The S&P 500 has bounced back in a big way in the past two months, but the near-term outlook for the US economy is still in limbo thanks to the economic shutdown. Earnings commentary seems to have eased Wall Street fears somewhat for the time being. The US government has also made clear that it intends to step in to support American companies as the nation rides out the downturn. However, with the latest US-China tensions and the Fed’s call for additional policy measures to prevent the mounting risk of long-term damage to the economy from COVID-19, pandemic analysts are starting to identify buying opportunities among beaten-down stocks. Here are seven of the best performing companies during the outbreak.
Quarantine efforts and lockdown orders are forcing many to look for entertainment at home. It’s no surprise then that Netflix is in high demand, and investors are enjoying the rewards with stock up 16% in the first quarter.
Graphics chipmaker Nvidia has also weathered the market downturn, with its shares up 12% so far this year. Its business has proved to be resilient and the company is showing signs of strong growth.
Clorox, maker of disinfectant wipes, continues to be a hot stock as the company’s products remain in high demand amid coronavirus fears. The stock gained nearly 13% in the first quarter.
Biotech company, Gilead Sciences, which is at the forefront of developing a treatment for COVID-19 also makes the list. Gilead Sciences has seen its stock rise 15% over the last three months compared with the market’s widespread losses.
Microsoft is on this list too. With millions of people working from home, cloud computing services have never looked more attractive. A balance sheet that’s flush with cash helps as well.
The company’s CEO pointed out that daily phone calls have more than doubled and the duration of those calls is longer than previously. It turns out that when Americans are stuck at home, they call each other a lot.
Since the company announced its support for frontline workers and a $25 million commitment to combatting COVID-19 on 17 March, the share price has risen.
The coronavirus has taken an increasingly severe toll on markets during the first three months of 2020. The Dow Jones Industrial Average fell over 23% in its worst quarter since 1987, while the S&P 500 plunged 20%, its biggest quarterly loss since 2008. All told, picking winners and losers in a crisis is a tricky exercise. The companies that are making a killing today due to the lockdowns might not do so well once the crisis blows over and people start going out again, even if that takes time.
For investors with a long-time horizon, real value could lie with high-quality names that have taken a hit, but have strong long-term growth prospects and clean balance sheets to ride out this crisis. For investors with a greater tolerance to risk, the most beaten-down names might also be interesting, as any developments related to the virus saga could trigger epic turnovers. That being said, we are still in the early days of a recession, so caution is warranted.