Learnings in a Bear Market: Top Sectors and Stocks to Look at

  • Apr 20, 2020 NZST
  • Team Kalkine
Learnings in a Bear Market: Top Sectors and Stocks to Look at

The scale and velocity which a worldwide turmoil can unfold are humbling. New Zealand has declared a state of emergency and is at Level 4 on the COVID-19 alert system. Moreover, share market is a place where those with big bucks get the experience, and those with experience get the money. Some economists are comparing the current collapse with the one observed in 2008, perhaps in the hope that the recovery too could be speedy.

The disease is spreading rapidly in dozens of nations, and at the time of writing, there were more than 2 million confirmed cases and nearly 1,65,234 deaths reported across the world. While there is too much uncertainty to be certain about outcomes, this economic tremor could cause persistent pain and possibly leave deep scars far more massive than the other post-war pandemics.

The recent sharp drop due to COVID-19 pandemic, in the overall share market may have frightened some investors, putting them on the shelves for these days. Instead, there are likely a few opportunistic individuals who are prepared to use their capital into the bear market.

Positives of a bear market-

Fear is one emotion that is predominant in such a market, and that needs to be controlled. During the turmoil, everyone nearly freezes, they either stop investing or start selling in panic. During the bearish market, one should not get panic and not pay attention to the rumours.

The bearish market eventually gets replaced by the bullish market and what an investor needs to do is to bank upon the investment opportunity that the market throws at this time. Smart investors have re-wired their brains to do the exact opposite. They know it is shopping time and go shopping for stocks that are swimming against the fall.

After all, famous investor Warren Buffett has often urged investors in order to take advantage of great investment opportunities- “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

INTERESTING READ: Learn the art of investing during a bear market - Warren Buffet’s style

A bear market associated with a recession nearly always ends in the middle of the downturn in the economy. The share market is what the experts call a discounting process, and this suggests that share prices tend to foresee the future.

DO READ: Following Warren Buffet’s Path Amidst Current Market Turmoil

The good news, though, is that bear markets have always opened the door for long-term investors to pick up great companies on the low-cost, and this instance will prove no different.

Let us acquaint you with the sectors that are getting benefit from the COVID-19 pandemic.

Retail Industry-

Retailers will weather the storm with mixed results. Food and consumer goods are considered counter-cyclical businesses; they are among the least affected ones in recessions. Supermarkets have seen a huge rise in their business as consumers stock up on staples including toilet paper, pasta, flour, and tinned goods, and generally fill their pantries against the emergency. Deemed essential services under the Government rules, food retailers are also about to enjoy a further boost, since restaurants and takeaway options are now closed.

Healthcare Industry-

Healthcare is expanding, with the Government recalling as many retired nurses and doctors as possible to care for what it fears will be a wave of patients with coronavirus.

The healthcare industry has come to the vanguard during this dreadful crisis, the recent rise of this industry is an extension of a long-term trend that has been unfolding in the stock market for more than a few years. The healthcare industry is prominent across the world in battling against the COVID-19, such as masks, gloves, sanitisers etc. are in extreme demand and stocks are running out in all parts of the globe.

ALSO READ: Global Healthcare Super Stocks – Gilead, Sanofi, GSK, AstraZeneca, Roche

Telecommunications Industry-

The Telecom sector is proving essential in the COVID-19 response, and the pandemic may be a silver lining for the telecommunications industry. Companies that provide the infrastructure for data transmission and communications, including wireless and cellphone service, are currently in an enviable position. The huge number of people working from home has produced unprecedented demand. And a resulting long-term shift to more flexible or home-based working may well embed this.

As the companies across the globe are asking their employees to work from home this has knocked to increase consumption of data and trigger a sharp jump in demand for virtual private network (VPN) services and home broadband in the upcoming period; hence, creating fresh enterprise opportunities for this sector. During this pandemic, telecom service operators have shown strength and commitment to perform and providing a peek into the new market experience.

Technology Industry-

IT services firms have also been busy helping customers adapt to remote working. In many countries such as Australia, Canada and Europe hospitals are using software developed by a New Zealand software firms to help in finding out which treatments are most effective for COVID-19 patients, who have been admitted into intensive care units (ICU). Presently, the software is performing a similar purpose for hospitals as they try to understand what medications are most efficient in tackling the COVID-19 symptoms.

ALSO READ: Tech sector perseverance amid buoyant share market

Let us now have a look on few stocks-

The a2 Milk Company Limited (NZX:ATM)

A dual listed (NZX and ASX) infant formula company, The a2 Milk Company Limited was founded in 2000 in New Zealand and is engaged in commercialising A1 protein-free milk under the a2 and a2 MILK brands. The Company distributes its products across the United States, New Zealand, Australia, China, the UK, Singapore, and Hong Kong.

a2 Milk™ brand expands into the Canadian market

On 13 March 2020, ATM revealed that the Company has entered into an exclusive licensing agreement with Agrifoods Cooperative for the production, distribution, as well as sale and marketing of a2 Milk™ branded liquid milk in Canadian market.

On 20 April 2020, ATM stock rose by 0.50 per cent to NZ$19.91, with a market capitalisation of approximately NZ$14.59 billion.

Fisher and Paykel Healthcare Corporation (NZX:FPH)

A leading healthcare company Fisher & Paykel Healthcare Corporation is engaged in development and marketing of products and devices for use in respiratory and acute care, along with surgery, and the treatment of obstructive sleep apnea (OSA). Fisher and Paykel’s products are sold in more than 120 nations across the world.

Fisher & Paykel Healthcare has seen a rise in its sales and share price as a consequence of the COVID-19 pandemic. Also due to the virus, there is additional demand for its respiratory humidifiers and masks, while the drop in the New Zealand dollar suggests it is getting paid more for them from overseas consumers.

On 20 April 2020, FPH stock fell by 0.33 per cent to NZ$ 29.90, with a market capitalisation of approximately NZ$17.24 billion.

Spark New Zealand Limited (NZX:SPK)

New Zealand’s largest telecommunications and digital services company, Spark New Zealand Limited is a provider for communications, entertainment and IT services over its networks and the Cloud to New Zealanders and businesses. The strategy of the Company is focused on the customer experiences, mobility as well as data.

In the first half of the FY2020, the Company reported good revenue by the successful delivery of its strategy fueling EBITDAI as well as earnings growth. Positive revenue momentum is now evident across all the crucial products of SPK; profiting from improved momentum to market, customer experience along with product performance.

On 20 April 2020, SPK stock rose by 1.15 per cent to NZ$ 4.40, with a market capitalisation of approximately NZ$7.99 billion.

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