The coronavirus pandemic is causing havoc around the world, with cities, states, and countries implemented varying degrees of shutdowns and stay-at-home orders to slow the spread of the virus. Although the effects of these policies have been crippling to most businesses, some companies have benefited from the shift in consumer behavior.
These tend to be either digital enterprises or those that have been deemed essential by authorities and allowed to remain open during the pandemic. Yet even some of those businesses that have benefited from increasing sales have experienced surging expenses as they have adjusted to operating under challenging circumstances.
While it may be true that some investors on the stock-trading platform Robinhood like to buy into investments that are high-risk with high-profit potential, that may not be true for all Robinhood traders. If you want to add a bit of balance and still participate in an excellent upside, you can protect your portfolio against the worsening of the pandemic by buying these stocks that rank in the top 50 among Robinhood traders.
Buy Netflix and chill
One such stock Robinhood investors can buy is Netflix (NFLX 0.94%). The streaming service provider has 193 million subscribers worldwide and is growing. In its most recent two quarters alone it has added a whopping 26 million paying customers.
As of its most recent update, the average revenue per user (ARPU) Netflix receives is $10.91, which is up slightly from the previous quarter ARPU of $10.87. Given the uncertainty surrounding the pandemic and the extent to which people's incomes are impacted around the world, now may not be the best time for a price increase. However, being that it is the best-in-class streaming provider, and there is a significant shift of consumers from linear television to streaming, the company can raise prices on its massive user base in the long run.
Not only is Netflix benefiting from a surge in usage and users because of stay-at-home orders, but it is also saving hundreds of millions of dollars in spending on content. It's also spending much less on marketing. In the first two quarters of its fiscal 2020, marketing spend is down $281 million or 23% from the same period a year ago.
The company's cash flow projections improved from an initial estimate for fiscal 2020 of negative $1 billion to a negative $2.5 billion range. It now expects cash flow to be flat to positive. Adding tens of millions of subscribers while reducing content and marketing spend can probably last only as long as stay-at-home orders are in effect, which makes Netflix an excellent stock to protect against the coronavirus.
Amazon is primed to accelerate revenue in the event of more stay-at-home orders
E-commerce giant Amazon (AMZN 0.24%) is experiencing a surge in orders and revenue because of the pandemic. In the most recent quarter, sales were up 26% from the prior year. Admittedly, the company said operating expenses would go up by $4 billion in the next quarter to adjust to coronavirus-related challenges. Still, operating cash flow was $40 billion in its most recent quarter, and the increased expenses can be reduced after the pandemic has run its course.
Many of the customers shopping during the pandemic are new to Amazon, and some portion of these new customers will stick around for the long run. Here is where the value is for investors -- the millions of new customers who become loyal Prime members.
As of January, the company already has over 150 million Prime members worldwide. Importantly, Prime members shop more than non-members, both in terms of how often they buy and how much they spend. This in turn attracts more third-party sellers to Amazon's platform, which allows shoppers to divert more of their purchases from brick-and-mortar stores to Amazon.
Additionally, Amazon has its own streaming service, Prime Video, that it offers as a perk to Prime members. It, too, is benefiting from the surge in demand for in-home entertainment. In March, the service saw an audience increase of 35%. The combination of Prime Video and consumers wanting to shop on Amazon to avoid stores makes an Amazon Prime membership an excellent value proposition.
If the coronavirus pandemic continues to keep people from going out, it will increase their dependence on Amazon, making the company an excellent investment to protect your portfolio against the virus.
What this means for investors
While some parts of the world are seeing reductions in COVID-19 cases, other regions are experiencing surges. If localities need to reissue stay-at-home orders, it will significantly hurt businesses that rely on people being able to go into public spaces.
Adding the already popular Robinhood stocks Amazon and Netflix to your portfolio can help protect it from a resurgence of coronavirus cases that could further decrease brick-and-mortar retail activity.