With cases of the novel coronavirus beginning to spike once again, investors are starting to pull out their watchlist of coronavirus stocks.
In February, the markets were marching to new all-time highs. Investors ignored the coronavirus news out of China and Europe, as equities forged higher. Then all of a sudden, the virus mattered as the U.S. started to be impacted by it as well.
Why it took so long to matter is unknown, but is ultimately unimportant at this point. It resulted in a punishing decline in the overall stock market in the first quarter, with the S&P 500 falling roughly 35% in a month’s time. In that span, virtually every stock was under pressure.
Most were hurt at some point during the volatility. However, the market quickly identified the stocks that were worthy to own during the Covid-19 outbreak. Specifically, it sought out the names that would either have an acceleration in growth or stocks that would have stable growth.
It created an extreme burst in demand for certain stocks — known as “coronavirus stocks” — that were either safe to own or generating the best growth (or both). With that in mind, let’s look at seven of them:
- Zoom Video (NASDAQ:ZM)
- DocuSign (NASDAQ:DOCU)
- Amazon (NASDAQ:AMZN)
- Walmart (NYSE:WMT)
- Clorox (NYSE:CLX)
- Peloton (NASDAQ:PTON)
- Activision Blizzard (NASDAQ:ATVI)
Now, let’s take a closer look at each one.
Coronavirus Stocks to Buy: Zoom Video (ZM)
Zoom Video was one of the first stocks to take off when the pandemic started. In fact, its rally started before the collapse of the broader market.
When the stock market sold off in mid-February, Zoom had rallied about 25% in the first 11 trading sessions of the month. Zoom barely budged when the market was putting in a bottom a month later. But from the last trading day in January to the highs in October, Zoom has rallied almost 700%.
Talk about a massive winner. Shares have enjoyed years worth of gains in just a few quarters. That’s because the company has enjoyed a few years worth of growth (or perhaps more) in just a couple of months.
Obviously, Zoom can’t rally 670% every year. However, its video conferencing — be it for personal or business reasons — makes it an in-demand platform. Particularly when there’s an ongoing pandemic.
So as cases begin to spike once again, lockdowns, curfews and reduced business travel are likely. Those situations not only vary by city and state here in the U.S., but by country in other parts of the world. But luckily for Zoom, it can take advantage, whether someone is in Hong Kong, Paris or New York.
Like Zoom Video, DocuSign is another name in the technology space that has seen an explosion in revenue due to the coronavirus. This name is attractive for one main reason: staying power.
From the company:
“We pioneered the development of e-signature technology, and today DocuSign helps organizations connect and automate how they prepare, sign, act on, and manage agreements. As part of the DocuSign Agreement Cloud, DocuSign offers eSignature: the world’s #1 way to sign electronically on practically any device, from almost anywhere, at any time.”
When the pandemic brought the world to its knees, most things stopped for a few weeks. Closing on a house, signing business contracts and sealing deals were off the table. But then, the world started back up again — albeit, in a much more cautious manner.
That said, just like Zoom helped keep the world connected, DocuSign kept the contracts flowing. Allowing for e-signatures upended the necessity to travel somewhere to sign. It ended the need to meet in person when closing a house or signing a contract.
Overall, moving these procedures to the cloud is a game-changer. And adding things like notarizing should only aid in the platform’s stickiness.
But unlike many other businesses, DocuSign should have staying power. Why? Because who’s going to want to go back to a way that’s more complex, takes more time and costs more money? No one.
Coronavirus Stocks to Buy: Amazon (AMZN)
There’s an interesting realization about the coronavirus. At a time during extreme lockdown and with activities drying up, one would expect spending to plunge. To an extent, it did. But it also funneled an explosion in online sales, with Amazon being the obvious benefactor.
And for that reason, the e-commerce juggernaut is one of our coronavirus stocks to watch.
As you can see from the St. Louis Fed, online sales have been increasing as a percentage of total retail sales for years. That’s been a long-term trend to begin with. But gasoline has been poured on the fire, as online sales have ignited during the pandemic.
Moreover, then there’s realization that the stimulus checks that were given out helped drive spending too. And as more and more people were temporarily or permanently out of work, they too spent more with the extra government assistance.
Overall, while Amazon is not the only retailer soaking up the growth, it’s the main beneficiary online. Let’s put it this way: With the coronavirus trends pretty well understood earlier this summer, Amazon reported earnings in July amid elevated expectations.
It didn’t matter.
Earnings of $10.30 per share came in way ahead of expectations. Revenue exploded 40% year over year to $88.9 billion, a full $7.5 billion ahead of estimates.
With cases picking back up, Prime Day landing in October and Black Friday through the holidays capturing its Q4 results, look for this stock to remain in demand.
Another retailer that’s done well during the coronavirus? Walmart. The company has done a remarkable job adapting to the new pandemic-driven world.
Walmart has been pouring billions into its e-commerce unit over the years. And while that business has generated solid growth over the last few years — again, as online sales make up a larger and larger portion of retail sales — it has really come to life during the pandemic.
Add on its order-online-and-pickup approach, and Walmart is pulling all the right levers to make it one of our go-to coronavirus stocks.
It helps that it’s an essential retailer, too. Whether people are staying at home, shopping online or going in store to shop, Walmart will be there. At the end of the day, Walmart is going to drive revenue with or without a pandemic.
Last quarter, sales of $137.7 billion easily cleared estimates by over $2.3 billion. Comp-store sales crushed it, as did Sam’s Club. But e-commerce growth of 97% really stood out. While the 1.5% dividend yield isn’t much, we know it’s safe during this uncertain time. Plus, it’s almost twice the payout of the 10-year Treasury yield.
Coronavirus Stocks to Buy: Clorox (CLX)
I don’t know when the world will stop disinfecting as many surfaces as possible, but I know it won’t be any time soon. As a result, Clorox will remain in consistent demand.
This one is a bit of a tough pick, though.
While Clorox is certainly a one of our coronavirus stocks, it’s been on a big run too. Thankfully, we’ve seen the stock pull back around 10% from its recent high in early August — giving investors an opportunity to buy this best-in-breed name.
The company makes the obvious products — Clorox wipes and bleach — but it also makes many other household names. Some of those brands include Kingsford charcoal, Brita filters, Pine-Sol, Fresh Step kitty litter and Glad garbage bags, among others.
Although this stock may pull back further at some point, I would be skeptical of Clorox’s business suddenly finding a lack of demand. Consumer and commercial interest in disinfectant should remain strong for a while.
Plus, its dividend is even more dependable. Paying out a 2.1% yield, Clorox’s 5% dividend hike in May was the company’s 51st-consecutive annual dividend raise.
Peloton has been one of the more interesting names on this list. The company went public just over a year ago on Sept. 26. Its IPO was priced at $29 per share, but opened for trading at $27.
Shares traded lower in its first four trading sessions, falling 12.6% in that span. Its holiday commercial didn’t go over too well, either.
But none of that matters now, because consumers still want to exercise, an activity that becomes much more difficult in the winter and during a pandemic. Instead of hitting the gym or popping into spin class, consumers are opting for at-home workouts.
It’s why Nautilus (NYSE:NLS) has done so well too — another name investors could include on their list of coronavirus stocks.
Because consumers would rather work out in the comfort and safety of their own home, Peloton has seen its share price boom far past its IPO price. Earlier this month, it hit a high of $139.75.
Admittedly, the valuation is a bit stretched here after a monster move. But investors’ argument is that this is not just a one-time sale of hardware. Rather, it’s the one-time sale of hardware plus ongoing subscription revenue.
In the world of investing, subscription revenue equals valuation premium and that’s what we’re seeing in Peloton.
With shares under pressure now, investors may be hoping to see a further dip in the stock in order to buy. And going into the holidays and winter months, alongside a spike in coronavirus cases could be a recipe for stronger Peloton sales.
Coronavirus Stocks to Buy: Activision Blizzard (ATVI)
There are plenty of names to include on a list of coronavirus stocks, but I would be remiss to leave Activision Blizzard out.
The video game maker has seen a spike in engagement and in demand due to the stay-at-home nature of the world. While kids and gamers got back outside in the summer, colder weather will soon shudder most of those activities.
I like to find trends that were already enjoying solid secular growth before Covid-19 came along. Then, as a result of the coronavirus, we want stocks that are seeing an acceleration in that growth.
In that sense, video games are an excellent selection. And in that group, Activision Blizzard is a leader. In terms of one-year and year-to-date performance, ATVI stock leads both of its major peers in Take-Two Interactive Software (NASDAQ:TTWO) and Electronic Arts (NASDAQ:EA).
Revenue is forecast to burst higher by 24% this year, helping fuel a 46% climb in earnings. While estimates taper down in 2021, expectations still call for growth. With the stock looking like it wants to breakout, Activision may be a solid bet heading toward the holidays.
On the date of publication, Bret Kenwell held a long position in DOCU and ATVI.