If 2020 can be summarized in two words, they would be: novel coronavirus. And that created a group of otherwise unrelated stocks known as “coronavirus stocks.”
At the end of 2019, I first heard about a new virus that was plaguing China. I didn’t think much of it, but the news only kept getting worse. Now, as the calendar has turned to August, many of us are wondering how much longer we will have to deal with the virus.
The answer is maybe longer than we think. Because there’s a growing consensus that any vaccine (or vaccines) we get may not be as available as we’d like. Some epidemiologists are describing the post-vaccine period as adjusting a dimmer switch. The economy will come back, gradually.
And there are reports that a large portion of Americans are already saying no to a new vaccine.
So that means, for the foreseeable future, our economy will remain in a position that I call “open, but not really.” We’re all trying to figure out ways to bring the familiar back into our lives.
But as investors, it’s our responsibly to look for opportunities in any market. And right now that means many of the coronavirus stocks you liked in March, you can still like today. These eight companies are keeping our economy going now, and have a business model that sets them up well for success as the virus drags on.
- Amazon (NASDAQ:AMZN)
- Dollar General (NYSE:DG)
- Zoom Communications (NASDAQ:ZM)
- Comcast (NASDAQ:CMCSA)
- Home Depot (NYSE:HD)
- Anheuser-Busch InBev (NYSE:BUD)
- Starbucks (NASDAQ:SBUX)
- Draftkings (NASDAQ:DKNG)
Here’s a look at what makes each promising stocks to buy despite virus woes.
Coronavirus Stocks: Amazon (AMZN)
It’s hard to put a stock that is selling for over $3,100 per share as one of the coronavirus stocks poised for growth. But AMZN stock has climbed 87% since March as of this writing. Make no mistake — Amazon was showing investors why it was more than an e-commerce company before the pandemic.
The company is the leader in cloud computing with Amazon Web Services (AWS). This allows consumers to have access to Amazon Prime Video, the company’s streaming service. And they can also chill out to Amazon Prime Music. And it can all be delivered to them through Alexa, the voice assistant that is becoming a staple in an increasing number of homes.
However, with millions of Americans continuing to spend more time at home, Amazon is reminding those same investors that it invented the category of e-commerce and is not going away. As time goes on, it seems likely that the novel coronavirus will likely be a part of our culture during the upcoming holiday season. And that only gives Amazon more reason to prove its mettle.
Dollar General (DG)
Americans love bargains in any economy. But when personal incomes are shrinking or are being threatened, they look for any savings they can find. And that is why Dollar General should continue to thrive. The novel coronavirus is a public health emergency. But the impact on the economy is impossible to ignore. Millions of Americans remain out of work. Extended unemployment benefits are expiring.
In short, many Americans are tightening their belts and that plays right into what Dollar General has been building for. Dollar General has expanded their brick-and-mortar footprint across the nation and now has more locations than any other retail chain. And a key to this strategy has been to grow its footprint in smaller areas that are not serviced by the larger chains.
That growth may slow down from what the company initially has forecast, but that should not have much effect on DG stock, which is up approximately 45% since March.
Zoom Communications (ZM)
Zoom Communications has been one of the darlings of the work-from-anywhere era. And there’s little doubt that many employees are going to have to wait just a bit longer before they can commiserate around the water cooler. This is one reason why ZM stock is up over 130% since bottoming out in April.
But there’s a bigger story emerging as well. While “open the schools” has become a rallying cry, the devil is in the details. Many schools will not be able to open for in-person instruction. And many districts that are will also be giving students a remote learning option. Plus, many parents have simply taken it upon themselves to enroll their child in remote learning programs that are not affiliated with their school district.
And as the holidays approach, Zoom may be a practical way for people to attempt to stay close at heart with family and friends. It’s not the reality we want, but right now it’s part of what living with the virus may mean. However you view it, it’s our responsibility as investors to take emotion out of it. ZM stock is a buy, period.
Another stock that is benefiting from more Americans staying home is Comcast. Whether it’s for binge watching their favorite shows or handling remote work or school, a high-speed internet connection is now an essential part of many homes.
I’ll agree that there may be other coronavirus stocks to play the high-speed internet market, CMCSA stock is still down for the year. However it’s up over 30% since April and that’s because Comcast has a couple of key catalysts.
One is the launch of its own streaming service, Peacock. On July 30, the company told investors that it was shifting its emphasis and resources from “linear TV” to streaming. And the company also announced that it has reached an agreement with the cinema chain owner AMC Entertainment (NYSE:AMC) that will allow Comcast to offer movies from Universal on demand starting 17 days after their release.
And speaking of Universal, Comcast has opened Universal Studios in Florida. While the short-term outlook for the theme park is cloudy, the company told investors that right now, weak revenue is better than no revenue.
Home Depot (HD)
The Covid-19 pandemic has ushered in a new era of home improvement. Honey-do lists are shrinking. And that has been good news for investors in Home Depot. HD stock has climbed approximately 75% since March.
As it turns out, some homeowners who loved the open concept model don’t like it nearly as much when their home has become their office and classrooms. Walls are going back up.
But Home Depot stock has more going for it than the home improvement activity of current homeowners. The market for new housing is also beginning to grow. Low mortgage rates are bringing a new wave of first-time home buyers who want more space during this pandemic.
And let’s not forget that we are entering the time of year when home decorating takes center stage. With other activities likely to be scarce, I imagine every home will be refreshing their holiday décor.
All of these catalysts should keep propelling the stock higher. And a nice dividend makes Home Depot one of the coronavirus stocks that should pay off handsomely for years to come.
Anheuser Busch InBev (BUD)
Anheuser Busch may seem like an odd choice among coronavirus stocks. As the nation continues to impose social restrictions, many of the company’s natural revenue streams are not available. Bars and restaurants either remain closed or are operating at far less capacity. And while live sports are back, the fans are not allowed to cheer their favorite teams in person.
And that took its toll on BUD stock. At one point, the stock was down over 50%. But it has made a comeback and is up over 35% since March. As it turns out, Americans can’t make up for the revenue the company makes from events. But they can try. And try they have. A quick stroll through my social media confirms that many consumers are prioritizing their alcohol purchases with about as much frequency as they were hoarding toilet paper. Do you think that will go down over the holidays?
But the key for Anheuser Busch is not what happens this year. In 2021, when the economy does start to truly open, the taps will open. And it will be hard to get BUD stock at this attractive price. And since I’m a fan of dividend stocks, I’ll point out that you’ll get a nice dividend for your patience.
While we’re on the topic of our vices, I’ll bring up Starbucks. Like Anheuser Busch, SBUX stock was hit hard at the onset of the pandemic. But some of that had to do with the company’s exposure to China. Ironically, it was the company’s recovery in China that helped Starbucks while its U.S. stores were closed. Now, the company is largely up and running and the stock has climbed over 30%.
Starbucks was already well seeded in allowing customers to order remotely. Now it’s just a question of whether the company will generate revenue. Two of the company’s most popular seasons are coming up. In fact, the company has already released its popular Pumpkin Spice products to grocery stores. As customers look for their creature comforts, look for Starbucks to be a beneficiary.
Wells Fargo analyst Jon Tower recently gave Starbucks an overweight rating with a higher price target. According to Tower, “investors currently underappreciate the pliability of Starbucks’ business model and sustainability of long-term sales drivers in the presence of temporary disruptions of the business related to Covid-19.”
Rounding out our list of coronavirus stocks is one that’s a bit more speculative, but should be ready to retain its upward trend. Draftkings is benefiting from the return of live sports. In the last three weeks, Major League Baseball (MLB), the National Basketball Association (NBA) and the National Hockey League (NHL) have all returned to action. And casinos are reopening as well.
All of these catalysts are giving gamblers something to bet on (other than their favorite stocks). And that has been a nice catalyst for DKNG stock. The stock is up over 200% for the year.
The rest of 2020 is still a bit cloudy. It does not appear likely that fans will be tailgating at college football games this year. But the outlook for the National Football League (NFL) is appearing to be a little brighter.
But putting that aside, sports betting is huge business. In fact, the sports betting industry is projected to expand at a compound annual growth rate (CAGR) of 8.8% until 2024.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for Investor Place since 2019. As of this writing, Chris Markoch did not hold a position in any of the aforementioned securities.