Coronavirus-immune companies could see stocks impacted soon
Companies whose stocks have remained largely immune to the coronavirus could catch a nasty cold once the panic clears, experts warn.
A handful of companies — from consumer staple companies to teleconferencing firms — have been cushioned from coronavirus-inspired stock blows so epic that the Dow’s longest bull run in history was officially declared dead last week.
Teleconferencing firms, for example, have proven one of the few brights spots in a sea of red as virus worries have led more companies to shift to remote work. Silicon Valley-based Zoom, a former unicorn that provides video-conferencing services, has seen a 5.6 percent rise in its share price from Feb. 21 — before the start of the recent market nosedive — to close at $107.47 on Friday.
Shares of ClearOne — which offers teleconferencing hardware including its “Zoom-certified” cameras — is up 25 percent in that time, to $2.13.
But analysts say investors should be prepared for beneficiaries of the coronavirus pandemic to also become casualties as the recovery takes hold and demand teeters.
“It’s all tied to the panic. People aren’t buying toilet paper because it’s a brand new product with good growth options,” explained Jim Paulsen, chief investment strategist at the Leuthold Group.
“If panic dies, they’re gonna pay it back,” he said.
Investors have also flocked to consumer staple companies as people across the country stock up on cleaning products and shelf-stable foods amid fears of government-imposed quarantines, like the ones imposed by Italy.
The hoarding got so bad, some companies — like supermarket chain Kroger — were limiting the amount of sanitizers and cold and flu medicines people could buy. Kroger’s stock is up 1.3 percent to $30.17 over the last three weeks, compared to an 18 percent drop in the S&P 500 during the same time period.
Shares of bleach-maker Clorox, meanwhile, actually hit a 52-week high during last week’s stock pandemonium to $178.88. Its shares are now up 1.9 percent to $167.77 over the last three weeks.
The buying sprees have also helped boost shares of canned-soup giant Campbell’s shares — up 2.7 percent since Feb. 21, compared to the 20 percent drop in the Dow Jones industrial average.
Kimberly-Clark, the Texas-based paper company behind Scott and Cottonelle brands, is down, but by just 4.3 percent since Feb. 21, compared to a 20 percent drop in the Dow Jones industrial average.
“People have stockpiled what they need to stay at home over the last 10 days or so, and I think that should result in a good quarter for a lot of those big-box retailers,” Eric Marshall, director of research at Hodges Capital Management, said in a recent interview.
But those retailers’ fortunes could change as the virus slows the economy and hits consumers’ wallets, according to Anthony Denier, CEO of Webull, a trading platform.
“People who are going there to stock up could not come back for some time,” he said.
Experts pointed to the online sports-betting industry as an example of how quickly the tide can turn in a panic.
Gaming and gambling operators were expected to be lifted if, like in Italy, many more people were forced to isolate themselves for a long period to ward off the disease.
Instead, the sports-betting business has “grinded to a halt” after the outbreak has forced major sports leagues to cancel their seasons, explained Jason Ader, CEO of SpringOwl Asset Management, a buyout firm specializing in the gaming, lodging and leisure industries.
London-listed shares of British bookmaker William Hill, which were already trending down on bad earnings, nose-dived on news of the NBA season suspension on March 11. Its shares are off nearly 54 percent since Feb. 21.
Fears of getting the virus are “taking everybody prisoner,” Ader said. “We don’t see too many businesses that are immune to the fear that’s been created around the coronavirus and all the related travel and leisure implications that it has.”
Additional reporting by Josh Kosman
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