We’ve all heard ad nauseam about the health crisis and economic crisis that is COVID-19.
But there is an enormous opportunity in the pandemic, upside that many investors – thanks to relentless downbeat news coverage – still don’t recognize.
We all know the big negatives…
In the U.S., there have been more than 8.5 million confirmed coronavirus infections and over 226,000 deaths.
In addition to the health crisis, hundreds of thousands of small businesses closed during the economic lockdown. Many of them permanently.
Millions of workers have lost their jobs and are dealing with the economic fallout.
Children across the nation have been unable to go to school, creating learning and behavioral issues as well as a childcare crisis in many households.
In addition, there are the many unhappy side effects: personal bankruptcies, domestic abuse, anxiety, depression and suicide.
Given this reality, can any good really be found in the pandemic?
Yes. But most don’t see it. Sure, they see the effect: a soaring stock market.
But too many investors believe shares have gapped higher due only to massive deficit spending in Washington and the Federal Reserve’s ultra-easy monetary policies.
Those have played an important role. But they’re not the whole story. Other key factors are sending stocks skyward.
At the outset of the pandemic, public companies were sitting on an eye-popping $4.1 trillion of cash – the largest hoard ever.
Small private companies were in much more precarious shape.
For instance, thousands of family-owned restaurants could not survive months without revenue.
But this development allowed larger restaurant chains – like Darden (owner of Olive Garden, LongHorn Steakhouse and others), Chipotle Mexican Grill and McDonald’s – to serve their former customers.
A restaurant owner may have lost everything this year. But leading restaurant stocks have more than doubled from their first quarter lows.
Big corporations had the financial strength and adaptability to survive and even thrive during the pandemic, not least of all because of increased market share and less competition.
Another major development has been the acceleration to a digital economy.
This trend has been well underway for years. But the pandemic put it on steroids.
Companies both large and small made changes in a matter of months – remote work instead of office attendance and videoconferencing instead of business travel, to give just two examples – that would have taken years under ordinary circumstances.
This hurt brick-and-mortar retailers, for-profit schools, travel companies and movie theaters, while simultaneously boosting sales and earnings for e-commerce leaders (like Amazon), remote learning companies (like Chegg), teleconferencing firms (like Zoom) and digital entertainment providers (like Netflix).
Virtually every company has increased its transition to digitalization over the last few months. That reduces costs, raises margins and increases profits.
Thirdly, the pandemic has brought about hyper-fast developments in healthcare.
Efforts to understand the coronavirus, treat it and find a vaccine have kick-started innovation across the healthcare spectrum, from biotechnology and drug development to diagnostics and patient care.
Recent technological advances – powered by computational biology and artificial intelligence – are reshaping industries, advancing certain companies and creating rich rewards for shareholders.
The post-COVID world will see a broad range of new tools to solve age-old healthcare problems, including kidney disease, cancer and genetic disorders, as scientists target disease pathways that weren’t even understood a few years ago.
(Oxford Club Members are already capitalizing on these trends with profitable investments in Genmab A/S, Livongo Health, MyoKardia, NeoGenomics and Novocure, to name just a few.)
To meet your investment goals, you want to identify and invest in the beneficiaries of change, even when that change is caused by something tragic.
This is not greedy, selfish, exploitative or uncaring, as some would claim.
Public companies did not predict or promote the coronavirus. They did not subvert their competition. Nor did they order the economic shutdown.
Indeed, they made life more bearable by meeting the wants and needs of hundreds of millions of consumers.
Every major development creates problems and opportunities, winners and losers.
To meet your financial objectives, you want to avoid the losers and capitalize on the winners.
And let’s be grateful that there are winners.
The great flu pandemic of 1918-1920 killed nearly 700,000 Americans, and almost nothing changed for the better.
There was no remote work, no e-commerce, no digital entertainment, no successful medical treatments, no vaccine.
We are fortunate to live at a time when science, technology, medicine, the private sector and public institutions help us survive – and, yes, even prosper – during one of the most difficult periods in modern history.
And plenty more money will be made in the months and years ahead.