Pandemic Stocks Locked Down?
When the COVID-19 pandemic struck the market in March 2020, portfolios went two different ways: if you were Bill Ackman, your Hedge paid off finely, leading to a positive portfolio, and if you were anyone else, your portfolio took a hit. If you were invested in healthcare, that was down. If you were invested in energy, you were down massively. If you were invested in travel and leisure, those stocks crumbled. I’m sure you get it by now, every sector fell by a lot, and we lost a good chunk of our money. However, I forgot to mention one more portfolio possibility: people who invested in pandemic stocks.
The term “pandemic stock” seems pretty niche because pandemics are split between decades, and even centuries. Still, that was the term given in 2020, and it’s likely to stick. A pandemic stock is simply one that has benefitted because of the COVID-19 lockdowns, with little to no impact on earnings. During 2020, I’m sure you’ve been in a Zoom call or Microsoft Teams conference. You’ve likely ordered a lot of items on Amazon, used Slack to communicate with your business, and received medical assistance through Teladoc. More recently, you might’ve gotten a dose of the Moderna vaccine. These are all examples of businesses that didn’t falter due to the virus and saw an increase in demand for their services. In the case of stock prices, Zoom and Teladoc saw their shares increase massively, and Moderna saw a modest bump in their stock. Microsoft, Amazon, and Slack fell with the broader market, but to a lesser extent. These stocks have also enjoyed the months since March as the US couldn’t fully clear the pandemic yet leaving them with continued demand.
Unfortunately, it could be the end for these stocks. Some of them, at least. On Thursday, the CDC updated their guidelines for fully vaccinated Americans, saying that they do not need masks in most places now. This solves for the problem that these business models were made to solve, especially for Zoom. The online communications platform was used by many businesses and schools, but they do not need it anymore as schools will be reopened and adults can go back to work, mask less. Teladoc could still survive as masks are still recommended in doctors’ offices, but they will have a massive decrease in demand. Slack could also follow that same line, but businesses were still using them before the pandemic, which is a good sign. The other 3 examples seem to sit safe; Moderna will survive as they can continue to innovate and create new vaccines; Amazon was already annihilating the retail industry before the pandemic; and Microsoft doesn’t have much reliance on Teams, with Azure providing a great source of business. Do you think pandemic stocks still have a bright future?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.