The Covid-19 pandemic triggered a financial and economic meltdown of epic proportions, rivaled only by the Great Depression, resulting in the fastest bear market in history.
While the energy industry is being forced to completely reinvent itself, with renewables coming out on top and diversification the new name of the game, and while travel and tourism segments aren’t likely to recover anytime soon, what happens if there’s yet another lockdown?
The investment thesis has already changed irreversibly, and 5 sectors are soaring. In the event of another lockdown, those same sectors will solidify their victories, while some sub-sectors that were still behind will catch up for the second rally.
#1 Biopharma and The COVID Gold Mine
For the foreseeable future, the biopharma sector will be completely consumed by a high-stakes game over the development of treatments and a vaccine for COVID-19. It’s a no-holds-barred game that is geopolitical at its most vicious level.
Indeed, stocks of companies in the race to develop Covid-19 vaccines or drugs soared over 470% from January 2020 to July 2020.
A handful of biopharma stocks have soared beyond imagination in 2020, including Vaxart Inc. (NASDAQ:VXRT), which enjoyed a boost of over 2,000% in the first and second quarters of 2020.
Sorrento Therapeutics (NASDAQ:SRNE) saw YTD returns from January-July of nearly 140%, with the biggest boost coming after an in vitro assay for its COVIDTRAP vaccine was able to “completely inhibit” the ability of the coronavirus to infect cell cultures at low concentrations.
And it’s not just about a COVID vaccine. The pandemic has given telemedicine a decisive boost as the “new normal” in healthcare. A case in point is Teladoc Health (NYSE:TDOC), a telemedicine and virtual health care company, which managed to rack up gains of over 173% between January and July 2020.
#2 Work From Home–Forever
One of the biggest lifestyle shifts forced by the pandemic has been the move to remote work. Many businesses are now allowing their employees to telecommute and work from home in a bid to enhance social distancing and minimize chances at infection.
Videotelephony and online chat services company Zoom Video Communications Inc. (NASDAQ:ZM) has emerged as the biggest winner here with its stock surging over 300% in the first and second quarters of 2020.
Now, Zoom is a household name. In December 2019, it had ~10 million active users. By April 2020, the company reported 300 million daily meeting participants.
It’s not without competitors because this is now a high-demand segment.
By April 2020, networking company Cisco Inc. (NASDAQ:CSCO) had 300 million Webex users, while Alphabet Inc.’s (NASDAQ:GOOG) Google Meet was adding 3 million users per day and boasted over 100 million by July 2020. Not to be left out of the game, Microsoft Inc. (NASDAQ:MSFT) said in April 2020 that its Teams service recorded robust 70% growth in the number of daily active users (DAU) in a single month to 75 million.
However, unlike Zoom, these are just auxiliary businesses for these tech giants and might therefore not readily drive stock performance.
Other remote communication stocks set to rise even further include business messaging platform Slack Technologies (NYSE:WORK), which saw YTD (January-July 2020) gains of over 50%.
#3 Streaming: The Final Push for Entertainment
With social distancing in effect, people who get their daily dopamine fix through entertainment have to mostly do at home. As a result, streaming services are booming and will continue to do so.
Netflix Inc. (NASDAQ:NFLX) is the indisputable leader in the space, gaining nearly 70% in the first two quarters of 2020, with analysts exceedingly bullish on the future. Streaming platform Roku Inc.(NASDAQ:ROKU) is also expected to continue tearing up YTD figures going forward in the “new normal”, and Amazon Inc.’s (NASDAQ:AMZN) Prime Video service is set for blockbuster performance, having seen a nearly 70% surge in subscribers for the first half of 2020.
Video gaming companies are also doing roaring business with Americans spending more time on their consoles. Investors are all over Activision Blizzard (NASDAQ:ATVI), the maker of massively popular video games such as Call of Duty, Electronic Arts (NASDAQ:EA),Take-Two Interactive Software(NASDAQ:TTWO) and Zynga Inc. (NASDAQ:ZNGA).
Meanwhile, with gyms featuring as a dangerous venue for the spread of disease, makers of home exercise equipment Peloton Interactive (NASDAQ:PTON) and Nautilus Inc. (NYSE:NLS) have surged and will be direct beneficiaries of another pandemic lockdown.
#4 eCommerce: Now It’s a Habit
Online shopping hasn’t just soared in the pandemic—it’s breached unthinkable new thresholds. Even without another lockdown it’s set to continue making massive gains because shoppers get used to the convenience.
But more than that, a new age group—45 and older—has latched onto the practice where they resisted prior to the pandemic. That fact adds millions of new ecommerce participants who very likely won’t give up the habit even once we’re COVID-free.
Again, Amazon Inc.—the ironman of ecommerce even before the pandemic—saw its stock soar over 70% in the first half of 2020. Other giants to keep an eye on include eBay Inc. (NASDAQ:EBAY) and online payment darling PayPal Holdings (NASDAQ:PYPL), is up 64.93% over the timeframe—both of which are expected to continue to rival Amazon in terms of stock boosts. In the event of another lockdown, these stocks will soar even further, but they may continue on their upward trend regardless.
#5 Information Technology: The Backbone of It All
Always the quintessential all-weather sector play, IT is set to continue to lead all 11 sectors of the U.S. stock market, with FAANG stocks—Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon, Netflix and Alphabet–seriously sharpening their incisors.
But looking slightly below the obvious surface here, a pandemic lockdown won’t just push Apple devices sales for stay-at-home work and entertainment, it will push sales of software and hardware.
Chips are where investors can get in on the rally if they missed it earlier in 2020 because they’re part of a broader trend.
As Gina Sanchez, CEO of Chantico Global told CNBC recently, “The trend towards remote working, the revamping and revisiting of business continuity plans, the push towards 5G, all of that has played into the hands of semis stocks.”