As the world is forced indoors to prevent the further spread of coronavirus, several fund managers and analysts highlight stocks they think might be able to benefit from a change in working patterns and behaviour.
Citrix, Microsoft and Zoom
With non-essential travel among the first things that governments have cracked down on to prevent further cases of coronavirus, huge numbers of people are now working from home.
As such, the providers of the technology enabling this should be among the key beneficiaries of this trend.
“With 250 million people in Europe and the US on lockdown, companies are scrambling to facilitate working from home,” said Josh Sambrook-Smith, investment analyst at Sarasin & Partners.
“Companies providing remote working and collaboration software, such as Citrix, Microsoft and Zoom, are notably benefitting from this increase in IT spend,” Sambrook-Smith said.
Chris Elliott, co-manager of the £595m Evenlode Global Income fund, also highlighted Microsoft as a company not only benefiting from more people working at home, but one which will continue to benefit when people return to their offices.
Performance of Microsoft over 1yr
20200325_stocks_working_from_home_benefit_emj_1_new
Source: Google Finance
“These users will rapidly learn and adapt to the systems out of necessity,” Elliott said. “For a company like Microsoft, this means the spike in usage of cloud-based products will be followed by a longer-term increase, even when we are all clear to return to work.
“Applications such as Microsoft Teams will be seen as more viable replacement for face-to-face meetings and companies will continue to store documents on Microsoft SharePoint, retaining the benefits of increased access and collaboration’.”
Intel
It’s not only a strong demand for cloud technology that’s risen, said Elliott said, but the physical devices needed to access it and is where semiconductor manufacturing company Intel is a key player.
“Laptop aisles of Best Buy stores in the US have begun to resemble the toilet paper shelves in Tesco,” Elliott said, many of which run on Intel components.
All of this, Elliott believes, will be carried over from the pandemic into a long-term change in how companies operate, meaning that these demands will still exist once offices reopen.
“On the world’s eventual return to workplace, many businesses will retain the more flexible cloud environments that they have adopted in a time of crisis, leading to step change in demand for high-power datacentre chipsets,” the Evenlode manager said.
SysGroup
Another cloud infrastructure provider which could benefit is SysGroup.
Chosen by Ken Wotton, lead manager of the £238.1m LF Gresham House UK Micro Cap fund, said that demand for this is not just from the migration to working from home, but the long-term megatrend of digital transformation across all businesses in the coming years.
Steam
Alongside the rising interest in companies that help businesses work from home there’s also been greater attention for those that help employees relax afterwards.
Much like the technology will keep co-workers connected professionally, social gaming platforms such as Steam will allow friends to socialise during the coronavirus lockdown.
“As the outbreak of Covid-19 has led to the widespread cancellation of professional sporting events and the closure of cinemas, bars and restaurants in many countries, consumers are increasingly turning to video games and live-game streaming services such as Twitch and Steam as interesting, if not perfect substitutes,” said Thomas Fitzgerald, co-manager of £192.7m EdenTree Amity International.
Looking at Steam whose games include Football Manager 2020, Counter-Strike: Global Offensive and Grand Theft Auto V the company has reported record number of users in recent weeks, evidence of increasing demand for connected recreation.
Nintendo
Another company tapping into this theme in the EdenTree Amity International fund – and one of its top-10 stocks – Japanese gaming company Nintendo, who Fitzgerald said was another beneficiary of people moving indoors.
The company has a long video gaming legacy, with 34 out of the 50 top-selling video games of all-time (and 16 out of top 25) belong to the firm, according to Fitzgerald.
Products such as Nintendo Switch – which has been sold out across multiple UK retailers for weeks – are central to this with its multi-player design hosting classic games such as Pokémon and Animal Crossing.
It also taps into the current ‘home workout’ trend Fitzgerald added, as many gym-goers have begun following online fitness programmes and videos.
Performance of Nintendo over 1yr
Source: Google Finance
Fitzgerald said: “We hold a long-standing position in Nintendo, which we believe is well-positioned to benefit from these near-term trends, as well as a number of long-term secular trends.
“We believe that over time the company will be able to leverage this portfolio of content to drive meaningful growth in both the Switch and Mobile divisions.”
He added: “Looking out beyond the near-term catalysts, we remain constructive on the long-term outlook for the firm.”
Amazon
Finally, with greater numbers of people on lockdown companies that can help deliver the necessities and household supplies have also become more important.
Online retailer Amazon has stepped in as an alternative supply route, according to Taymour Tamaddon, portfolio manager of the $2.5bn T. Rowe Price US Large Cap Growth Equity.
The stock – which had been among the top-performing FAANG (Facebook, Amazon, Apple, Netflix and Google-parent Alphabet) before the pandemic – is the second largest holding in the portfolio.
Tamaddon said: “It is reassuring to know the company has taken steps to prioritise key products – in household staples, medical supplies and other high demand goods – as the needs of its customers have shifted. Maintaining relevance to the customer is key in any environment.”