The best analyst comentary and leader in investing in disruptive innovation Catherine Wood from ArkInvest could not have captured the markets and opportunity better. Especially in thinking about how this global pandemic changes behavior and how we should be looking at investing. We highly recommend everyone follow and subscribe to the Ark Invest newsletter.
D uring turbulent times innovation gains traction. Over the last 40 years in business, we have experienced more than 10 crises, including recessions, and have seen rapid behavioral changes as a result. The best examples are from 2008-09, a near depression which pushed businesses away from enterprise software licenses to pay-as-you-go software-as-a-service, and consumers away from bricks and mortar toward online shopping. As a result, in the face of significant declines in technology spending and retail sales, Salesforce.com and Amazon delivered revenue gains of 20% and 14%, respectively, during the worst quarters of the Global Financial Crisis.
While volatility might whip stocks around in the short term, when consumers and businesses are afraid or highly uncertain, they are willing to change their behavior and embrace disruptive innovation. Now that we have learned that cash could be a virus “super-spreader”, for example, consumers are likely to adopt contactless payments like Apple Pay and digital wallets like Cash App or Venmo at accelerated rates, once they venture from home.
Until then, because the home is now the central hub of activity, businesses are likely to boost spending on productivity and collaboration tools/services, as well as the infrastructure to support digital employees, while consumers boost spending on streaming videos and gaming, not to mention on-line education and telemedicine services. Now that the coronavirus has disrupted supply chains and is causing parts shortages globally, quick-turn manufacturing and 3D printing parts closer to end demand should gain more traction, while robotics will help with social distancing and productivity gains to salvage profitability.
Finally, because of this health crisis, investors, businesses, and consumers will understand more about the genomic revolution now underway. Scientists sequenced this coronavirus in just two days, much faster than the five months necessary to understand SARS in 2003, and will continue to sequence it, monitoring for mutations and preparing health care systems around the world.
Great examples of companies that benefit from pandemic and changes in behavior.
- Zoom Video Communications (ZM)
There’s no doubt a pandemic is tough on brick-and-mortar companies, but for most white collar workers the show must go on. As a pure play stock in the video conferencing category, Zoom is uniquely positioned as companies shift to more remote work, and class rooms look to e-learning classes fro home.
- Domino’s Pizza (DPZ)
With people wanting to avoid crowds because of COVID-19, it’s natural to want to order in. Domino’s, as well as other companies that focus on food delivery, stand to benefit in the short term from the virus.
More awesome infographics are on Visual Capitalist