JOIN USFuture tense: Opportunities in the new normal
Of late (that would be three months to date since the lockdown was announced – and likely to be extended intermittently) we have seen a significant displacement of what normal life looks like.
Seniors are virtually housebound as are most children. Others are mostly grappling with work-from-home, securing employment, family finances, and various supply runs during Covid-19.
And the stock market is rising, irrationally, and the credit markets remain frozen (pending, perhaps, Q1 results to see which companies will survive and which ones may not). And let us not even get into the canceled holiday plans, summer school, sporting events, dance/music teachers (though one particular school of music with over eighty thousand students has made a transition online powered by zoom, currently at 20,000 students in 2.5 months) which are all in limbo. During this chaos, there are businesses that have not just recovered but are thriving and worthy of inclusion into our retirement portfolios.
Obvious ones are e-commerce - with some getting lost in the bureaucratic labyrinth while others struggling with disrupted supply chains. However, all have upped their capacities, hiring is on the rise services are slowly coming back to a near-pre-Covid normal. The first level expansion of services we have seen from these players has been into entertainment and gaming (e-sports).
So, what has really changed? And if one were to gaze into the crystal ball, which businesses are likely to see a brighter future than others? At the onset, it is clear what we are seeing today is a rapid acceleration of an existing trend and not necessarily something born just from the pandemic. The biggest example of this is the swift adoption of tech by the last mile, i.e. the ubiquitous “Kirana store” via Amazon Local, Grofers, and even Jiomart, the newest Sumo on the block. Spurring the adoption are government initiatives like dismantling the APMC framework (resulting in Farm to Table disintermediated supply chains) and, a need to aggregate inventories, digital payments, accounting, tax net expansion (GST), etc.
The genesis of these trends is security, and services delivered keeping safety paramount. The first element is healthcare which is where we have seen a plethora of offerings from associated businesses like patient monitoring (a renewed interest in telemedicine to deliver tertiary contactless healthcare and, more importantly, epidemiological data collection to develop an early warning system/cure for epidemics of disease clusters), Pharmaceuticals (which will see heightened activity till the pandemic rages on and vaccines are out or more is understood about the nature of the virus) and insurance.
Real estate, similarly, could see a mild revival due to demand for specialized structures for labs, socially distanced and controlled offices, Covid intensive care, and treatment facilities, where current ‘Economy Class’ packed-to-the-rafters’ hospitals are no longer feasible. For example, a cancer treatment centre or a pulmonary or even a cardiac facility can be risky in the same physical space as a general hospital with a Covid-19 ward.
The second is ongoing and now accelerated obsolescence of jobs (as companies go under like Jet Airways or where the job ceases to exist like Mutual Fund front offices) which will lead to a demand for rapid reskilling. The other transformation accelerants which have already made significant progress are Infrastructure /Utility including data, 5G (equipment and services), Renewables, Electric cars, Agri-tech, and fintech. But those are discussions for succeeding notes.
And how do we invest in these? The first step is to buy these companies directly in their home markets via authorised intermediaries but it is advisable to do some homework and have broader savings or retirement plans.
An ETF (or broader ETFs) remains a cost-effective simple instrument to gain specific exposures like CLOU, EBIZ, KURE, SBIO, etc. An online or human planner would be useful but with some effort, a DIY approach is more than possible. Also, in India, keep in mind SEBI and RBI regulations if you are investing overseas.
Stay safe, save regularly, and wear a mask.