As humans, we are creatures of habit.
We seek the comfort of the familiar.
Yet, as businesses reopen after a prolonged closure, the world looks decidedly unfamiliar.
We see it everywhere.
Masks have become a staple when we step outside. Social distancing has become a standard practice wherever you go.
Unless a vaccine is discovered, we have to accept that these measures are here to stay.
Meanwhile, the movement of people has been drastically reduced.
Most employees are still working from home, even as Singapore’s circuit breaker measures are lifted. At the same time, students will have to get accustomed to regular home-based learning.
As more people avoid the outdoors, their needs are visibly shifting.
As investors, we need to be alert to these changes. Some could have a long-lasting effect on businesses.
Tectonic shifts
Some changes are hard to miss.
In April, Singstat reported that food and beverage sales in Singapore had plunged by over 50% year on year. However, in the same month, supermarket and hypermarket sales grew nearly 75% year on year.
Between the two statistics, it would be fair to say that more people are cooking at home rather than eating outside.
Meanwhile, businesses are adopting digitalisation at an unprecedented pace.
OKTA (NASDAQ: OKTA), a cloud identity software-as-a-service (SaaS) provider, said that the Covid-19 pandemic has fast-forwarded cloud migration discussions by five years.
The cloud services provider shared the example of FedEx (NYSE: FDX), which transitioned over 80,000 of its employees to remote work within 36 hours. The original plan, which was supposed to have taken a few months, was dramatically shortened to just a single weekend.
Given the high investment in time and effort, I doubt that FedEx will return to its pre-Covid work arrangements again.
Elsewhere, a massive shift is happening in how we communicate and engage with each other.
Zoom (NASDAQ: ZM), a popular video conferencing provider, reported that the number of annualised minutes on its platform jumped from 100 billion at the end of January to over 2 trillion in April, a 20-fold increase in a matter of months.
At its peak, there were over 300 million Zoom meeting participants daily.
As more people stay at home, virtual meetings are being used for everything from team meetings to yoga lessons and doctor appointments.
Veeva Systems (NYSE: VEEV), a healthcare-based SaaS provider, said the use of telemedicine increased from less than 1% of doctor visits in February to an eye-popping 30% by April, just two months later.
The company added that doctors and patients are starting to accept a mix of in-person and virtual interactions as the new normal.
Again, it is unlikely that things will revert back to the past after the pandemic is over.
Safety first
Changes are not confined to the online world.
Safety has become a key factor as workplaces adjust to a new reality.
In China, Cushman and Wakefield has assisted 10,000 organisations to move over a million employees back to their offices as the economy reopened.
Worker safety is a top consideration in each step of the process.
Groups such as the immuno-compromised or those who are exposed to long commutes are discouraged from returning to their workplaces.
Meanwhile, the commercial real estate firm has partnered Salesforce.com (NYSE: CRM) to pioneer a new “6-feet office” concept to encourage social distancing.
Using visual cues on the floor, employees are reminded to maintain the required distance during face-to-face interaction.
Closer to home, CapitaLand (SGX: C31) is deploying autonomous UV robots after hours to disinfect floors with high shopper traffic. Mall lifts are being fitted with photoplasma air systems to eliminate viruses and bacteria.
“Covid-safe” may become a new standard for buildings in the future.
As things changes, so should we
It may no longer be business as usual for some businesses.
When restaurants are allowed to reopen, they may have to make do with half the seating capacity compared to the past due to safe-distancing measures.
Online deliveries and takeaway orders will have to pick up the slack.
Meanwhile, commercial office buildings may face a period of lower demand as businesses adjust to remote work and relook into the amount of office space that is needed to operate without disruption.
As investors, we have to be alert to the possible shifts that may fundamentally alter our original investment thesis.
We cannot close our mind and ignore what is happening.
Likewise, we cannot simply assume that businesses will revert back to their previous forms after the circuit breaker measures are lifted.
In some cases, we may have to accept that the reason why we bought some stocks may no longer be valid.
Lifelong learning
Even as the ground beneath businesses shift, we should recognise that some of the key qualities we seek as investors will remain unchanged.
We still want to have good management teams at a company’s helm who are willing to adapt to new realities, innovate, and pivot their business accordingly.
Similarly, a business with strong financials and steady free cash flow rarely goes out of style, as cash would provide the company with the all-important financial firepower to turn strategy into reality.
These factors remain timeless.
And we have to keep learning.
We will continue looking for instances and data points that will either validate or break our assumptions on how things may change in the future.
It’s an ongoing process that we, as investors, have to adopt and be willing to change our mind if the situation calls for it.
Ultimately, keeping an open mind and a long term view is key.
New, unexpected developments could take shape in ways we cannot predict ahead of time.
At the same time, in staying with a long-term mindset at The Smart Investor, we are mindful that we shouldn’t act too fast and allow time for management to do their good work.
More than ever, we remain steadfast in our belief that the best returns come from holding stocks for the long term.
And that applies, even as we step out into an unfamiliar world.
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Note: An earlier version of this article appeared in The Business Times.
Disclosure: Chin Hui Leong owns shares in OKTA, Veeva Systems and Salesforce.com.
