By now, everyone has resigned themselves to the fact that COVID-19 is here to stay.
The coronavirus has proven to be extremely tough to eradicate, and its highly infectious nature means there is always the danger that another explosion in cases may occur in the future.
As investors, we have to be mindful of changes in the business environment that may impact our investments.
An assessment of our investment thesis for each company is necessary to ensure we do not end up owning lemons.
COVID-19 has introduced us to a whole plethora of changes in how we work, commute and go about our lives.
Some of these changes may be temporary, while others are likely to be permanent.
One thing’s for sure, though.
We will have to adapt to a new normal once this whole crisis is over.
The pandemic has created a heightened sense of awareness of the importance of sanitization and cleanliness.
With the virus running rampant among the population, governments around the world have urged their citizens to adopt numerous hygiene practices.
The use of hand sanitizers has jumped while the sale of cleaning agents such as Clorox (NYSE: CLX) has soared.
Gloves and face masks are now standard fare in clinics and hospitals, leading to outsized demand for such items.
Restaurants have implemented enhanced cleaning procedures as they wipe down all seats and tables with bacterial hand wipes after each customer has left.
And in time to come, aeroplanes, buses and cruise ships may have to impose stricter hygiene practices to assure customers that it is safe once again to commute.
If your portfolio contains companies that deal with sanitization, such as Kimberly Clark (NYSE: KMB), you’re in luck.
Investors in Top Glove (SGX: BVA), the largest manufacturer of healthcare gloves in the world, have seen their stock price shoot up more than six-fold this year so far.
And if you own shares in a little-known company called Medtecs International (SGX: 546), which produces personal protective equipment, your investment would have multiplied 18-fold year to date.
These companies were chugging along and growing steadily before the pandemic, but have seen nearly five years of demand compressed into a six-month time frame.
It’s not surprising, therefore, to see their stocks performing so spectacularly as this new trend seems here to stay.
In the line of fire
Governments have imposed strong measures in a bid to stem the spread of COVID-19.
Through no fault of theirs, industries that have been directly exposed have suffered from lockdowns and movement restriction orders.
These would include airlines, cruise ships, bars, pubs, cinemas, hotels and tourist attractions, just to name a few.
Almost overnight, these industries have been decimated by the effects of the virus.
The risk of a severe outbreak was always present, but most investors may not have paid much heed to such a risk during good times.
With demand still severely impacted and with no end in sight so far to the pandemic, these industries will likely continue to suffer.
An investment thesis based on a pre-pandemic world now has to be closely scrutinised and probably re-evaluated.
Investors may be forced to make painful choices here, perhaps selling a once-promising investment and deploying that money into a company that has a stronger buffer in place to withstand such shocks.
Get Smart: A whole new world
The pandemic has almost completely transformed the business landscape.
Many companies have gone bust, jobs have been lost and fortunes have vaporised overnight.
Sad as this may be, it is a reality we have to live with.
On the flip side, many companies are thriving or have been unaffected thus far by the crisis.
Investors need to remember that the investment process is a dynamic one and that they should constantly react to changes and adapt their philosophy accordingly.
No one gets it all right all the time.
The prospect of losing money increases when there are great upheavals such as these.
It is the ability to evolve as an investor that will distinguish the savvy investors from the novices.
We have to accept the brutal truth as it happens and adjust our portfolios accordingly.
This pandemic is certainly not the first big shock to hit us, and I am betting it will not be the last.
But if you hold the principles of sound, prudent investing close to your heart, you will come out just fine eventually.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.