All of a sudden, the coronavirus pandemic has put the market into panic mode. The S&P 500 and other major indexes have all fallen more than 10% in just four days this week through Thursday, marking the fastest correction, a sell-off of 10% or more from a recent high, in market history.
The pullback has walloped stocks across the board. Predictably, cyclical sectors like energy and financials have gotten hammered, as have those sensitive to a global contagion, like travel and tourism stocks. Elsewhere, retail, restaurant, and entertainment stocks have tumbled as investors fear a supply chain disruption and Americans being less willing to venture out into crowded spaces if the disease spreads.
Tech stocks have also gotten hit hard, as many are closely tied to the global economy and count on China as a key supplier of chips and other components. Apple stock, for example, is down 14% over the four-day span after the company warned of supply shortages earlier in the month. Microsoft, meanwhile, issued a similar warning on Wednesday. Even "safe" stocks like Procter & Gamble are down double digits.
Despite the widespread sell-off, there have been a handful of stocks that have gained this week. Some have benefited from strong earnings reports, while others have gained because investors believe they could actually benefit from the outbreak in one way or another. Below are three surprising and not-so-surprising winners this week.
1. Teladoc Health
You might think that a company specializing in telehealth -- providing medical consultations through videoconferencing and other such tools -- would be well-positioned during a global epidemic, and you'd be right. Investors believe that Teladoc's (TDOC 0.05%) services would become more valuable during such an outbreak, and the event shows the power and attractiveness of telehealth, which offers a greater scalability and reach than conventional visits to the doctor. Teladoc's capabilities should also improve as telehealth technology gets better.
The stock is up 18.9% so far this week. Most of those gains came from its fourth-quarter earnings report, which included better-than-expected revenue growth at 27% and revenue growth guidance of 25.6% to 28.3% in 2020. Still, the stock was up before earnings came out, having gained 3% during the week before the earnings report.
Teladoc may not need an actual outbreak to take place to boost its growth, as its relevancy has already been made apparent by the threat of an outbreak. Zoom Video Communications, a company that provides cloud-based videoconferencing tools for businesses, also gained this week, rising 11.4% as downloads for the service soared amid the coronavirus scare.
2. Peloton Industries
Normally, investors rush into safe-haven stocks during an event like coronavirus, but that's not what's happening with Peloton (PTON 0.34%), a high-priced growth stock. Peloton has been a big winner, climbing 11.8% on little direct news. Some analysts think that the maker of high-priced interactive stationary bicycles and treadmills could be a beneficiary from the coronavirus scare as an outbreak would lead to more gym enthusiasts choosing to work out at home and avoid the gym, where germs are easily transmitted.
Peloton is a high-risk stock as an unprofitable maker of a niche product in an often-faddish industry. There's no evidence that interest in the company's products has risen over the past week, but if the virus expands in the U.S., it's possible that Americans will experience some of the lockdown conditions that have taken place in countries like China and Japan, where schools and businesses have closed. That would likely motivate more people to work out at home, and perhaps consider buying a Peloton product and paying for a membership.
By contrast, Planet Fitness stock has fallen 20% over the past four days, showing that investors are fearful that an outbreak could douse prospects for the discount gym chain. Netflix, another high-flying growth stock, has also outperformed as, like Peloton, it benefits from a threat that would encourage people to stay at home. However, that stock is still down 2.9% over the past four days.
Clorox (CLX -1.46%), the maker of its eponymous bleach and a number of other household products, has gained modestly over the past four days, up 3.3%, but the stock has still bucked the broader trend in the market and outperformed peers like Procter & Gamble and Colgate-Palmolive.
Clorox's strength in cleaning products likely gives it an advantage over other consumer staples companies, as its namesake bleach is a disinfectant and one way to help control the spread of a COVID-19 virus.
Clorox CEO Benno Dorer told CNBC's Jim Cramer earlier this month, "We do have products that can help combat the coronavirus, but we have not seen an impact on sales yet." He also said the company was prepared to build inventory if needed as demand for its products grow.
In a similar fashion, Lakeland Industries, a maker of disposable protective clothing that was worth less than $100 million before this week, has jumped 61% in the last four days as investors anticipate a run on clothes that could be used in a quarantine for cleanup or in another sensitive environment.
The crash this week is a reminder that markets can change fast and that news moves quickly. But even in one of the sharpest sell-offs in market history, there are still stocks moving higher.
The SARS-CoV-2 virus continues to develop, but the latest coronavirus news is that the spread seems to be slowing in China. Starbucks said it had reopened most of its stores there, and Apple said it was reopening factories in China. Next week, in other words, could bring an entirely different set of winners.