As the COVID-19 coronavirus races across the globe and the U.S. teeters on the brink of recession, it might be tempting for investors to bury their heads in the sand and forego any new investments, wondering if they should buy stocks right now, particularly since we have no idea when the bottom will come and there could be more pain in store. As of this writing, each of the broader market indexes have lost about one-third of their value, with no end in sight.
Yet even as the majority of equities are falling, some companies are operating from a position of strength. Each and every one of the recommendations outlined below is beating the market right now, and has the potential to continue to capitalize on the unprecedented situation happening in the world.
Here are four current trends shaping the future and five stocks perfectly positioned to benefit from them.
Long distance is the next best thing to being there
Once upon a time, meetings were held in person, up close and personal. With social distancing the order of the day and large gatherings discouraged (or even outright forbidden), video conferencing is finally seeing its time in the sun. While remote meetings were already seeing greater use, the global pandemic has significantly accelerated their adoption by a growing swath of businesses and educational institutions. With workers and students alike forced to stay home, video communication and collaboration platforms have emerged as an important lifeline.
Zoom Video Communications (ZM -3.57%) is the best pure play in video conferencing. The platform is known for its free-to-use tier and ease of use, while also being lauded for its reliability. The company has been able to scale the number of users rapidly to accommodate the surge in demand that accompanied a growing remote workforce caused by the outbreak.
The platform also gained many converts by offering Zoom's services to schools for free during the outbreak. Earlier this month, mobile intelligence company Apptopia reported that Zoom's global daily active users had grown by 67% since Jan. 1, 2020, and the number has surely accelerated in the weeks since. It doesn't hurt that the company has $855 million in cash and marketable securities and no long-term debt.
Slack Technologies (WORK), a platform that allows for real-time workplace conversation and collaboration, has also come to the rescue for the rapidly growing stay-at-home workforce, with a surge of new users in recent weeks. The ability to send messages and share files with remote co-workers has become a necessity and Slack has been cited as being among the best.
In a regulatory filing last week, Slack said it had added 7,000 new paid customers in just six weeks, far exceeding the 5,000 customers it added in each of the third and fourth quarters. The company also has $769 million in cash and marketable securities and no debt on its balance sheet.
Streaming entertainment becomes an important escape
Streaming video had already become a part of everyday life for many viewers, but with consumers hunkering down at home to ride out the pandemic, adoption is surging. Not only are existing customers tuning in more often, but a greater number of holdouts are joining the ranks of streaming viewers.
When it comes to streaming entertainment, no platform can hold a candle to Netflix (NFLX -1.37%). The company closed out 2019 with more than 167 million subscribers, with expectations to add another seven million in the first quarter. While the company has significant market share in the U.S., there's plenty of opportunity in international markets. Anecdotal evidence suggests that its forecast may be too conservative, as the EU asked Netflix to throttle streaming rates and several analysts have found evidence of increasing demand.
Don't take my word for it. Netflix was upgraded by Baird on Monday to outperform (buy) from neutral (hold), saying the company will be one of the preeminent stay-at-home winners as the pandemic unfolds. The analysts also expect cord-cutting to accelerate due to a lack of sports on TV, giving them even more of a reason to switch to streaming.
Netflix is the riskiest among these picks, with $5 billion in cash, but a whopping $15 billion in long-term debt. However, with more than $5 billion in revenue coming in each quarter from existing subscribers, the streaming pioneer should be fine.
Technology brings back house calls
Because coronavirus is so highly contagious, it has become increasingly important to keep those with the disease from infecting others. The Centers for Disease Control (CDC) are strongly encouraging physicians to take measures to protect medical staff. That's where telemedicine comes in. Patients can book an appointment with their healthcare provider and meet with them remotely via a virtual health platform.
Teladoc Health (TDOC -3.62%) has emerged as a key player in the fight against coronavirus. The company announced that during a one-week period earlier this month, its virtual medical visits had soared 50% year over year, and that growth was escalating. While the company was seeing patient volumes consistent with peak flu seasons, demand spiked mid-week, with as many as 15,000 visits per day and soaring to 100,000 for the full week.
Insurers and patients were already adopting telehealth in greater numbers, but the need to stem the tide of the outbreak has accelerated an already important trend.
Teladoc's financial position is a bit riskier, with $517 million in cash and $440 million in convertible debt, but the soaring demand should give the company a solid backstop.
E-commerce goes from convenience to necessity
Amazon.com (AMZN 1.12%) had already made converts of a large portion of the U.S. population, and the company was beginning to work its way around the world. Amazon was also beginning to make inroads into online grocery delivery, and boasted more than 150 million Prime members worldwide.
Since the outbreak of coronavirus, Amazon has become an important pipeline of needed supplies as consumers hunker down in their homes to ride out the pandemic. Demand was so strong that Amazon was forced to stop accepting deliveries of non-essential items at its warehouses and temporarily suspend its Prime Pantry service to focus on much-needed consumer staples and medical supplies. The company is also adding 100,000 new fulfillment and delivery workers to meet the unparalleled demand.
Amazon has a rock-solid balance sheet, with cash and marketable securities of $55 billion and just $23 billion in debt.
Some might argue that the good news for each of these companies is already baked into their respective stock prices -- and that may be true to some extent, as each of these companies has significantly outperformed the market since the major indexes began their descent on Feb. 19.
That said, each of these trends was already gaining steam before the coronavirus pandemic gave them a boost. Once people experience the tools that facilitate remote work, the joys of streaming video, the ease of telehealth, and the convenience of e-commerce, there may be no turning back.