.
The federal government is pulling out the big guns, including interest rate cuts and a massive $2 Trillion stimulus spending in its effort to juice markets and shore up the economy. But don’t expect those actions to have much of an impact on your portfolio.
Instead, look at this as a buying opportunity in stocks that are likely to profit from today’s unique economic conditions.
In the Middle Ages, when the Black Death Plague wiped out around 200 million lives across Europe and Asia, no one understood the science of contagious disease. But they figured out that it had something to do with human-to-human contact, and so invented quarantine, eventually slowing and then stopping the disease.
Today, 600 years later, the primitive strategy of quarantine is still one of our only weapons against the deadly COVID-19 pandemic. There is no cure, and scientists estimate it will be at least 18 months before we have an effective vaccine developed, trialed, and approved for human use.
And so practically overnight we have gone from a social society where people congregate in restaurants, bars, gyms, and theaters, to a world of solitary confinement within our homes, and even when venturing out for necessities we eye strangers cautiously from our mandated six foot distance.
The economy is spiraling downward. Factories and businesses of all kinds have sent home their workers. Laid-off workers in turn have less money to spend. And even those who still have cash are shuttered inside instead of out shopping or traveling.
Continuing the downward spiral, slower economic activity leads to weak state and local budgets, which means governments at all levels cut spending.
Economists call it the negative multiplier effect, or what Center for Economic and Policy Research fellow Martin Wolf calls a “supply-demand doom loop.”
Not all economic activity will buckle, though. Pharmaceutical scientists are still working to develop vaccines. Grocery and drug stores are still open and busy. Much of America’s white collar workforce is still working, though now from home.
And while consumers are avoiding brick-and-mortar stores, they are shopping online and entertaining themselves in their confinement with online games and video streaming services.
Businesses are figuring out new ways to get their work done, including teleconferencing, drone deliveries, disinfecting robots, infrared thermometers, artificial intelligence-powered drug discovery platforms, and fever-detecting cameras, among others.
The pandemic is reorienting the way we live and do business. Some of the changes will be temporary, but others will have a lasting effect.
Expect to see the rise of telemedicine, the fall of draconian regulatory hurdles for new drug approvals, a greater reliance on business technologies like videoconferencing and touch-free security systems, and a seismic blow to brick-and-mortar stores as consumers shift to even more online shopping.
These changes are creating enormous opportunities for investors. Companies like Clorox (NYSE: CLX), maker of disinfectant wipes, Slack Technologies (NYSE: WORK), an up-and-coming remote work program, Citrix Systems (NASDAQ: CTXS), a cloud computing and software company, Amazon (NASDAQ: AMZN), which is seeing online orders explode, and Campbell Soup (NYSE: CPB), which shoppers are stockpiling, are all good investment choices to give you the kind of gains that could make broad market losses less painful.
Here is a closer look at a few of the most promising stocks that could see big gains in the coronavirus economy.
China made news in February when it deployed an army of drones in 11 cities to help stop the spread of COVID-19. They were used primarily in four ways:
Using a thermal camera, the drone can measure temperature to within 0.5 degree Celsius at as much as 100 feet.
The temperature-measuring drones are being used in numerous communities and at road checkpoints, according to the South China Morning Post.
Other countries are following suit. But while China is using its own domestically-produced drones, other countries are sourcing theirs from North American manufacturers.
Canadian drone maker Draganfly Inc. (OTCQB: DFLYF / CSE: DFLY / FSE: 3U8) just announced on March 26 that it has been selected as the exclusive systems integrator to work on a health and respiratory monitoring platform with groups that include the Australian Department of Defence Science and Technology to immediately commercialize AI-equipped drones.
These AI-equipped drones are capable of monitoring body temperature, and heart and respiratory rates among crowds, workforces, airlines, cruise ships, potential at-risk groups i.e. seniors in care facilities, convention centers, border crossings or critical infrastructure facilities.
Draganfly Director Andy Card, former U.S. Secretary of Transportation and White House Chief of Staff, says of the deal, “As we move forward, drones and autonomous technology doing detection will be an important part of ensuring public safety.”
Draganfly (cleverly named for company founder Zenon Dragan) has consistently been one of the industry’s leading innovators since introducing their first drone model way back in 1999, when most people still thought of drones as science fiction.
The company is credited with the first commercial quadrotor unmanned aerial vehicle (UAV), the first multi-rotor UAV with integrated camera system, and the first UAV to save a person’s life, which earned the Draganflyer X-4ES drone a place in the Smithsonian Air and Space Museum.
Draganfly was also the first company to have multiple UAV systems certified compliant by Canada’s transportation agency.
Draganfly technologies have won numerous awards, including from the International Academy of Science, the Ernest C. Manning innovation award, and Popular Science’s “Best of What’s New.”
Significantly, in January the U.S. Department of the Interior grounded its fleet of 800 Chinese-made drones out of concern that they pose a security risk.
This of course presents a tremendous opportunity for North American manufacturers like Draganfly.
"There’s about $1 billion in revenue right now for strategic commercial work, military and government work that is being done that comprises drone sales or services that now can’t be done by Chinese drone companies," says Draganfly CEO Cameron Chell.
Chell added that “there are maybe three or four companies that can capture that work, and Draganfly is one of them.”
There are three bills being rushed through Congress that aim to prohibit the government from buying foreign-made drones.
Draganfly has a robust patent portfolio and proven technologies, both important to government procurement agents.
DFLYF traded at a high of $0.90 as recently as late February before falling along with the rest of the market. After hitting a low of $0.38 the stock is trending higher again, up around 18% from that low as of this writing.
Zoom Video Communications (NASDAQ: ZM)
With people around the world stuck inside to wait out the coronavirus pandemic, video calls are becoming the preferred way to communicate with family, friends, colleagues, and customers.
There are plenty of services that get the job done, but Zoom Video Communications (NASDAQ: ZM) is emerging as the clear leader. It is the number one most downloaded app in the Apple store, which has helped Zoom to now be worth more than Uber and Lyft combined, and nearly the combined value of the four biggest U.S. airlines.
Founded in 2011 by former Cisco engineer Eric Yuan, Zoom was one of the earliest software-as-a-service companies that freed companies from the need for expensive enterprise teleconferencing hardware. The company established a strong foothold in the market right from the beginning by pricing the service as much as five times cheaper than competitors like GoToWebinar, the service from LogMeIn Inc. (NASDAQ: LOGM).
Now, with people everywhere stuck at home, Zoom has added more users this year than in all of 2019. After gaining 1.99 million new users in 2019, the service added another 2.22 million users in just the first two months of 2020.
That growth has investors pouring into the stock, which has shot up more than a whopping 140% YTD, including nearly 60% in the past week.
That makes ZM pretty pricey, trading as it does at close to 60 times its book value. (To compare, Zoom’s industry peers trade at a price book ratio of 3.28.)
But the long term looks great for Zoom. The millions of new users turning to the service because of coronavirus are forming new communication habits. They are finding that in-person meetings are not always preferable or necessary. And they will continue using Zoom long after the pandemic subsides.
Zoom is a long-term play. Consider adding it to your portfolio on any significant pullback of the stock.
Teladoc Health (NASDAQ: TDOC)
“Medicine is changing dramatically in this critical period,” says CNBC. And one of the biggest changes is the surge in “telemedicine,” which connects clinicians and patients remotely, without breaking quarantine or “social distancing.”
This is another service that is making it easier to maneuver through the coronavirus pandemic. On March 17, the Trump administration announced an unprecedented expansion of telehealth services for all seniors through Medicare.
Telehealth had been previously restricted to seniors living in rural areas, and between clinicians and patients who had already established in-person care.
Hospitals and health insurers have also promoted video visits amid the coronavirus, and both California and New York are now requiring insurers to offer telehealth services. Both Cigna Corp. (NASDAQ: CI) and Humana Inc. (NASDAQ: HUM) are among the insurers that have announced plans to do so.
“There’s this slow momentum that’s been building, and now with something like coronavirus, which is very amenable to telemedicine, we’re going to see it tip,” says Dr. Gary Greensweig, chief physician executive of CommonSpirit Health, one of the nation’s largest hospital systems.
Telehealth is still a new concept, so far generating less than 1% of U.S. medical claims. But the need for social distancing will drive the trend higher, and Teladoc Health (NASDAQ: TDOC) will be one of the prime beneficiaries.
The service already boasts more than 37 million members in 130 countries, including 27 million users in the U.S.
According to the non-profit Healthcare Information and Management Systems Society, Teladoc is the only large telehealth supplier in the market.
On March 16, the large insurer Blue Shield of California announced that in order to boost use of telehealth services it would waive all out of pocket costs for its plan members who use Teladoc.
Teladoc has seen demand for its virtual care services spike 50% because of the pandemic, delivering about 100,000 virtual visits in the week of March 16 alone.
Revenue is keeping pace with that growth, increasing 32% in 2019 compared to 2018. The company also achieved positive cash flow for the first time in 2019 – a total of $30 million. Revenue is expected to grow by 26% to 28% in 2020.
The stock has doubled so far in 2020, but as with Zoom, Teladoc is a good candidate for long-term investment. Consider buying on any significant pullback.
One of the biggest problems in fighting COVID-19 has been the lack of plentiful, fast, efficient, inexpensive diagnostic tests.
That may be about to change though, thanks to a partnership between microcap Sona Nanotech and healthcare giant GE Healthcare Life Sciences.
On March 3, the companies announced that they will jointly develop a rapid response screening test that is expected to be faster, cheaper, and easier to administer than existing tests.
Sona’s proprietary nanotechnology-based test is expected to produce results in 5-15 minutes, instead of the 2-4 hours required for existing tests.
The screening would also cost significantly less than existing tests, about $50 to the current tests that typically cost $200 or more.
What’s more, it can be administered without skilled technicians or additional laboratory equipment, unlike existing tests that require skilled technicians and specialized equipment, both of which create testing bottlenecks.
The company is also developing a dual test for the next flu season that screen for both the influenza virus and COVID-19.
Sona was an obscure nanotech company with a little-loved stock until the announcement of the GE partnership. Then the stock took off, reaching a high of more than $1.00 before falling slightly.
But make no mistake: As soon as their new COVID-19 and dual COVID-19/flu tests are deployed, the stock could take off and never look back.
Economists say there is little doubt that the U.S. is headed into a recession because of the coronavirus.
Goldman Sachs is forecasting a 24% economic drop in the second quarter. And Credit Suisse says, “Economic data in the near future will be not just bad but unrecognizable.”
The stock market crash has fallen more than a quarter from its recent record high, and the losses keep on coming. What’s an investor to do? This certainly isn’t the time to dump your portfolio. But it is the time to reduce your losses by investing in a handful of stocks that will rise despite – or because of – the coronavirus pandemic.
And remember, always do your own due diligence before investing in any stock.
Cynthia Berryman, Contributor
for Investors News Service
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