Bizarrely, the coronavirus could be good for the stock market and value hunting investors. Strangely, there are many companies that could profit from the coronavirus.
Moreover, the coronavirus is great for bargain-hunting investors. The Standard & Poor’s (S&P) 500 fell from 3,886.15 on 19 February 2020 to 2,480.64 on 12 March 2020. However, the S&P 500 rose back to 2,711.02 on 13 March 2020.
I think the S&P 500 is going up because investors recognize there are many companies that could make money from the coronavirus. Consequently, stock pickers who identify those companies could make money from coronavirus.
Companies that could Make Money from Coronavirus include:
1. Amazon (NASDAQ: AMZN)
Social distancing could boost Amazon’s online sales because people want to avoid going out to sales. In particular, you could have the delivery person put the order on your porch and have no contact with her.
In addition, people will be watching more Amazon video because they will close the movie theaters. However some experts claim coronavirus could disrupt Amazon’s supply chain, Vice claims. Additionally, Amazon is investing heavily in automated stores that minimize human contact.
2. Grubhub (NYSE: GRUB)
Many people will stop going out to eat so they will turn to meal delivery apps such as Grubhhub. Grubhub stock was cheap at $40.78 a share on 17 March 2020.
However, Grubhub is under fire for charging fees to independent restaurants. In addition, Grubhub’s management expects restaurant traffic could fall by 75% over the few weeks, CNBC claims. Thus, Grubhub’s business could shrink in the short-term. However, I think Grubhhub’s business could grow in the long term as people stuck at home get hungry and reach for their phones.
3. Kroger (NYSE: KR)
Business at the nation’s largest standalone grocer is booming because people fear being trapped at without food. However, I predict panic buying will end fast.
Additionally, Kroger and its partner; the Ocado Group PLC (LSE: OCDO), are investing heavily in robotic fulfillment centers to support online delivery services. In addition, Kroger has a strong relationship with the online grocery delivery leader Instacart. Kroger also offers curbside pickup of online grocery orders from many of its stores.
Interestingly, Kroger has become a new favorite of Warren Buffett’s. In fact, Berkshire Hathaway (NYSE: BRK.B) bought 19 million shares of Kroger in 4 thQuarter 2020.
Two unappreciated sources of value at Kroger are the retailer’s 2,270 pharmacies and 176 Little Clinic in-store clinics. Kroger could attract more customers by offering Coronavirus testing in its stores.
4. Walmart (NYSE: WMT)
The nation’s largest retailer is investing heavily in store pickup. Therefore, you could order groceries and household supplies and pick them up with minimal human contact.
In addition, Walmart is making big investments in robotics, store automation, and online retail. Hence, Walmart could roll out a new generation of stores that minimize human contact to cash in on social distancing.
5. Berkshire Hathaway (NYSE: BRK.B)
Stock prices are collapsing and Warren Buffett wants to make an “ elephant-sized purchase,” CNBC reports. Moreover, Berkshire Hathaway (NYSE: BRK.A) has the cash to make such a purchase. Berkshire Hathaway reported $128 billion in cash and short-term investments on 31 December 2020.
Consequently, I think Berkshire could add a vast amount of future value with a strategic purchase now. Companies Berkshire could buy include grocers; such as Kroger or the privately-held Safeway, Grubhub, Uber, Lyft, Ford (NYSE: F), railroads such as the Union Pacific (NYSE: UNP), CSX (NYSE: CSX), Netflix (NASDAQ: NFLX), Walgreens (NASDAQ: WBA), and the Canadian Pacific (NYSE: CP), and food makers such as General Mills (NYSE: GIS).
6. Dollar General (NYSE: DG) and Dollar Tree (NASDAQ: DLTR)
I think the dollar-store operators could profit from coronavirus because of their “grab and go business” model that minimizes human contact.
A woman could need toilet paper now, but fears entering a big store full of people, for instance. Therefore, the woman could dash into Dollar General or Family Dollar. However, Dollar Tree and its Family Dollar subsidiary are poorly run and badly stocked. Hence, those stores could collapse fast if coronavirus disrupts the supply chain.
On the other hand, a larger retailer such as Kroger, Amazon, or Walmart could buy Dollar Tree or Dollar General and convert its locations into automated stores. Thus, both these retailers could have great infrastructure.
Thus, Dollar General’s 15,000 stores and Dollar Tree’s 15,115 could have a lot of value. Hence, Berkshire Hathaway could buy Dollar General or Dollar Tree for its real estate and convert the chain into automated stores. Notably, Berkshire Hathaway owns the McLane Company, one of the nation’s largest distributors of merchandise to retailers.
7. Fast Food Operators such as McDonald’s (NYSE: MCD)
To explain, social distancing will stop many people from eating at sit down restaurants but they are still too lazy or busy to cook. Therefore, those people will head for the drive-thru. Thus, Yum! Brands: which owns Pizza Hut and Kentucky Fried Chicken (KFC), could profit from Coronavirus. Many families could turn to Pizza Hut or Kentucky Fried chicken to eat.
8. Domino’s Pizza Inc. (NYSE: DPZ)
No company could profit more from social distancing than Domino’s. To explain, Domino’s major businesses are takeout and delivery pizza.
Thus, people who do not want to cook but do not to risk going to the restaurant could call Domino’s. Domino’s; in particular, could make money by leaving Pizzas on people’s doorsteps. Therefore, Domino’s delivery infrastructure could have a vast amount of value in the coronavirus age.
9. Walgreens Boots Alliance (NASDAQ: WBA) and CVS Health (NYSE: CVS)
Both Walgreens and CVS have vast footprints they could convert into automated stores. Walgreens, for instance, had 9,277 drugstores in the US on 31 August 2019. Meanwhile, CVS Health claims to operate over 9,900 locations in the US.
In particular, I think they could use Walgreens and CVS’s pharmacies and clinics as coronavirus testing facilities. Plus, Walgreens and CVS could profit if the government expands Medicaid or Medicare to provide drugs or supplies for coronavirus patients.
However, other large retailers such as Safeway, Walmart, and Kroger could also profit from a Medicaid or Medicare expansion. Specifically, each of those retailers operates hundreds of pharmacies and Kroger operates clinics. Thus, retailers could make money from coronavirus.
10. The Walt Disney Company (NYSE: DIS)
COVID-19 could devastate Disney’s cruise ship and theme park businesses. Conversely, coronavirus could increase the demand for Disney’s growing streaming services Disney+, ESPN+, and Hulu.
To explain, Coronavirus could confine many people; including millions of kids, at home in front of the TV set. Thus millions of parents will have a strong incentive to order Disney+. Plus tens of millions of couch potatoes will order Hulu. In fact, Disney owns 67% of Hulu.
Meanwhile, sports fans will turn to ESPN+ to see the teams or leagues still playing. I think coronavirus could be a boon for ESPN if the major sports leagues start playing games to empty stadiums.
Thus, ESPN+ could be the only way many fans have to see their team at play. In addition, many of those fans will be at home with nothing to do. Notably, NASCAR, and World Wrestling Entertainment (NYSE: WWE) are holding events without audiences and broadcasting them.
Unfortunately, only time will tell if streaming subscription income will make up for lost movie, theme park, and cruise revenue at Disney. However, I think Disney could take advantage of the new entertainment landscape. Thus, Bob Iger is a genius. Moreover, Disney pays a dividend, and does not have a mountain of debt as Netflix does.
11. Netflix (NASDAQ: NFLX)
I think demand for Netflix’s streaming video could increase because of coronavirus. However, Netflix loses money, pays no dividend, and Mr. Market overpriced it at $319.75 on 17 March 2020.
Notably, Netflix reported a quarterly operating cash flow of -$1.461.97 billion on 31 December 2019. Consequently, I think Netflix could run out of cash and collapse at the time demand for its products explodes. Hence, Netflix could collapse as it explodes.
Thus, I think Netflix could end up selling itself to Disney or Berkshire Hathaway to survive. Therefore, I advise you to avoid Netflix and buy Disney if you want to invest in streaming video.
12. NVIDIA (NASDAQ: NVDA)
I think coronavirus could increase demand for this tech powerhouse’s products such as graphics processor units and chips.
Moreover, the new automated stores will rely on artificial intelligence (AI) and deep learning. NIVIDIA builds the chips and processors that deep learning AI runs on.
Thus, NVIDIA could make money if Amazon, Walmart, Kroger, and other retailers open hundreds of automated stores and robotic fulfillment centers. To explain, NVIDIA will build the brains that operate those centers.
Finally, I think NVIDIA belongs in smart investors’ portfolio because it is a growing tech company that pays a dividend. In fact, NVIDIA paid a 16₵ dividend on 27 February 2020. Plus, NVIDIA delivered a 40.82% revenue growth rate in the quarter ending on 31 January 2020.
Don’t Panic and Do Your Research
Entertainingly, Douglas Adams’ Hitchhiker’s Guide to the Galaxy offers the best piece of advice for this crisis. That advice is: Don’t Panic!!
Therefore, don’t panic and don’t sell or buy stocks only because of Coronavirus. Sell a stock because it is a bad stock and buy a stock because it is a good stock.
Don’t sell stocks because of coronavirus. I think selling stocks because of coronavirus will be a great way to lose money. Therefore, don’t panic and do your research if you want to make money from Coronavirus.
Originally published at https://marketmadhouse.com on March 17, 2020.