Almost every business around the world is affected by Covid-19 in one way or another. While some have been forced to completely close, others have welcomed a tsunami of new customers that had not even heard of their product a matter of weeks before the crisis hit. Louis Jamieson, Global Equity Analyst, discusses the immediate winners and losers of the pandemic, and the likely future trends as the world comes to terms with living with this new coronavirus.

Technology sector

When we talk of winners amid this crisis, technology companies immediately spring to mind. Almost overnight, businesses and schools had to move their operations online, and individuals were forced to find new ways of socialising with friends and family. What was incredible was how quickly we adjusted as a society and adopted new platforms to keep life as normal as possible.
Immediate impact
One big winner was Microsoft. Their cloud technology allows multiple people to be online at any one time and their applications experienced a huge spike in usage as schools and businesses adopted it as their platform of choice. Indeed, Microsoft Teams reported over 75 million daily active users (DAUs) by the end of March – up 70% from the reported 44 million on the 18th March. The same applies to Tencent in China as it provides both cloud and ‘work from home’ applications for the Chinese audience.
Video conferencing is another winner, with Zoom Video Communications the industry leader. It has seen both business and personal customers surge, going from 10 million daily meeting participants in December 2019 to 300 million in April 2020. This extraordinary growth means the company is now bigger in terms of market capitalisation than the world’s top seven airlines.
Meanwhile, the gaming sector is booming as users have more time to play online games. Winners include EA and Activision Blizzard in the West, and Tencent and NetEase in China. And of course, online streaming services such as Netflix have also been big benefactors. It nearly doubled its subscription growth forecasts in the first quarter of 2020, from 8.47 million subscribers to 15.77 million.
The pandemic has also been responsible for a speedy transition to online education. In China, NetEase has seen the use of its online education services spike during the pandemic. This level of awareness would have been impossible to achieve in normal times, and therefore that business is on a completely different growth trajectory than it otherwise would have been. Who knows how it will change the future of education?
Future trends
It’s harder to predict the longer-term impact on the technology sector – especially when life returns to some sort of normality.  The key will be what is the new normal? People have realised that working from home is viable for many jobs. Businesses have seen they can save large costs on commercial rents. This means that companies that facilitate working from home, such as Microsoft, will continue to prosper. Microsoft Teams would have taken many years to get to the position it is in now without the pandemic.
It’s likely that advertising dollars will move from ‘above the line’ (TV, billboards, etc.) to online (Facebook, Google, Instagram and, in China, WeChat ), as this crisis forces businesses to cut down on advertising spend amid the inevitable recession. Above-the-line advertising is relatively expensive, and there is less consumer exposure to billboards and TV adverts as people stay at home and increasingly stream their TV programmes rather than watching them live with adverts.
The pandemic is also likely to accelerate digital transformations and investments in new technology as those companies that do not have this as part of their strategy are likely to suffer competitively. This is not just in terms of productivity efficiencies, but also in enterprises getting closer to their customers through insights and analytics to generate growth. We are also likely to see an acceleration in the adoption of artificial intelligence, analytics, customer behaviour services, video conferencing and distributed workflow. This will be beneficial for Microsoft, which is involved in large digital-transformation projects, and Google, with its own cloud and artificial-intelligence offerings.


Healthcare sector

For obvious reasons, the pandemic has had a heavy impact on the healthcare sector: from developing a vaccine to treating the virus to supporting other areas of healthcare that have been forced to take a backseat. Even GPs have been forced to offer online consultations, which was almost unthinkable only a few months ago.
Immediate impact
Drug companies looking to develop a vaccine have been in the spotlight. But vaccine manufacturing is complex, heavily regulated to ensure safety and difficult to scale. It’s therefore unlikely that we will have a vaccine for at least another 18 months. In the meantime, Gilead’s drug ‘remdesivir’ has been in the headlines as a stop-gap to help suppress the virus until a vaccine is developed and manufactured.
Manufacturers of hospital ventilators (Philips) have seen strong demand, as governments sought to rapidly increase the number of ventilators available in intensive care units (ICUs) and build strategic stockpiles. More ICU beds (which Stryker manufactures) were required for those patients who developed severe cases of Covid-19, and there has also been increased demand for patient monitors, computed tomography and ultrasounds, which are important for diagnosing and treating the virus.
There has also been significant demand for molecular testing devices, benefiting several companies that manufacturer these products and can scale up production. We have seen accelerated approval from the regulatory authorities for devices to help diagnosis of Covid-19. Abbott and Roche have both had devices approved and are experiencing robust demand for their products.  
On the flip side, since hospitals have been forced to prioritise Covid-19 patients, most elective procedures, such as orthopaedics, have been stopped and delayed. Companies such as Stryker, Medtronic and Johnson & Johnson are exposed to this sector of healthcare. It will take some time for hospitals to switch hospital beds and infrastructure configurations back to pre-virus setups to enable elective procedures to return.
Future trends
Healthcare authorities and technology companies are working together to develop applications that can help in the next phase of the pandemic. Apple and Google have announced that they are coordinating a potential technological solution for contact tracing. This will be a mobile-based notification tool that will assist the healthcare authorities in isolating specific areas where there are flare-ups. This will help to control the spread of the virus and will also be central to our response to a future virus of this nature.
This is undoubtedly an opportunity for healthcare systems around the world to modernise and position themselves for the future, such as increasing the use of online consultations and in-home care. Businesses that can support the healthcare system in improving efficiency and safety through technology will surely benefit.

Travel Sector

Sadly, one of the big losers of the pandemic is the travel sector. With lockdowns imposed across the world, travel has come to a complete standstill.
Immediate impact
In the short term, it is all about the balance sheet. Some companies are very well protected from this kind of shock. We estimate that could survive three years with no revenue. But some of the European airlines are not so lucky. Depending on the length of the pandemic and how willing governments are to step in, we may see airline bankruptcies.
Clearly, the cessation of travel will also affect hotels. Occupancy is running at just 10% in some markets. The worst-affected markets continue to be Spain, Italy and Japan. China is looking a lot better with around 35% occupancy. This is good news for hotel groups with high exposure there, such as InterContinental Hotel Group (IHG). Also, large hotels chains do not own their hotels – they merely franchise their brands. It will be easier for those hotel owners to get access to funding in a downturn, while independent hotel owners might find it trickier. This will lead to franchise hotel groups taking market share. This dynamic has played out in previous recessions.
Future trends
It is likely that domestic travel will be the first to recover. If this is the case, certain markets win, and certain markets lose. If we were to crudely assume that all outbound travel is redirected to inbound, then Spain, Italy and France will be net losers, whereas the UK, China and Russia will be net winners.  
One part of the market that could be permanently impaired is business travel. The argument here is that many meetings that were done at great travel expense have now been shown to be just as effective over videoconferencing. This will heavily affect airlines and franchise hotel groups that are exposed to business travel. We believe that Hilton, for example, is 75% exposed to the business traveller.


We are still unclear on how long and how deep the economic downturn will be, so our focus continues to be on investing in resilient companies that stand the greatest chance of surviving the ravages of this pandemic. As investors, we are also very focused on the long term, and we will be carefully analysing and monitoring every sector to fully understand the ramifications of this crisis and where future opportunities lie. Sadly, in the short term, it’s not going to be easy for business. Apart from the lucky few, most companies will be focusing on survival, not growth, and investors will back those that are likely to prevail as winners within their sector.
Please remember that the information and opinion contained in this article should not be treated as a forecast, research or advice to buy or sell any particular investment or to adopt any investment strategy.

16 January 2020
Veganism comes of age

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