A Cross-Sector View of Coronavirus Impacts

In this series of videos, our research analysts discuss how the global spread of the COVID-19 coronavirus could affect various sectors and what investors should be considering amid rising volatility. Joshua Cummings addresses consumer stocks, David Chung gives his views on industrials and Jon Bathgate offers insights on the outlook for tech companies.

Key Takeaways

  • Within consumer stocks, it is difficult to assess the impact of the virus on bottom-line results or short-term valuations, as the market is still waiting to see when the situation will bottom and then start to improve. While the outbreak could affect near-term fundamentals – particularly for companies with direct operations in China – we think it is unlikely to have a material impact on the long-term value of most businesses.
  • The coronavirus outbreak has stalled factory production and disrupted the supply chain within industrials, causing the sector to revert to the level of uncertainty that dominated 2019 before trade discussions calmed and consumer sentiment lifted. Against this backdrop, we think investors should focus on finding companies whose earnings and cash-flow potential is higher than what the market has priced in amid the sell-off.
  • Technology companies started the year in recovery mode, planning and investing for growth in 2020, but renewed uncertainty related to the global spread of COVID-19 has clouded that outlook. Regardless of the near-term outcome, we believe long-term opportunities in the tech space remain robust, especially as semiconductors are building blocks for secular growth trends such as artificial intelligence, the Internet of Things and 5G.