The COVID-19 pandemic has had a significant impact on our society. Even if you don't know anyone who has been affected by the disease directly, we have all seen and made changes to our daily lives to slow the spread of the disease. While it is difficult to say what the world will look like as we begin to navigate a post-COVID reality, it is safe to say that it will likely look different than it did before the pandemic. The same may be true for your portfolio. In this post, we will look at a few trends that we believe will likely continue through the coming months and years, and how we might position a portfolio to benefit from them. In a later post we will take a look at the other side of the coin, and touch on some sectors or businesses that may continue to struggle in the post-COVID world.

Online Ordering

Every afternoon the UPS truck drives down our street, often stopping once or twice so that the driver can deliver packages to our neighbours. I've chatted with him a few times, and to say that he is busy is like saying that the Titanic had some trouble with ice. It's true, but it doesn't do the situation justice. In his words, it's like the winter holiday season, only right now there's no end in sight. This makes sense. Online ordering during the lockdown period has exploded. People who might never have thought of ordering from Amazon are now regular users of it and other, similar services. The sector has seen what would have likely been a five to ten-year evolution in shopping habits crammed into a three-month period. While people will likely revert to in person shopping for some items as restrictions ease off, they will just as likely continue to use online platforms for convenience and safety reasons.

Many of the companies which stand to benefit from this surge in online activity have already seen their share prices turn higher. Companies like Amazon, and Wayfair have seen significant increases in their share value. Similarly, conventional retailers who have quickly adapted to the online world have also done well. Lululemon shares are up 33% as of this writing, both on the backs (literally) of a trend towards casual wear and a very strong online ordering and delivery process. Going forward, portfolios that have exposure to both the online giants and the more technologically nimble traditional retailers will likely continue to reap benefits.

Ecommerce & The Cashless Society

To help cope with fears about transmission of the Coronavirus on surfaces, many stores have gone cashless. The ability to tap your card or your phone without coming in contact with another person certainly helps reduce risk of contamination from a health standpoint. From a shopping experience standpoint, it also introduces an element of convenience that will likely remain attractive even after the risk of catching Coronavirus diminishes. Companies like Square that offer mobile payments solutions will likely benefit from this trend.

Similarly, those companies that provide the infrastructure for online and cashless shopping are likely to continue to benefit. In this space, a company like Visa, which supports the world’s largest network of electronic payments, should continue to see decent growth. Visa is as much a technology company as it is a financial services firm. One common question people have about Visa is what happens if people are unable to pay their credit card bills? In this case, it is the issuers of the cards, not Visa, who are at risk. Visa simply provides the background infrastructure and payment network and charges a fee on each transaction. As long as people are using their Visas for purchases, they will continue to collect their fees.

Social Distancing and Remote Working

One of the biggest changes to come about in response to the Coronavirus is the significant increase in people working remotely. As I write this, I am sitting in my home office. Likely, many of you who are reading this are doing the same. While we certainly expect people will go back to the office once it is safe to do so, we do not expect them to go back in the same numbers or manner as they did before. Many companies have already indicated that they will be reviewing their remote work policies and expectations, and likely this trend will continue as technology improves and people become more comfortable with this new way of working.

While this move towards remote work has a number of negative implications for certain sectors (which we will look at in our next post), it also stands to benefit businesses that support this kind of infrastructure. Microsoft and IBM both have significant cloud computing operations that can support the massive networks needed to keep a remote work environment running. Microsoft, along with companies like Zoom and Skype, also provides virtual communications technologies that will be more important in a world where your coworker or client isn't sitting across the desk from you.

These are just three of the trends we expect to see continue into the coming months. In our next post, we will look at the negative consequences of some of these factors, and what types of companies may be best avoided as a result. In the meantime, feel free to get in touch if you want to review how your portfolio is positioned for the post COVID world. We look forward to hearing from you.