When Covid-19 was declared a pandemic in March of 2020, many looked to see if there would be certain stocks or industries that excelled as the rest of the economy tumbled into a recession. Now that the vaccine rollout has revealed the light at the end of the tunnel for the pandemic, investors face the opposite challenge: trying to predict which stocks provide the best opportunities in a post-pandemic world.
Deciding which stocks to invest in requires more than just an observation of which sectors performed well throughout the pandemic but also an analysis of which ones are likely to continue growing even after the world returns to normalcy. Two sectors that received particular attention in 2020 were the eCommerce and biotech industries, both of which provide opportunities for investors to find value as society begins to look more like it did before the pandemic.
One stock that will likely grow post-pandemic is actually one that boomed during the onset of the pandemic as well: Amazon (AMZN). Amazon’s stock rose almost 100% from the beginning of March 2020 through its peak in September. A large portion of this growth can be attributed to the rise of general e-commerce during the pandemic, with sales increasing by 32% last year. However, the growth in e-commerce won’t necessarily hold as the pandemic comes to a close; it is possible that as malls and retails shops reopen at full capacity, they will reclaim some of the market share lost to e-commerce in 2020.
Amazon’s long-term appeal, however, lies not in the growth of e-commerce as a whole but in its share of the e-commerce market. Amazon’s share of the e-commerce market has been growing steadily the past few years, and in 2020, it was estimated to account for half of the entire online retail market. The growing market share accompanied by the spike in general e-commerce sales yielded significant extra revenue for Amazon, the revenue it is using to more fully monopolize their supply chain and invest in its rapidly growing web services (AWS). As Amazon continues to grow, their service will continue to blow past their competitors as their larger inventory and an increasing number of warehouses streamline the user’s ability to receive their product. Amazon’s stock has been relatively even for the past six months, but look to see it grow as its investments pay off in the coming quarters.
Biotech stands as another sector poised to continue to grow post-COVID. While the unprecedented success of Covid vaccines produced by Pfizer and Moderna certainly gives reason for optimism, it is not the only reason to expect a long-term boost for biotech companies. To be sure, immediate successes in vaccine distribution and efficacy testing for children may boost the short-term prospects of a stock like Moderna (MRNA); however, long-term value may also lie latent as a huge increase in biotech investment awaits its payoff.
The biotech sector saw a record-setting level of capital funding in the first two quarters of 2020, and multi-billion dollar government contracts issued under operation Warp Speed funneled heaps of new capital into the sector. For biotech companies, this increased capital investment may not immediately translate into increased profits as the financial benefits of increased medical research may only be realized months or years after the initial investment. Additionally, individual biotech stocks have historically proven to be volatile due to their dependence on governmental regulation and approval. All this being said, the biotech sector recorded quite a successful year, with a 44% return from 02/20-02/21 relative to 19% for the S&P. Look to biotech ETFs such as ARKG to continue to provide long-term value as additional research translates into revenue.
If the Covid-19 pandemic has taught the world one thing, it is that there will always be unforeseen events, some of which may change the landscape of the entire world. Investing is not about trying to predict the future but about making calculated risks and finding value where others don’t. With this in mind, Amazon and biotech ETFs serve as two investment opportunities that are poised for growth in a post-pandemic world.