The Playbook For The Modern Man

The Australian Stocks That Will Do Better Than Others In A Crisis

An investment advisor shares his top picks.

If you think practically about how your life has changed as a result of the Coronavirus, you can start to get a good idea of what stocks might thrive in these volatile times (that luxury helicopter trip might have to wait).

Working from home

This is one of the major changes that’s been forced on almost all desk jockeys. It’s likely your company or business is relying on Zoom (ZM) or Microsoft Teams (MSFT) both listed in
the US to enable you to communicate, meet and engage with colleagues and clients. All that data needs a home and its home is in a data centre. NextDC (NXT) is Australia’s primary listed player, however there are global names, Equinix (EQIX), Interxion (IXIN) and Digital Reality (DLR) that operate in Australia and around the world.

Shopping

Many of us have had to setup home offices or mobile workstations. Officeworks (owned by Wesfarmers, ASX code WES), JB HiFi (JBH) and Harvey Norman (HVN) are surely seeing a surge in sales this quarter. You are also likely sourcing a lot more of your ‘stuff’ online. The king of online is Amazon (AMZN) but there’s second and third derivatives of this trend.

More online payments may benefit payments beasts like PayPal (PYPL) and/or Square (SQ).
Perhaps our new obsession with hygiene drives global adoption of “tap and go” technology from Visa (V) and Mastercard (MC). How will our national shopping centres fair during this period? A protracted shut-down of non-essential retail could impact our nations landlords as their tenants’ close shop, ask for rent reductions and stop demanding temporary space.

Some examples of shopping centre landlords include: Charter Hall (CQR), Vicinity Centres (VCX), Abacus Property Group (ABP), Shopping Centres Australia (SCP), and Westfield (URW). Similarly, those retailers who are still operating a primarily “in store” business model could face hard times, while their predominantly “online” competitors take market share. Discretionary spending in general may decline as unemployment rises and people tighten their belts.

Software as a service (SaaS)

Software you can’t live without. I haven’t spoken to Luc, the boss at DMARGE, but I can guarantee you he’s paying his Adobe (ADBE) Creative Suite subscription fees next month before he goes and gets a haircut or buys another pair of expensive loafers!

Same goes for accounting software like Xero (XRO) in my opinion. I personally couldn’t run my business without it. For me, same goes for market data related providers like IRESS (IRE) and Factset (FDS).

Isolation

I don’t know about you, but I’m not cancelling my Netflix (NFLX), Spotify (SPOT) or Amazon Prime (AMZN, again) right now. It’s like a great pair of jeans. It doesn’t really matter how much you spend, your cost per wear is so low and you’re getting more value out of these subscriptions than ever.

As for Foxtel, Kayo or that fedora you bought for the races in 2012… not so much.
I’d think a few gym memberships are getting the chop as well (hopefully you’re staying healthy and working out at home/in the park). This isn’t good news for the likes of Ardent Leisure (ALG) who own Goodlife and a bunch of other gyms in Australia.

Get woke

This is more of a personal favourite, but I love companies that do the right thing. I think it’s smart business and can generate immeasurable goodwill from the community. Think about investing in businesses that are handling this crisis best. I loved Nike’s (NKE) “Play Inside” strategy and Louis Vuitton Moet Hennessey (MC on the Paris Stock Exchange) have also handled this beautifully. Converting perfume factories to make hand sanitiser and ordering 40m health masks to give to the French health service. Both are excellent examples of corporate leadership. I’d back both to be equally excellent when it comes to reinvesting my capital in their business.

This article is of a general nature only and does not consider your objectives, financial situation or needs. You should consider the appropriateness of the information in light of your objectives, financial situation and needs before acting on it and obtain copies of any relevant disclosure documents. Seneca Financial Solutions does not warrant the accuracy or reliability of the information in this report.

Luke Laretive, Seneca Financial Solutions, it’s Directors and it’s associated entities may have or had interests in companies mentioned. They may have or have had a relationship with or may provide or has provided investment banking, capital markets and/or other financial services to those companies mentioned. 

Luke provides clients with a daily note, which you can access here.

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