The COVID-19 pandemic is undoubtedly going to change things. However, it makes sense not to go overboard and start predicting wholesale changes to society. A better idea would be to look at the possibility that certain trends, already in place, will see accelerated development as a consequence. In this context, here are five ideas for investors to consider.
1. The car makes a comeback
The fear of getting an infection in a public place may well change consumer attitudes toward using a car rather than public transport for travel. Indeed, early indications from China are suggesting that car sales are receiving a boost from this.
That said, there's still the tricky issue of new car sales being linked with employment gains, and overall economic growth conditions. In this context, it might make more sense to favor stocks that make money from more miles being driven than new vehicles sold. Examples include the auto parts retailers like O'Reilly Automotive (NASDAQ:ORLY), AutoZone (NYSE:AZO), and Advance Auto Parts (NYSE:AAP). They make money when older cars are driven more, and ultimately need servicing -- something that's likely to happen in the recovery phase as economic activity picks up.
Throw in low gasoline prices encouraging drivers to rack up mileage and ongoing air travel restrictions, and the outlook is good for the auto parts retailers.
It's no secret that e-commerce sales are already in a long-term uptrend, but it seems the COVID-19 pandemic is only going to encourage an uptick in it. Indeed, UPS (NYSE:UPS) has already reported a spike in demand for e-commerce deliveries. That's good news for e-commerce-related companies in the near term. However, it's also good in the long term, as it might create a structural shift in some consumers' behavior.
If so, then it's likely to benefit the usual suspects such as Amazon.com (NASDAQ:AMZN) It's also going to benefit a business like Honeywell's (NYSE:HON) Intelligrated, a manufacturer of warehouse automation machinery.
3. Factory automation
The trend toward the increased use of robotics and automation is already in place, and the COVID-19 pandemic is likely to give it a boost. Not only does automation help reduce costs, it also helps companies avoid some of the extended shutdowns put in place by the pandemic. In addition, the increased use of automation could make it more viable for industrial companies to invest in bringing back manufacturing to the U.S.
That's probably the reason why industrial automation company Rockwell Automation (NYSE:ROK) and its industrial software partner PTC (NASDAQ:PTC) have outperformed the S&P 500 and the industrial sector this year. Rockwell still faces issues in the near term -- full-year organic sales are expected to decline by 6.5% to 9.5% -- but it's a company whose best days are yet to come.
Meanwhile, PTC, alongside other industrial software companies, is a beneficiary of the shift toward digitizing factories through the adoption of the Internet of Things (IoT).The PTC/Rockwell strategic partnership aligns PTC's augmented reality, IoT, and digital connectivity solutions with Rockwell's industrial automation platforms and should serve to boost growth for both companies.
4. Increased awareness of health and safety
The explosion in demand for personal protective equipment is obviously benefiting some companies, like 3M with its N95 respirators, in the near term, but it can also be a long-term driver as well. For example, food safety, clean water, and hygiene company Ecolab (NYSE:ECL) has an opportunity to benefit due to its market leadership in sanitation.
There is a bull/bear debate around Ecolab. After all, the hospitality and food service industries are key customers, and bears will see this as a potential issue. However, if you think that people will eventually start going back to hotels and restaurants as they did before -- except with a heightened sense of awareness around sanitation -- then Ecolab is an attractive stock.
5. Healthy buildings
The pandemic is also likely to raise the awareness of commercial and institutional building owners on the subject of health climate in buildings. It's a theme picked up on recently by the CEOs of Honeywell (which makes climate sensors and controls for buildings) and heating, ventilation, air-conditioning, and refrigeration company Carrier (NYSE:CARR).
Dave Gitlin, CEO of Carrier, sees an opportunity for his company to be at the forefront of the effort to improve the health of buildings through its ventilation and filtration solutions.Meanwhile, Carrier's transport refrigeration business could also benefit from the shift toward e-groceries as part and parcel of the trend toward e-commerce.
All told, these technologies and solutions are already available and it's likely that the aftermath of the pandemic will help to convince building owners to start adopting them. Something to look out for in the coming quarters.