Stocks to Ride Out the Coronavirus Scare

The following first appeared on Kiplinger’s as 11 Best Stocks to Ride Out the Coronavirus Outbreak

It’s never reassuring when you see news footage of quarantined tourists stuck on cruise ship, or when the Homeland Security agent gives your passport an extra hard look for recent visits to China. But when you see Venice cancelling its annual Carnival and the entire country of Italy on effective lockdown, that’s it really starts to feel real.

Health scares can really spook the market, as we saw on Monday and Tuesday. But we still have portfolios to manage, even if it seems like the world is ending.

The winners and losers in these situations aren’t always obvious at first. The same company that benefits from a stockpiling of supplies or a surge in home delivery might also suffer from supply chain disruptions, particularly if they source from China. That’s what makes this challenging but ultimately rewarding.

It’s safe to assume that this too will pass. This isn’t the first global flu scare, and it’s not likely to be the last.

It’s also important to keep things in perspective. While the data on coronavirus is still patchy, it doesn’t appear to be exceptionally lethal. The death rate is only about 2.3%, and the real rate could actually be lower. We have no way of counting early carriers of the virus who may have been misdiagnosed with flu or the common cold.

To put that in perspective, the good, old-fashioned flu only kills about 0.13% of those that catch it, but the SARS and MERS viruses had death rates of 9.5% and 34.5%, respectively.

But while the coronavirus is far less deadly, its effects on the economy will likely be much worse. When SARS hit the Chinese economy in 2003, China accounted for just 4.2% of the world economy, according to IHS Markit. Today, the Chinese economy makes up 16.3% of the economy. So any pronounced slowdown in China is going to be felt around the world.

We’ll get through this. But in the meantime, let’s look at stocks that are poised to survive and thrive regardless of how bad this pandemic gets.

Amazon.com (AMZN)

Amazon.com (AMZN) is taking over the world. This is essentially a foregone conclusion at this point. The ease of ordering on their website makes going to a mall seem almost old timey and quaint. Whether it’s a new computer, clothing or even your weekly groceries, chances are good you can buy it on Amazon and at a reasonable price.

And beyond retail, Amazon is also the dominant provider of cloud computing services to companies, government agencies and even regular Janes and Joes via its AWS platform. The list of major companies using AWS are a virtual who’s who list. Apple (AAPL) reported spends more than $30 million per month on AWS, and Netflix (NFLX), Lyft (LYFT), McDonald’s (MCD), Johnson & Johnson (JNJ) and even the U.S. Department are all noteworthy users.

If that wasn’t enough, Amazon also goes head to head with Netflix and Disney (DIS) in video streaming.

The bullish case here is pretty straightforward. If more and more people opt to avoid crowded public spaces, companies like Amazon that bring goods to your door and streaming video services to your computer, phone or TV stand to benefit.

Amazon won’t get through this completely unscathed. The company depends on goods coming from China, so disruptions to its supply chain due to employee absenteeism or factory closures could create problems, particularly during Amazon’s annual Prime Day. It’s something Amazon is taking very seriously and taking steps today to mitigate.

But it’s important to note that any hiccups will be short-term in nature, whereas customers that embrace delivery from Amazon during the virus scare aren’t likely to give up the convenience once it blows over.

To continue reading, see Best Stocks to Ride Out the Coronavirus Outbreak

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