TO BE FEARFUL OR NOT TO BE?
COVID19, commonly referred to as novel coronavirus, in a deadly outbreak has left global leaders racing their minds to find a solution to this problem. A few months ago, no one could have predicted the impact COVID19 would have on the global economy. With major sports events canceled and tech conferences either postponed or canceled, the world has suddenly taken a halt. As major companies see their stocks plunging and the gap between supply and demand widening, another big fear looms. How long before companies dry out of funds to keep them going?
UNSETTLING FEARS OF COMPANIES
No one can tell how long this pandemic will last, and this casts fear over small retail owners who are under lockdown under government orders. Even online retailers like Amazon, Bigbasket, Flipkart, and Grofers have suffered enormously due to it. Amazon has started prioritizing essential orders while Flipkart has completely shut operations. Grofers is not allowing new users to sign in.
Amongst all of this chaos, investors, in the past few days, have borne the blunt trauma of this pandemic. Cruise companies like Carnival, Norwegian Cruise Line, Royal Caribbean and airlines like Virgin Atlantic, American Airlines have seen a huge plunge in their stocks with their values going down as far as 80%.
In India, the situation is critical just the same as the world, with companies enforcing work from home policies and even cutting their growth forecasts. So a question that arrives amongst all of this is whether this is the right time to invest in stocks or not? And even if someone were to invest, wouldn’t it be a waste since almost all companies seem to be losing their worth.
IMPACT ON TECH COMPANIES
Warren Buffet once said, “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” This is a fearful time expected to be soon worse than the Global Recession of 2008. Moody’s has already cut India’s 2020 growth forecast from 5.3% to 2.5%.
On one hand investing in companies Uber and Ola have seen significant dips while on other stocks of companies like Amazon, Facebook, Nintendo, Intel, NVIDIA and Google have little impact with some even leaning towards the positive. In fact, with more people indoors their services are increasingly being demanded. This brings into the highlight as to whether investing in the big tech is the right thing to do.
Graph:-Stock trends of top companies in the United States
UNPREDICTABLE FUTURE OF INVESTING IN COMPANIES
The present situation can ultimately lead to two situations. In the first case, either it is contained in a few months. In such a case, as rates dip, this time is a huge boon for tech investors in the long run. When all of this is over, while non-tech companies will take time to resurface again tech will still lead. People won’t immediately make plans for travel unless unnecessary and would still prefer eating indoors as compared to going out. Things will take time to soothe out for the common man to return to the previous lifestyle. Investing in companies will only become more volatile.
In the second case, if this pandemic sees no end for a long time it would hurt the market very badly impacting even big-tech companies as they ultimately rely on manufacturing and people for their growth. Therefore, making investing futile. This weight is ultimately borne by the investors.
In the present situation, while manufacturing is also at a standstill so is consumer spending. The closure of Apple stores in China and other countries led to a huge loss which will heap over as the situation worsens. Companies in Europe and North America have even plans to lay off workers if the situation is not under control in the next three months. What can be predicted for investing in companies is difficult to understand.
Investing in companies is tough as this is making the market even more volatile and tricky to the extent that some countries like the Philippines and India have even halted their stock exchanges briefly in the past few days.
WATCHING THE MARKET: Investing in Companies
Gary Mishuris, MD of Silver Ring Value Partners, an investment firm, in his article “How To Invest Safely Amidst The Coronavirus Market Meltdown” mentions the importance of acting slowly yet deliberately as it is expected for major stocks to go down more.
In the coming days more and more companies will look for employees for Work from Home conditions. Under such conditions, emerging technology players like Zoom and Slack (for video conferencing) and Amazon Web Services will again come into the picture and be far more profitable than before. With more than 3 billion under quarantine online streaming services have witnessed a huge increase in demand to the extent that they even had to reduce their streaming quality from High Definition to Standard Definition to reduce internet traffic.
Also, as more and more people become health conscious handwashes and sanitizers are too in demand which will continue to stay even after this crisis is over. So, companies like Hindustan Unilever Limited and Bradley Corp too have seen positive growth in their respective share markets. Companies like Alphabet, Microsoft and Facebook will too see a rise in their stock values irrespective of how long the crisis lasts.
In India players like Zomato (and Uber Eats) and Swiggy too will remain afloat as more and more people recognize their importance.
No one can tell you what the future holds. The risks and the profits will both be borne by you. So, watch the market.
These players are already deemed to be the leaders of tomorrow as under no condition will they be facing any backlash after the crisis is over. Therefore, investing in them will surely be a sure shot in the long term. Watch and invest.
Read More: Next Big Tech That’s Coming Your way