With markets rallying their most in a single day since 1933 on the back of a gigantic stimulus bill, there’s talk that this may be the bottom
. And after one of the most aggressive 35% selloffs in market history, you’d be forgiven for wanting it to be so. While economic uncertainty
may continue for some months yet and volatility in the stock market
might hang around with it, the canny investor is eyeing up companies that are well placed to lead the eventual recovery from the front.
More people than ever before are working from home as a result of efforts to contain the spread of coronavirus but the internet is going nowhere which means tech, which came into the crash as the leading industry, will also likely be the most resilient industry to this social shift.
Netflix (NASDAQ: NFLX)
Shares of the video streaming giant were among those least affected by the S&P 500’s ferocious drop over the past month and when you think about it, this makes total sense. With bars and restaurants shutting down, people were forced to look for entertainment from within the 4 walls of their home and as a leader in the on-demand space, Netflix would have been top of mind for anyone that didn’t already have it. When the S&P 500 continued its slide to fresh lows on Monday, Netflix shares were already up over 30% from their lows last week and go into Wednesday’s session less than 10% from their pre-crash levels.
Indeed, looking at their chart, the last few weeks appear to be nothing more than a normal, healthy pullback that set a higher low than the previous one before shares bounced off support and turned back up north.
Prior to the coronavirus crash, Netflix shares had rallied more than 50% in the previous 5 months. They offer a very sticky, online-based product, built around a monthly subscription model which is an investor’s dream. It will be interesting to see how subscriber numbers jumped compared to previous expectations in their next quarterly report.
Facebook (NASDAQ: FB)
The social media stalwart was trading at all-time highs at the end of January, having staged an impressive recovery from what seemed like setback after setback in recent years. Facebook had proven itself capable of being able to pivot and adapt to changing fashions and generations and investors were liking what they saw. But, like every other name out there, its shares also took a hefty haircut as investors fled equities and risk-off became the dominant sentiment. At their low last week, Facebook shares were trading down almost 40% from January levels.
Like Netflix however, Facebook is fundamentally positioned to capture an upswing from people being stuck at home with little to no social outlets. For any users who had started to drift from the platform in recent months, it’s one of the first places they can return to catch up with friends and see what’s going on while we’re in lockdown. Similarly, new users will gravitate towards the platform which is also known for its stickiness. Any increase in its audience or screen time is good news for Facebook’s revenue as their ad business will thrive.
It seems that Wall Street has started to pick up on this and shares are already up 17% from last week’s lows, having bounced off a rising support line. Prior to this selloff, they’d rallied more than 80% in the previous year and there’s every reason to think that growing fundamental numbers will support similar moves in the future.
Amazon (NASDAQ: AMZN)
When you see headlines announcing that a company is rushing to add 100,000 employees to its books to meet a surge in demand, you know they’re onto something. Having ‘only’ fallen 25% in the previous month, Amazon’s shares are already up 20% from the lows and only about 10% from all-time highs. Considering home delivery orders of goods and groceries are going through the roof as people look to avoid having to go to the stores while also stocking up, this shouldn’t come as a surprise.
The company has been one of the standout successes of the past decade and seems to have a finger in pretty much every pie out there. Their e-commerce model has eaten up competitors and many are struggling to remain relevant in the face of incomparable margins and unbeatable prices.
With the coronavirus outbreak, Amazon finds itself in a win-win situation. The longer people are stuck at home, the more their online orders will increase. If normality returns sooner than expected, Amazon will still be the go-to online store for all of its pre-coronavirus customers and also for the new ones they picked up during the outbreak.