4 Sectors In Focus Following Coronavirus-Induced Selloff

With the novel coronavirus spreading rapidly beyond China, investors across the globe are getting increasingly puzzled about whether to exit or enter the market at this time of correction. Though the major benchmark indices have plummeted, what’s assuring is that, historically, such panic-driven market correction has been followed by fast recovery.

Many experts are of the view that this COVID-19-led stock market correction can be utilized as an opportunity to make new investments. Let us delve deeper:

International Trade Stands Still

The ongoing mass quarantine of towns and closure of manufacturing units across nations hit by the coronavirus outbreak have led to supply chain disruption. As such a situation is correlated with the volume of export and import, it is considerably impacting global economic growth.

The aviation industry is one of the worst hit with restricted international travel. The travel and tourism industry that had been witnessing growth over the past few years has been dealt a huge blow. In this regard, we note that, according to the 2018 report of the World Travel & Tourism Council (WTTC), this sector accounted for 10.4% of global GDP, 319 million jobs and 10% of total employment. Undoubtedly, the current situation is going to hit current-year economic growth in a substantial way.

Energy, Technology and consumer discretionary product are the other affected sectors.

A number of companies that have manufacturing units in China are closed for a month now. According to a report by UNCTAD (United Nations Conference on Trade and Development), this production loss is expected to have repercussions elsewhere through regional and global value chain. In this regard, China Manufacturing Purchasing Manager’s Index (PMI) fell by about 22 points in February (last-provided figure). This decline implies a 2% reduction in annualized export. Looking at the current scenario, we expect this trend to continue in March and April, making the international trade scenario grimmer.

Sectors Holding Ground

While growth has taken a backseat for most sectors, COVID-19 has, however, opened up enormous growth prospects for a few. Here we discuss four such sectors.

Consumer Staples stocks are in focus in the current scenario. With mass quarantine and home isolation, panic buying has increased. Consumers are hoarding toilet papers, sanitizers, face masks, other personal hygiene products and basic packaged food and beverages. Further, delivery disruption of online retailers like Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) is compelling customers to go for stockpiling. Going by a Investopedia report, “As retailers scramble to restock their supplies, traders may find buying opportunities in companies that manufacture and/or sell these in-demand staple products.” Two consumer staples stocks that investors may consider buying now are COCA-COLA HBC (OTC:CCHGY) and Henkel AG & Co. (OTC:HENKY) , both with a Zacks Rank #2 (Buy).

Homebody Economy stocks have gained significant momentum over the past couple of months as more and more people remain confined to their homes. While people are limiting their outdoor activities as much as they can, online gaming company Tencent Holdings (OTC:TCEHY) , subscription streaming entertainment channel Netflix, Inc. (NASDAQ:NFLX) and interactive fitness products provider Peloton Interactive (NASDAQ:PTON) , all with a Zacks Rank #2 are a few of the Homebody economy stocks that investors can bet on now. You can see the complete list of today’s Zacks #1 Rank stocks here.

Telemedicine sector players too are witnessing good response after the Centers for Disease Control and Prevention asked healthcare service communities to increase the use of telemedicine in broader ways to limit COVID-19 outbreak in February. Added to this, the House recently passed an emergency spending bill, allowing medicare reimbursement for telehealth during crisis situations. Accordingly, investors may opt for stocks like Teladoc Health, Inc. (NYSE:TDOC) . The company is currently enabling health systems to provide virtual care on a greater scale through the technology and capabilities of both Teladoc Health as well as its newly-acquired InTouch Health platform. The stock carries a Zacks Rank #3 (Hold).

At present, a number of Biomedical companies and drug makers are competing to find a treatment option against COVID-19. NovaVax and Roche are two of them. However, Gilead Sciences (NASDAQ:GILD) seems be the clear winner in this race, following the latest Centers for Disease Control and Prevention (CDC) confirmation, Going by ‘The Street’ report, yesterday, CDC director Robert Redfield told lawmakers that Gilead's remdesivir drug (originally developed to fight Ebola virus) is being used to treat some U.S coronavirus patients on 'compassionate' grounds.

Conclusion

Long-term investors should not panic over this ongoing COVID-19-induced sell-off and change their investment strategy. Instead, they may consider it as temporary shock. Going by a Market Insider report, Wedbush analyst Daniel Ives expects companies such as Apple (NASDAQ:AAPL) to normalize quickly once the disruptions from the outbreak have passed.

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