Unintended Opportunities

Friday Reflection | February 12, 2021

Broad stock indices had a relatively quiet week, hovering near record highs as markets caught their breath following a volatile but positive start to the year. We are inclined to look past the short-term headlines – from Tesla’s forays into Bitcoin to the latest Reddit fad driving cannabis stocks higher before plummeting the next day, and even the second impeachment of former president Donald Trump. This week, we are hopeful the more enduring outcome is the positive news on vaccinations and declining global infection rates – but many researchers warn that the virus will circulate globally for years to come.¹

We are now a year into the pandemic. Viral mutations, high transmission rates, and slower vaccination timelines for developing nations are likely to force continued adaptation to living with the reality of the virus. For some industries, that spells business opportunity. The global economy will not pause as public health measures evolve, and unintended opportunities will emerge for businesses to provide new and relevant products and services. Innovation in business can in turn illuminate the path forward for effective public health practice, and investors are paying close attention.

As Covid-19 shifts from a pandemic disease to an endemic one, certain modifications to personal and societal behavior will become ingrained. Businesses understand this shift, and new and potentially lucrative Covid-19 business lines are quickly emerging as they invest in goods and services, including air-quality monitoring, diagnostic kits, and new treatments.

Technology stocks thrived when the world jolted to virtual everything in March of 2020, and a new wave of growth may come from the businesses that support the transition back to physical commerce and community. We wrote about how Etsy has taken advantage of this moment, shifting production and search algorithms to support the boom in demand for safe and stylish facemasks. Other examples include South Korea’s SD Biosensor, which has ramped up production of at-home diagnostic kits that can support rapid testing prior to attending sporting events, concerts, or family functions. Meatpacking plants in Canada and Europe are investing in robotic arms in order to curb the risk of outbreaks by reducing the number of workers on assembly lines.² Private colleges and other venues are investing in upgraded air filtration and greywater monitoring systems.³

Many of the technology companies that profited from the shift to remote work will also continue to profit in an endemic scenario. Zoom, GoToMeeting, and other virtual platforms are here to stay. Delivery services are likely to continue to expand as well – Uber Eats just reported 224% growth versus last year, which partially offset declines in the company’s core ridesharing business, while DoorDash continues to grow since going public in December. Larger companies have entered this field as well – Target’s subsidiary Shipt is delighting Safeway shoppers locally with fast deliveries and text inquiries for substitutes if the desired item is unavailable. These sectors were already poised to become core elements of the economy, but the pandemic materially accelerated that timeline.

The saying suggests you should make lemonade, but with a bit of creativity, you will discover a myriad of other uses. That same open-minded outlook allows an investor to see the silver linings that follow an economic crisis, and importantly, to have the confidence to stay invested. This acceptance of uncertainty and volatility as our clients stay invested allows them to participate in new opportunities as they arise. Unexpected twists in consumer demand can lead to innovation, and innovation has always been an accelerant of global growth.

Life gave the globe a pandemic; now businesses are making lemonade with the unintended opportunities.

¹ Respiratory viruses like the novel coronavirus are prone to becoming endemic because they can transmit through usually benign acts, like breathing and talking. Thankfully, hospitalizations have already fallen 30% in Israel after it vaccinated a third of its population (https://www.bbc.com/news/health-55706855). In the US, our own coronavirus cases continue to plummet, along with the number of Americans hospitalized with symptoms, and daily vaccinations have tripled in the last month (https://www.nytimes.com/interactive/2020/us/coronavirus-us-cases.html.)

² As Covid-19 Vaccines Raise Hope, Cold Reality Dawns That Illness Is Likely Here to Stay. By Daniela Hernandez and Drew Hinshaw. Published February 7, 2021. Wall Street Journal

³ Colleges Turn To Wastewater Testing In An Effort To Flush Out The Coronavirus. NPR.org