The pandemic has brought a range of changes to personal and professional lives. For investors, these developments and new trends have meant identifying companies that are likely to continue building sustainable competitive businesses that will do well in the “new normal.” Therefore, let’s discuss seven companies to invest in that pivoted perfectly in the pandemic.
Analysts debate how sizeable firms can pivot and re-adjust their businesses when their traditional markets change, almost overnight, as witnessed in 2020. For example, companies in the food chain — in many cases — saw their business grow exponentially and had to cope with the growth. This includes agricultural firms, producers, distributors and retailers. Additionally, little-known biotech firms became the sign of hope in developing a cure against the novel coronavirus.
Moreover, companies whose technological offerings helped people and firms connect digitally simply thrived and became household names in a matter of weeks. The increasing Environmental, Social, and Corporate Governance (ESG) momentum gave a major boost to firms operating in the electric vehicle (EV) and alternative energy space. And the list could be longer.
Overall, are certain sectors more or less prepared than others to withstand the new normal? Laura Gonzalez, Ph.D., associate professor of Finance at California State University, Long Beach, suggests:
“The new normal will offer opportunities to those that are flexible and willing to invest in the new skills, products and services the market is going to demand and compensate. Success will not depend on the type of industry, but rather on the capacity to innovate, adapt and foresee where the demand is going to be.”
In recent weeks, many public firms have been forced to pivot their strategies in order to adjust to Main Street’s realities. As a result, the successful ones have seen revenues soar, and share prices on Wall Street reach new highs. The current volatility and profit-taking in broader markets are now giving long-term investors the opportunity to start a shopping list for the near future.
With that in mind, here are seven companies to invest in since they are likely to build upon their recent successes in quarters to come, too:
- AstraZeneca (NYSE:AZN)
- DocuSign (NASDAQ:DOCU)
- DraftKings (NASDAQ:DKNG)
- ETFMG Prime Mobile Payments ETF (NYSEARCA:IPAY)
- Global X Cybersecurity ETF (NASDAQ:BUG)
- Proshares Online Retail ETF (NYSEARCA:ONLN)
- Walmart (NYSE:WMT)
So, let’s dive in!
Companies to Invest In: AstraZeneca (AZN)
Europe-headquartered biopharma company AstraZeneca, our first pick of top companies to invest in, represents both the global efforts to develop a vaccine against Covid-19 and the stability of passive income generation.
As of Sept. 21, the number of globally reported COVID-19 infections has surpassed 31 million. And overall, the pandemic has so far killed close to 1 million people globally. AstraZeneca, along with its partner Oxford University, is regarded as one of the forerunners to come up with a successful vaccine. Late-stage trials are underway in the U.K., Brazil, and South Africa.
In addition to its pivotal work on vaccine development, the group has a robust pharmaceutical product portfolio as well as a pipeline. It has an enviable research and development (R&D) division The range of drugs for diseases extends from cancer to cardiovascular conditions, diabetes, gastrointestinal disorders, infection, inflammation, respiratory troubles and renal issues.
These are drugs that patients need and buy even when economies and personal budgets contract. The drug development cycle is a long process, and the company is likely to hold on to its dominant position in many of the drugs it has for years to come. Therefore, investor confidence in the stocks rests high.
Overall, AZN stock shareholders have done well in 2020. In fact, AZN stock is up around 13%. In late July, AZN stock hit an all-time high at $64.94. And right now, the current dividend yield stands at 2.53%.
As a result of the increase in price, fundamental metrics have become rich, especially since early spring. Its forward price-earnings (P/E) and price-sales (P/S) ratios are now 23.6 and 5.71, respectively. That said, potential investors may regard any decline toward the $52.5-level as an opportunity to buy for the long-term.
San Francisco, California-based DocuSign is hailed as the innovative cloud-based electronic-signatures and document management company. It has greatly benefited from remote working trends in 2020.
Its range of products helps businesses to manage electronic agreements. Management initially focused on providing e-signature solutions. Last year, it also launched the DocuSign Agreement Cloud platform. Now companies can “automate and connect the entire agreement process” swiftly. Agreements signed with DocuSign are legally binding in over 180 countries.
Moreover, a recent report by Markets and Markets highlights, “The digital signature market is projected to grow from USD 2.8 billion in 2020 to USD 14.1 billion by 2026, at a Compound Annual Growth Rate (CAGR) of 31.0%…”
In early September, the company released second-quarter earnings. In that, total revenue was $342.2 million, an increase of 45% year-over-year. So, in other words, the company can continue to grow significantly in future quarters.
CEO Dan Springer said, “… the need to agree electronically and remotely has never been stronger, as shown in our 61% year-over-year billings growth. We are just scratching the surface of our Agreement Cloud opportunity and believe we are increasingly becoming an essential cloud-software platform for organizations of all sizes.”
Year-to-date, DOCU stock is up more than 185%. However, the shares are down nearly 20% from the all-time high of $290.23 seen on Sept. 2. Potential long-term investors may regard another 7%-10% drop to mean that the margin of safety has improved considerably. And in the long run, I expect DocuSign stock to see new highs, possibly quite regularly.
Companies to Invest In: DraftKings (DKNG)
Boston-headquartered DraftKings went public in late April, at the height of the lockdown. Management chose to do a reverse-merger with a special-purpose acquisition company (SPAC) instead of a conventional IPO.
The company’s beginnings go to 2012 when it was set up as a fantasy sports platform, where participants can create their teams of choice made up of real-life players. They compete for cash prizes, typically derived from entry fees. In recent quarters, the company has also moved to online sports betting, thanks to a 2018-Supreme Court ruling. Previously, a federal law barred gambling on sports such as football, basketball, baseball in most states. Since the ruling, though, all states have the go-ahead to legalize betting on sports.
The size of the fantasy sports segment in the U.S. is currently around $8 billion. By 2025, the domestic online gambling market is expected to reach close to $100 billion. Put another way, DraftKings could increase revenue substantially during this new decade.
Many analysts have initially debated whether DraftKings’ timing of going public was appropriate. After all, there were no live sports to bet on in the spring. However, management has been pivoting to extend its product offerings, such as eNASCAR, Counter Strike and Rocket League. The company has also launched a series of pop culture, free-to-play pool contests covering topics, ranging from political debates to competitive reality TV shows. In September, investors were also pleased to learn it would now collaborate with ESPN to promote online sports betting products on ESPN-affiliated websites.
Over the past five months, DKNG stock has been volatile. It was officially listed on April 24, opening at $20.49. On Sept. 18, it hit an all-time high of $55.70. If you believe the company may have significant growth prospects, you may consider buying the dips, especially if the price declines toward the $50-level.
ETFMG Prime Mobile Payments ETF (IPAY)
Our next choice comes from the world of exchange traded funds (ETFs). The ETFMG Prime Mobile Payments ETF provides exposure to companies that are playing a role the current transition taking place from cash/physical credit card payments to a mobile/digital system. It focuses on credit card networks, payment infrastructure and software services, payment processing services, and payment solutions (such as smart cards, prepaid cards, virtual wallets).
At present, current transaction value in the digital payments segment is around $5 trillion. IPAY, which has 42 holdings, tracks the Prime Mobile Payments Index. The top ten holdings constitute close to 55% of IPAY’s net assets, which stand around $770 million. Several of those ten companies are Fiserv (NASDAQ:FISV), MasterCard (NYSE:MA), Paypal Holdings (NASDAQ:PYPL), Square (NYSE:SQ) and Visa (NYSE:V). In terms of country allocations, the U.S. tops the list — with the Netherlands, France and Australia following.
YTD, the fund is up about 8%. And given the current volatility in broader markets, a decline toward the $50-level is likely. Therefore, if you believe smartphones, e-commerce, peer-to-peer (P2P) payments, and the “new-normal” following the pandemic will increase the number of digital payments worldwide, then you may put IPAY stock on your radar.
Companies to Invest In: Global X Cybersecurity ETF (BUG)
We have another ETF to bring to your attention. The Global X Cybersecurity ETF provides businesses in the cybersecurity technology space. Such firms may be developing security protocols preventing intrusion and attacks to systems, networks, applications, computers or mobile devices.
Analysts concur that cybersecurity is one of the fastest-growing segments of IT spending worldwide. It is a top priority for many firms adapting to a post-pandemic reality. The size of the global cybersecurity market currently stands around $150 billion.
BUG, which holds 28 holdings, tracks the Indxx Cybersecurity Index. The top sector allocation (by weight) is Information Technology (98.2%), Communication Services (1.4%), and Industrials (0.5%). The top ten holdings constitute more than 58% of BUG’s net assets, which stand around $42 million. Among those companies are CrowdStrike Holdings (NASDAQ:CRWD), Okta (NASDAQ:OKTA), Palo Alto Networks (NYSE:PANW) and Zscaler (NASDAQ:ZS).
So far in the year, BUG is up over 28%. And on Sept. 2, the fund hit an all-time high of 23.97. That said, those investors who believe the sector is likely to grow in the coming years too may consider investing in the fund, especially if the price goes toward $20 or below. If that’s the case, then this is one of those companies to invest in.
Proshares Online Retail ETF (ONLN)
Our final exchange-traded fund may piques the interest of readers who believe in the continued growth of e-commerce worldwide. The Proshares Online Retail ETF provides exposure to retailers that principally sell online or through other non-store channels.
ONLN, which has 26 holdings, tracks the Proshares Online Retail Index. The top ten holdings constitute close to 73% of the fund’s net assets, which stand around $170 million. The fund’s top holding is Amazon (NASDAQ:AMZN), which has a weighting of 24.08%. Next in line are Alibaba (NYSE:BABA), Qurate Retail (NASDAQ:QRTEP), eBay (NASDAQ:EBAY) and Etsy (NASDAQ:ETSY).
YTD, the fund is around 68%. In early September, ONLN hit an all-time high at $69.23. However, I believe the fund may deserve your attention as the price declines toward $55.
Companies to Invest In: Walmart (WMT)
With a market capitalization of $38 billion, Wal5mart hardly needs an introduction. It is the largest retailer in the world, and the company employs over 2.2 million people worldwide. In the U.S., most of the nation lives within 10 miles of a Walmart store.
In mid-December, the group released robust Q2 earnings. Total revenue came in at $137.7 billion, an increase of $7.4 billion, or 5.6%, YoY. Adjusted EPS was $1.56, while the Street was expecting $1.25.
Its U.S., same-store sales grew by 9.3%, thanks to sales of food and general merchandise. Investors were pleased to see that e-commerce sales jumped 97%. This is because consumers had both packages shipped to their addresses and also used curbside pickup. In recent quarters, Walmart has been more proactive in focusing on digital profitability, while keeping its brick-and-mortar business growing. And the pandemic certainly helped management in its efforts.
Yet, at this point, e-commerce accounts for about 8% of Walmart’s total revenue. Therefore, there is still room for growth. And as long as the Street believes the positive omni-channel revenue momentum is on track, WMT stock shares are likely to continue to add value to long-term portfolios.
YTD, Walmart stock is up around 14.5%, and the current dividend yield is about 1.6%. Moreover, its forward P/E and P/S ratio are 27.2 and 0.72, respectively. In turn, a potential decline of 5% or more in price would improve the margin of safety for potential investors. And therefore, we rate it as a long-term buy for companies to invest in.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation. She also publishes educational articles on long-term investing.