It’s been quite a year for companies, with clear division between the Covid-19 winners and losers, writes Mike Taylor, CEO and founder of Pie Funds.
The US share market and economy hardly reacted at all to the 1918 Spanish Flu. This shows that, sadly, the share market is a cold-blooded beast irreverent to human suffering or economic pain. The share market only cares about two things: corporate profits and interest rates. Armed with this information, stock picking at Pie Funds becomes less about emotions, and more about facts – with a dash of sentiment thrown in.
When Covid-19 hit
When Covid-19 first struck earlier this year we tilted the portfolios to companies we thought would be clear winners from a stay-at-home environment, including the likes of Netflix, Microsoft (who communicated with colleagues via Teams?), e-commerce craft site Etsy, and meal-kit company HelloFresh. These companies, along with others, were expected to benefit from our change in behaviour. We were working from home, consuming online entertainment, and ordering things online while in various forms of lockdowns. You probably experienced some change in your own habits during 2020. And it was well noted that many companies that had not transitioned to online, or were unable to, didn’t survive.
What will a vaccine do?
With a vaccine now on the horizon, the Pie Funds investment team has now turned its eye to recovery plays. That’s anything hit hard by Covid-19: airlines, energy, tourism, travel, public entertainment like restaurants, hotels, cinemas, concerts and events, plus retailers without much online presence - companies that will benefit from a vaccine and lockdowns easing.
While some of our behaviour changes are permanent (such as online meetings and flexible working), we are social creatures and not everything will be done online once the pandemic ends, and lockdowns finish. Some things need to be experienced in person - like a beach holiday in Fiji.
A vaccine will mean that, eventually, travel will kick off again. So we are now looking for the Covid-19 survivors. These companies, if they have survived 2020 already, are expected to recover strongly when the drawbridge is let down. To find these specific companies, we dig into our library of knowledge across the investment team, as well as screen for companies in the sectors we’re interested in.
Our investment team, including researchers and analysts in New Zealand, Australia and London, are working hard to find companies they expect to do well once a vaccine arrives - that’s one of the benefits of active management, and our team making direct stock picks.
When markets are changing fast, as they were during Covid-19 and still are, active fund managers can act quickly to aim for the best outcomes. This may mean buying or selling shares quickly to take advantage of opportunities.
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To download our product disclosure statements, go to www.piefunds.co.nz. Past performance is not an indicator for future returns. This information is general in nature only. You may wish to discuss with an expert before relying on it.