Investing during a pandemic: what investors are investing in

Investing during a pandemic: what investors are investing in
Stock markets are still in limbo. People continue to invest in stocks, but these decisions are mostly ad hoc and speculative. They invest in everything that continues to work and make a profit. It’s much more interesting to see who will benefit from COVID-19 events in the long term. Let’s see what to expect from the pharmaceutical and biotechnology sector.
he economic recession associated with the coronavirus pandemic will negatively affect all sectors, one way or another, affect the deterioration of the financial performance of the vast majority of companies. It is clear that someone will have the hardest time, there are industries that have fallen into the epicenter of the storm. Some will get off with light injuries.

It is not entirely correct to say that there are those who hit the jackpot in the history of the COVID-19 epidemic and related quarantine measures. There are certain sectors and individual companies that have suffered the least and are therefore more attractive to investors in the current situation. There are those who have been able to increase profits. Although in the long term, such a speculative interest in them at the moment can have a negative effect.

What stocks rose amid the coronavirus epidemic

After the panic from the huge drawdown in the stock markets on March 24 subsided a little, investors began to think about where to invest money, since stocks have fallen so much. Many are puzzled to find the optimal balance between discounts and risk in each of the sectors.

First of all, we chose industries in which everything is intuitive and predictable:

  • grocery retail;
  • pharmaceuticals and biotechnology;
  • IT companies (streaming services, telemedicine, telecommunications, etc.).
People continue to buy food, and retail sales are growing, everyone is trying to buy a month in advance. When the refrigerator and pantry are packed to capacity, it is all naturally consumed with double zeal.
The tech giants survived the early months of the epidemic perhaps better than others. Amazon shares are up 30% this year, not least as online sales soared. Paper Microsoft rose in price by 9%: increased demand for cloud services. Netflix added 29% by the end of April. Apple was slightly less fortunate because of the disruption to traditional supply chains for components and products.
Everyone already knows about Zoom, which provides a service for video calls and teleconferences. Its shares have gained 130% since the beginning of the year. Even though serious shortcomings of the system in terms of data security were revealed almost immediately.
Common sense dictates that the situation with the COVID-19 pandemic must be sat out, not risking money in an extremely volatile market. However, investors continue to invest in stocks en masse, supporting the uptrend. There is nothing new under the sun, the pattern of behavior inherent in people at all times is being repeated. When large European and American cities first faced cholera epidemics in the 1830s, wealthy citizens held grandiose costume balls, which spent their last money on. These stories inspired the then novice writer Edgar Alan Poe to create the story “The Mask of the Red Death”
After a short pause, legions of “experts” appeared again, advising which stocks to urgently buy during the spread of the epidemic. Such lists include not only grocery retailers, biotech companies, tech giants, but also fast food restaurants, coffee chains, Uber, Lyft, Tesla, car manufacturers – everyone who has been seriously affected by the quarantine.
Such advice must be taken with extreme caution. We always say that there is no bad time for a long-term investor to enter, the best strategy is to gradually buy more assets into your investment portfolio. This does not mean that you can grab onto everything. It is necessary to adhere to clear rules and avoid mistakes .

Let us consider the nuances of investing during the crisis using the example of the industry that is most of the attention today – healthcare and biotechnology.

Biotechnology sector bonuses

Biotechnology sector bonuses

The sector of pharmaceuticals and biotechnology after the March collapse of the markets in the last month reached its local maximums. We are closely following everything that happens in this direction, since we opened the Biotechnology mutual fund last year (its yield was 31.97% in rubles at the end of April).
Biotechnology is one of the most interesting and innovative areas, regardless of the current situation. The pandemic has made its own adjustments to the sector. Moreover, one can note both positive and negative consequences of close attention of investors to the sector.
The biotech sector has grown strongly over the past month on the money of speculators. Those investors who were not averse to buying some stocks and understood that this industry could be considered quite defensive for the story of the coronavirus. Such investors will not hold funds on a long-term horizon in shares of biotech companies. As soon as there is more certainty in the economy, they will lock in profits and move in directions that are more understandable to them. As a result, the shares of the companies in the sector will be corrected. This is an obvious disadvantage.
However, in these circumstances, one big plus has appeared, which in the long term can make the sector even more attractive for investments. We initially expected this year to be very volatile and difficult for the sector. Historically, the election race in the United States has evolved in such a way that everyone and sundry wipe their feet on biotech companies. Candidates, especially from the Democratic Party, in such a situation often propose to cut prices for drugs.

At the current difficult moment for society, pharmaceutical and biotechnological enterprises significantly benefit from the issue of trust and reputation, and earn pluses in karma. In the development of dozens of vaccines against coronavirus, some have reached the testing stage. Companies are testing various drugs that could help manage the disease. Expensive medical supplies in the amount of several million doses are distributed to hospitals free of charge. Companies are ditching beefed-up patents, allowing competitors to use their technological capabilities to develop a vaccine faster. Large pharmaceutical companies donate money directly to foundations.