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5 Themes (& Picks) for Coronavirus Investing

Entrepreneurs

5 Themes (& Picks) for Coronavirus Investing

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With the Fed stepping in to save the markets, small scale companies and individuals, investors have turned upbeat. So money has started pouring back into the market. That’s not to say that the going will be smooth. Of course it won’t.

Because most of the fears around the virus haven’t gone away. Nor have we got a cure yet (though we may be getting there). The point is, we don’t know. Researchers are on the job trying anything that might work; it could be therapeutics, vaccines, or both. We may have something soon, or not.

What we do know is that this isn’t going to vanish all of a sudden. There could be fresh attacks as the virus mutates. And even if that doesn’t happen, it will be tricky getting out of lockdown in a way that doesn’t start a fresh outbreak. So yes, lots of ifs and buts there that tell us a V-shaped recovery is unlikely.

So if that’s a given, why not invest in a way that makes the most of the situation. There’s never going to be a perfect market. What’s perfect about this one is that valuations are more reasonable than they’ve been in a long time.

That’s what led me to these pet themes that we can play on to maximize our gains in these difficult times.

At the top is the digital trend. While I like most things digital in these times because we absolutely need devices and clouds and automation and Netflix (!) to do whatever it is we need to, today I’m focusing on content creation/delivery. Companies engaged in these things are generally in the background, doing the heavy lifting while we’re more concerned with what we see in front of us.

So here we have a U.S.-based company called AudioEye AEYE, which develops voice-driven technologies to facilitate mobility and usability of Internet-based content through content publication and distribution software delivered through the cloud for real-time access across all browsers on any connected device. It uses the SaaS model and counts government agencies and schools as customers. Shares are currently going for $4.38. Here are some additional details-

Momentum Score A

Industry: Internet – Software Top 36% (91 out of 253)

Sales estimated to grow 61.6% in year ending 12/2020 and 60.3% in 12/2021; loss per share estimated to drop 45.4% in 12/2020 and 94.3% in 12/2021

2020 loss per share estimate dropped 29 cents and 2021 loss per share estimate dropped 13 cents in the last 30 days.

Next, I’ll move to medical instruments. Of course these are essential things that patients will need whether there’s a lockdown or not. Unless it’s the capital intensive kind, because hospitals don’t have the resources for that just now.

In this group I picked Electromed ELMD, which isn’t expensive at $12.25. But that’s not the only reason. This company designs, manufactures and distributes globally its SmartVest® Airway Clearance System, using personalized high-frequency chest wall oscillation (HFCWO), an alternative to Chest Physiotherapy (CPT). It mechanically loosens, mobilizes and releases respiratory secretions from the lungs. In March this year, it released an app for iOS and Android that uses Bluetooth facilitating real-time tracking and collaboration between patients and healthcare teams to improve therapy and outcomes. The SmartVest is therefore proving crucial in treating coronavirus patients. Need I say more. Other details include a

Zacks Rank #1

Growth Score B

Momentum Score B

Industry: Medical – Instruments Top 11% (29 out of 253)

EPS estimated to grow 82.6% in 6/2020 and 11.9% in 6/2021

2020 EPS up 6 cents in last 60 days, 2021 up 13 cents

With everyone staying home, working from home, eating at home and doing everything else at home, we obviously need a whole lot of things at home. And we probably shouldn’t go to the store to pick up stuff, what with new research showing that the virus can stay airborne for hours and infect people up to 4 meters away (yes, everything we knew about it keeps changing), we probably should stay only at home. Unless there’s an emergency. So that means we need to get most things home delivered. That’s what makes ecommerce so important right now.

While Amazon pretty much dominates the scene there (it has even curbed its plans for entering the shipping business to get more essentials out to people), other smaller companies may be worth picking up. At $30.41 Fiverr International FVRR isn’t exactly going cheap. But there’s room for further upside is what I feel. And judging from the way its per share loss estimate is declining, analysts seem to agree with me. So here are a few details-

New York-based Fiverr International provides an online marketplace for selling goods and services. It also offers logo, poster and brochure designing, as well as photoshop editing, content marketing, web analytics and translation services.

Zacks Rank #1

Momentum  B

Industry: Internet – Commerce Top 22% (56 out of 253)

Revenue expected to grow 28.1% in year ending 12/2020 and 28.3% in 12/2021; EPS to grow 15.5% in 12/2020 and 35.9% in 12/2021

2020 loss per share estimate dropped 7 cents and 2021 loss per share estimate dropped 35 cents in the last 60 days

The coronavirus has also put a scare into many people about their own immunity. So the health conscious amongst us are anxious to do more and they’re really infecting others to follow. So whether it’s a fad or a craze or whatever, more people want to eat healthy these days (especially if it can boost their immune systems) and more people are concerned about sourcing and such things.

To capitalize on this sentiment, I picked Sprouts Farmers Market SFM, which is currently going for $19.00. The company has fresh produce in the store center, a bulk foods section, as well as a vitamin department, all focused on wellness. It generally touts its natural, organic, plant-based, gluten-free, keto-friendly and grass-fed selection targeting concerned customers. Other details:

Zacks Rank #1

Growth B

Momentum A

Industry: Food – Natural Foods Products Top 9% (22 out of 253)

Revenue expected to grow 9.5% in year ending 12/2020 and 4.5% in 12/2021; EPS to grow 4.8% in 12/2020 and 3.3% in 12/2021

2020 EPS up 3 cents in last 30 days, 2021 up 3 cents

And finally, while it may not feel great investing in a Chinese company given that that’s where the virus came from, it’s also true that China has (almost) left the problem behind it and its production levels are picking back up. So while the rest of the world is still reeling from the impact, China is in rebound. So it makes absolute sense to put your money into Chinese companies and those doing business in China.

So in this group, I picked Beijing, China-based 21Vianet Group VNET, which operates as a carrier-neutral Internet data center services provider in China, offering hosting, related services, managed network services and cloud computing infrastructure. Its customers include Internet companies, government entities, blue-chip enterprises, and small-to mid-sized enterprises. Other details include

Zacks Rank #1

Value B

Growth B

Industry: Internet – Services Top 15% (37 out of 253)

Sales estimates to grow 20.3% in year ending 12/2020 and 22.3% in 12/2021; EPS estimates to grow 70.8% in 12/2020 and 171.4% in 12/2021

Loss per share for 2020 dropped a couple of cents in the last 60 cents and for 2021 earnings grew a penny.

Rounding Off

We will still need the Apples and Googles to prop the market, but there’s money to be made from some of these smaller picks. Especially if you’re willing to hang in there for a while. So don’t waste time and jump in!

 

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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