When it comes to betting on long-term stocks set to benefit from the novel coronavirus acceleration of secular trends preceding the pandemic, the most obvious plays are in digital technology.
Academic research papers are being churned out to explain just how Covid-19 has changed the world of business permanently. Some industries and sectors have fared much better than others during the crisis.
Amazon (NASDAQ:AMZN) is just one example of a company that’s benefited from Covid-19, with higher e-commerce revenue, greater demand for Amazon Web Services (AWS) and even growth in digital advertising. Founder Jeff Bezos is now worth almost $200 billion as a result of AMZN stock rising by 80% in the first nine months of 2020.
Of course, some industries haven’t fared nearly as well. Airlines are one sector unlikely to see any semblance of normalcy for several years.
So which are the best industries to invest in right now? Here are 10 long-term stocks to ride this wave:
- Amazon (NASDAQ:AMZN)
- Intuitive Surgical (NASDAQ:ISRG)
- Prologis (NYSE:PLD)
- Nvidia (NASDAQ:NVDA)
- Accor (OTCMKTS:ACCYY)
- Kinaxis (OTCMKTS:KXSCF)
- Chegg (NYSE:CHGG)
- Microsoft (NASDAQ:MSFT)
- Teladoc (NASDAQ:TDOC)
- Shopify (NYSE:SHOP)
While these stocks have benefited from coronavirus tailwinds, they were already well-positioned for gains in our increasingly-digitized world. Let’s dive right in.
Long-Term Stocks to Buy: Amazon (AMZN)
Amazon isn’t the only e-commerce business to benefit from Covid-19, but it is the biggest.
Stock Twits founder Howard Lindzon recently interviewed Alex Danco on his Panic With Friends podcast. Danco’s take on Amazon says all you need to know about Jeff Bezos and company:
“In order to compete against Amazon, you need to have taste or you need to be ok with losing.”
A lot of people probably think they have taste, but Danco’s talking about bankable taste, and that’s much harder to come by. In March 2018, I argued that Amazon wanted to own your home. Not literally, of course, but to be the provider of every product and service found in your house.
And it would do so through its Prime services.
“In Amazon’s case, it increases the number of Prime members and the amount those members spend annually by providing everything you need to run your home and life,” I said back in 2018. “Over time, revenues will exponentially climb, and with it, the price of Amazon stock.”
AMZN stock is up 127% in the two years since. I expect it to continue to move higher as it grabs additional market share across people’s lives. Covid-19 tailwinds have only accelerated this land grab.
Intuitive Surgical (ISRG)
Intuitive Surgical was a major player in robotics even before Covid-19 hit the world. Now, its surgical systems have become crucial to medical professionals.
Wired published an article in March discussing the difficulties of getting robots into hospitals:
“A cruel irony of the coronavirus pandemic is that medical professionals know better than anyone that social distancing is critical for slowing the rate of new infections, yet they’re forced to be the closest to the disease. And those that need social interaction perhaps more than anybody — the elderly — are the ones who need to isolate the most, since they’re the most susceptible to the disease.”
In this instance, writer Matt Simon is talking about robots providing care to patients in hospitals and the like, but it illustrates why robotics are necessary to the future success of hospitals and other medical facilities.
Intuitive could also partner with iRobot (NASDAQ:IRBT) to develop a robotic orderly that helps humans do their jobs more effectively while reducing the spread of infectious diseases.
With Intuitive already a big part of hospital life, the acceleration of robotics in healthcare is bound to help ISRG stock continue moving higher.
Prologis (PLD)
This segment of the real estate industry was benefiting from e-commerce long before the pandemic struck. However, Covid-19 has accelerated this trend.
“Accelerated adoption of e-commerce was definitely a positive trend of the pandemic,” said Michael Coppola, a partner with Bluewater Property Group. “E-commerce has changed our industry. We’ll all be attuned to how much of that sticks.”
How good has this positive trend been for owners of industrial real estate? Beyond their wildest expectations.
“The e-commerce increases we’ve seen in the last few months have been astounding,” Duke Realty vice president of leasing and development, Stephanie Rodriguez, said in June. “In this short amount of time, we’re outpacing where we thought we’d be in three years.”
Prologis, the world leader in logistics real estate with 963 million square feet of space in 19 countries, is ideally situated to benefit from this acceleration. Despite the gains it will be seeing from e-commerce, PLD stock is up just 14.6% year to date through August 26.
As far as long-term stocks go, I think investors are undervaluing Prologis’ future potential in 2020. Look for that to change in 2021 and beyond.
Nvidia (NVDA)
With so many people working from home for the foreseeable future, augmented reality (AR) is going to experience an acceleration in demand for products that allow businesses to provide a simulated in-person customer experience.
“[T]he use of AR technology for collaboration and remote support of frontline workers has soared, enabling experts to be much more productive in helping to debug problems and resolve production issues remotely,” U.K. industrial innovation technology specialist Jim Heppelmann told IoTNow in May.
“COVID-19 has meant industry has been forced to adapt quicker than it probably would have done under normal economic circumstances, but now they’ve had a taste of the operational and financial benefits it can deliver, I can see a major rise in adoption.”
In April, InvestorPlace contributor Eric Fry discussed how Covid-19 would accelerate technology changes, and how Nvidia would benefit from those changes.
“To protect your portfolio, you need to have exposure to these nascent trends. And let’s be clear: All roads lead to Nvidia. Thanks to the company’s dominance of the GPU market, it is at the very center of several powerful multi-decade growth waves, including gaming, data centers, autonomous vehicles, AI and machine learning,” Fry stated back on April 8.
I couldn’t agree more. That’s why I believe NVDA stock is an excellent long-term buy.
Accor (ACCYY)
I would bet my left arm that one of the big companies operating ghost kitchens in the U.S. will merge with a special purpose acquisition company (SPAC) in the next 12 months. It’s a business that just seems tailor-made for someone with a big name in the restaurant industry to raise half a billion and find such a target.
But this isn’t about SPACs; it’s about ghost kitchens, and ACCYY stock in particular.
At the end of June, The New Yorker discussed why ghost kitchens would be our future. If you don’t know what a ghost kitchen is, it is a restaurant that’s expressly set up for take-out and delivery only — no in-house dining.
The subject of the article was Reef Technology, which is backed by SoftBank Group (OTCMKTS:SFTBY). Reef operates kitchens in 18 cities across the U.S. It also repurposes parking lots into dining spaces. The pandemic has accelerated its plans.
In February, I recommended Simon Property Group (NYSE:SPG) because of C3, the mall owner’s partnership with SBE Entertainment Group and Accor, to develop 200 ghost kitchens in the U.S. by the end of 2020.
While a lot of restaurants have been laying off people, C3’s been hiring. While you could go with Simon, I like Accor because it owns 50% of SBE Entertainment Group, run by hospitality and real estate entrepreneur Sam Nazarian.
Malls have to do something with all that empty retail space. Why not ghost kitchens?
Kinaxis (KXSCF)
Of all the stocks on this list, Kinaxis is most likely the one least familiar to U.S. investors.
Based in Ottawa, Ontario, the company’s RapidResponse cloud-based supply chain management software has garnered a lot of attention, not to mention business, this year due to all of the supply chain issues resulting from the novel coronavirus pandemic.
My wife is in the construction business. You wouldn’t think it would be hard to get ahold of bathtubs right now, but the pandemic has made it difficult for companies across industries to maintain their supply chains.
On August 10, Kinaxis raised its guidance for 2020. Covid-19 had everything to do with that change. In the three months ended June 30, company sales increased by 45% over last year to $61.3 million. In 2020, it expects revenue of at least $216 million, up from guidance of $211 million in the previous quarter.
“Kinaxis has quite simply never been more relevant,” stated CEO John Sicard in a statement. “There has never been more attention on global supply chain resilience and the power of concurrent planning to provide the agility needed to respond to daily disruption.”
Back in 2018, I discussed how Toyota (NYSE:TM) started using Kinaxis’ software to handle its supply planning instead of doing it by hand. I expect more companies to lean on Kinaxis in the years ahead as supply chain management becomes even more critical than it already is.
Chegg (CHGG)
Last July, I wrote about seven stocks to invest in that are making life easier for students. One of those picks was Chegg, an online platform that helps individuals become better students by providing tutoring, writing instruction and grammar correction, better study aids, etc.
“Chegg might not be profitable just yet, but it will be. Buy in now while its shares are still affordable,” I wrote on July 16, 2019.
Chegg is up 75% since then.
In the second quarter, Chegg had 3.9 million subscribers for its Chegg Services offering, which includes all of the aforementioned services. For the quarter, subscriber base grew by 29%, while revenue was up 31%. With permanent changes to education expected post-Covid-19, Chegg delivers a winning formula.
It might fall back in the near-term, given how hot it’s been in 2020. However, long-term, I like it a lot. And so does Piper Sandler. which has an overweight rating and a $90 target price on CHGG stock.
Microsoft (MSFT)
The obvious pick when it comes to virtual meetings stocks is Zoom Video Communications (NASDAQ:ZM), whose stock was trading below $70 at the start of the year and now is closing in on $300.
While there’s no denying its success, Zoom is a niche specialist. By contrast, Microsoft has several businesses that have benefited from Covid-19 — Teams, Cloud, Gaming and Windows — and should continue to outperform the competition in the months and years ahead.
Now Microsoft is teaming with Walmart (NYSE:WMT) to buy TikTok’s U.S., Canadian, Australian, and New Zealand businesses. Estimates suggest the duo will have to pay anywhere from $20 to $30 billion for the short-form video application’s business in those countries.
While there are other bidders for TikTok, there’s no doubt that they’ll be looked upon in a positive light by U.S. government regulators.
Microsoft CEO Satya Nadella continues to show why he’s one of the best chief executives in America.
Teladoc (TDOC)
Before Covid-19, I’m not sure many people thought telehealth or virtual medicine would become an everyday norm for Americans. Post-Covid, I’m sure many patients will go back to in-person visits with their primary healthcare provider.
On the surface, this suggests that Teladoc’s revenues could be at risk. That said, I’m confident that Teladoc has built this reality into its business model.
Recently, Teladoc announced it would acquire Livongo Health (NASDAQ:LVGO) in an all-stock transaction worth $18.5 billion. Teladoc shareholders will own 58% of the merged company and Livongo Health shareholders the rest.
My InvestorPlace colleague Matt McCall recently reminded investors that mergers don’t always work out so well. Matt, you’re preaching to the choir here.
On July 9, I recommended that investors consider Livongo Health’s stock because it would stay hot for years to come:
“With an asset-light business model, I find it hard to believe Livongo’s revenues are going to slow anytime soon. Further, it has more than enough cash to survive the novel coronavirus and anything else Mother Nature chooses to throw at the world. I see LVGO as the diamond-in-the-rough of the seven hot stocks on my list. It’s going to surprise a lot of people in the future.”
Well, 18.5 billion reasons later, the merger gives Teladoc a broader foundation upon which to grow its market-leading telehealth business. Long-term, Teladoc’s a winner.
Shopify (SHOP)
This last pick probably seems at odds with reality. Covid-19 has decimated small business. And while it might be hard to imagine small businesses rebounding anytime soon, in my experience, these are some of the most resilient entrepreneurs around.
I’m not trying to downplay the facts. According to McKinsey and Co., small businesses were much less prepared for the economic shock of the pandemic, with approximately one-third operating at break-even or even at a loss pre-Covid.
This is where Shopify comes in.
It has the resources and know-how to get businesses rolling again. This technology platform’s reason for being is to help small businesses to be successful. If they win, Shopify wins.
In Canada, the company partnered with the Canadian government to launch Go Digital Canada, expressly set up to help small businesses go digital.
“From our perspective, small businesses, they are the backbone of the Canadian economy. They make up 98 percent of Canadian companies,” Sylvia Ng, general manager of Shopify’s Start product line, told BetaKit in July. “The fact that they’re faced with these unprecedented challenges due to COVID right now [made us want] to provide support to help bring these businesses online, and help future proof that backbone of the Canadian economy.”
Ditto for the U.S. I first recommended SHOP stock in May 2017 and I still recommend it today.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.