The market crash following the coronavirus pandemic has brought light to many trading and investment opportunities. Following the steep stock market crash of March 2020, markets have experienced a strong recovery into June 2020. However, market volatility is likely to continue, and this volatility can present many trading and investment opportunities.
This article lists some stocks and industries that have been particularly impacted by the coronavirus pandemic.
Fear of coronavirus caused stock markets around the world to crash. Investors had not seen such large drops since the financial crisis in 2008. Stock market crashes can be scary, uncertain times but many seasoned traders would suggest that a stock market crash is a great opportunity to pick up highly valued stocks at bargain prices.
Industries that have been particularly impacted by the coronavirus crisis due to industry shutdowns offer many stocks that can be purchased at prices not seen for years. In terms of coronavirus, any industry related to travel (cruise liners, airlines, travel companies) or hospitality (restaurant chains, pubs, alcohol manufactures) could represent bargain opportunities. Examples could include IAG and Carnival.
Think of blue-chip stocks that have survived past recessions and managed to stay profitable. These stocks could end up good opportunities for hefty stock price increases. However, it is worth noting that many of these stocks are in the ‘bargain bin’ as they have had to stop business operations for many months. Any business in the bargain bin without proper management and low cash resources has the chance to go bankrupt.
Additionally, just because these stocks are at a bargain price, does not assume that the stock price will rise in the near future. If you try to time the market, you may enter at the wrong time and make substantial losses. Bargain hunting coronavirus stocks can result in huge gains, but also losses.
International Consolidated Airlines Group or more commonly known as IAG is a multinational holding company, running notable airlines such as British Airways and Iberia. Since the lockdown and restrictions in travel, IAG has had to lay off staff and ground many of their flights ‘like never before’. Boss Alex Cruz quoted that the airline industry was facing a ‘crisis of global proportions’.
Therefore, it is no surprise that IAG is trading at lower prices when compared to its price before the coronavirus outbreak started. The real question, in this case, is how can IAG bounce back from lost passenger revenues? This uncertainty has caused IAG to be valued at prices not seen in years.
Carnival Corporation is a cruise liner operating in the US and the UK. They run notable cruise companies such as P&O, Princess and Carnival. Similar to the aviation industry, cruise operators have lost billions in customer revenue, with the lockdown and social distancing destroying companies revenues in 2020 and perhaps beyond. However, it is worth considering if Carnival could bounce back in the future, as the stock is at the lowest price it has experienced in years.
When trading with us, you can go long or short on the market. Therefore, if you predict the price of a market to fall, or rise, you can trade either way. Open a trading account here.
Beyond bargain stocks, is losing stocks. Following the spread of COVID-19, numerous stocks have seen tough times and some of these stocks may not survive. This is a much riskier coronavirus investment or trading strategy as you are essentially buying troubled stocks that could potentially go under. However, if these companies manage to recover from their troubles, their stock prices could increase by ten or twenty times.
Examples of losing stocks could include struggling airlines, smaller-cap oil companies and other companies that have had their foundations shook following the coronavirus crisis. With such companies, you are risking complete collapse but could witness a turnaround.
Many analysts predicted that tech stocks could fall the most if there was a market crash, due to their expensive price to earnings valuations. However, tech stocks have been one of the best-performing stock types on the market. This defies the logic that companies with higher valuations often depreciate more than companies with lower valuations when a stock market crashes.
Examples of these companies that have cruised through the COVID-19 crisis include Microsoft, Amazon and Google. However, as they have performed so well, most likely due to their ability to adapt to remote working, everyone is buying them. So, what was once an ‘expensive’ valuation could get pushed to an even higher valuation in a time of crisis.
Amazon an online retail shopping service that also operates with cloud technology has forecasted around a 28% increase in Q2 of 2020. Amazon has managed to stay operational during the coronavirus outbreak, with employees either working from home or still attending their warehouses.
Amazon, however, had to employ many new workers to cope with their surge of demand, and have expressed their concerns over the probability of turning over a loss for the first time ever. Besides this, the stock price increased substantially while the wider stock market struggled, crashed and recovered slowly.
New trend stocks represent any company or industry that has benefited positively because of the coronavirus crisis. Although, it should be noted that it is best to look through a broad lens at companies who will also perform well once the coronavirus pandemic is over, as consumer behaviour is likely to change. Companies could include Zoom, Slack and Chegg. These stocks are any kind of company that can benefit from the digitalisation of normal human behaviour and social distancing measures.
Zoom is a video-conferencing software that has experienced major price increases since the coronavirus outbreak. Many businesses have had to opt for virtual meetings and conferences because of COVID-19 and the social distancing measures in place; this has substantially increased the demand for software such as Zoom. Some analysts predict that Zoom’s revenue will increase substantially, and the stock could even sustain these increases once coronavirus is over.
Ultimately, investing in, or trading stocks during the Coronavirus pandemic is a risky option, as markets are experiencing volatility not seen since the financial crisis of 2008. Additionally, the full impact of Coronavirus is yet to be realised so markets could continue to stay volatile. However, the market crash following the discovery and spread of coronavirus does also present opportunities for traders and investors alike, to capitalise from these price swings. The difference between success and failure is the quality of decisions made, therefore do enough research before making any investment decision or seek financial advice if you are unsure.
When you trade on with us, you can trade both sides of the market and can, therefore, capitalise from rising or falling stocks. Open a live trading account here to start trading. Trading with leverage increases your exposure beyond your deposit, and therefore, can increase your profit and losses relative to your leverage ratio.
Investing in CMC Markets derivative products carries significant risks and is not suitable for all investors. You could lose more than your deposits. You do not own, or have any interest in, the underlying assets. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Spreads may widen dependent on liquidity and market volatility. The information on this website is prepared without considering your objectives, financial situation or needs, and is general in nature. Consequently, you should consider the information in light of your objectives, financial situation and needs. CMC Markets Asia Pacific Pty Ltd ABN 11 100 058 213, AFSL No. 238054 (the derivative product issuer), CMC Markets Stockbroking Limited, Participant of the ASX Group (Australian Securities Exchange) and SSX (Sydney Stock Exchange) and Chi-X (Chi-X Australia), ABN 69 081 002 851, AFSL No. 246381 (the stockbroking services provider) provides the financial products and/or services. It's important for you to consider the relevant Product Disclosure Statement ('PDS') or Information Memorandum (for CMC Pro accounts) and any other relevant CMC Markets Documents before you decide whether or not to acquire any of the financial products. Our Financial Services Guide and Information Memorandum (for CMC Pro accounts) contain details of our fees and charges. All of these documents are available at cmcmarkets.com.au or you can call us on 1300 303 888.
Apple, iPad, and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.