It’s a strange new world we find ourselves in. Prayers for everybody affected by the Coronavirus, which at this point, is all of us. This is a human tragedy first.
But my job…
Look, the US and the whole world are already in a major recession. Revenues at companies like Apple for the next 90 days could be down 20% or more versus what the analysts thought they might be. All those small businesses and large companies too that have too much debt and not enough cash but are seeing cash flow go negative as revenues disappear are in trouble. The government might help them. It’ll be tough for the Federal government programs to not get hijacked by the giant corporations as always, so small businesses are going to be adversely affected. That’s why the Russell 2000 is down another 10% today.
On the other hand, let’s flip the script and think about who’s going to benefit and how in the strange new world we find ourselves living in.
With all these universities and businesses and government offices shifting to online remote meetings and work, we need to own some of the companies that facilitate this. It’s most likely that even after the Coronavirus Crisis passes that this trend will sustain. And all companies will develop contingence plans for the future that includes letting employees having a lot more flexibility about working remotely. As evidenced in this Twitter thread that asks “Anyone know what companies universities use for online classes?,” it appears that Zoom is by far the de facto standard platform for this remote work movement. So I am starting a position Zoom ZM. As usual, I’ll start with about 1/3 of a full position and look to add more in coming days and weeks. Slack will also be a big beneficiary from this remote work environment. I’m adding to that position here too.
The companies that enable remote work will also benefit from this remote work trend. That means Amazon Web Services, Google Cloud and Microsoft Azure. Not to mention that one of the biggest costs for running these cloud networks is energy, which is going to be much less expensive for the next couple quarters at least and those savings will be pure earnings. I’m nibbling on AMZN and GOOG and opening a new position in MSFT.
Here’s another thought — With all the closures at stadiums and other public places that won’t have people in them to advertise to, those advertising dollars are going to be spent online too. People are going to change their behavior and how they go about existing in public physical spaces, but they will not stop spending time on social networks. In fact, I would expect people to spend even more time than ever on social networks out of boredom if nothing else. I’m nibbling on FB, TWTR and opening a new position in PINS.
People staying at home and not going to concerts and sporting events is going to drive people to play more video games. The video game platform industry is a global duopoly — Sony Playstation and Microsoft XBox. I’m adding to SNE and as mentioned above, I’m buying MSFT too.
I also nibbled on some more AMD (server chips will be in big demand to make these remote workers work). And of course, people will be spending more time at home streaming TV and movies instead of going to the movie theaters. I’m nibbling on more ROKU and NFLX.
I’m not saying that these themes will magically keep these stocks from tanking with the broader market if the broader markets continue to crash here. So give yourself some room to add more, as usual. But these are some Revolutionary companies that I’d like to own anyway and that are actually likely to benefit from some of the Coronavirus Crisis and their stocks are being sold 30% or more off from their recent levels.
Be careful out there. Don’t draw a line in the sand. But just about the only way that many of these stocks that we’re buying here were ever going to be taken down to these levels was going to be from a Black Swan event. That’s what’s happening, isn’t it?
We’ll do this week’s Live Q&A Chat this morning at 11am ET.