In today’s Exponential Investor…
- What happened in 1993?
- Clattered and smashed
- Ten reasons to stay positive
It seems that we’re on the brink of another extended lockdown period.
Wales has gone into a “fire break” lockdown, Scotland is in lockdown, Northern Island is in lockdown and it seems an English nationwide “circuit breaker” is more imminent every day.
The fascinating thing is the reluctance to call it a lockdown. That’s what the first one was, that’s what the second one will be.
Ironically, the fact another one is on the cards means the first one didn’t work – that lockdowns don’t work.
They maybe prolong things, but at what expense? Some may argue that it’s saving hundreds of thousands of lives. The only problem is that daily cases are higher than they’ve ever been, and deaths are under 100 per day.
Slide that number in with typical daily numbers of deaths and you’ll find everything right now is well within historic means.
In fact, in 2019 in England and Wales there were 530,841 registered deaths. That’s 1,454 who die every day in a normal year. This year’s numbers you’d expect will be higher, but will it be?
One thing we can’t disagree on
There were clearly elevated numbers in March, April and May. Yet from June to the start of October (week 40) the average weekly deaths in the UK has been 9,268. With 12 weeks of the year remaining from that date, the UK is tracking to see around 574,964 total deaths for the year.
That is more than 2019. A lot more. You’d be easily led to thinking that this year’s today will be the highest since the Spanish flu outbreak in 1918.
But it’s not. 1993 was the most recent devastating year for deaths with 578,512 deaths in the UK.
What happened in 1993 that the UK would end up with more total deaths than this year?
Nothing. That’s what.
Nothing related to the public health happened in 1993.
I mean take from that what you will. But everyone should be questioning the decision making to wreck an economy and the livelihood of millions at the expense of threats to public health that have resulted in no more deaths than would be expected in a year in which nothing happens to the public health just 27 years ago.
You may support more lockdown measures. Clearly I don’t. You may disagree with my analysis this year’s impact on the public health won’t be radically different from previous years in which there’s been no major threat to the public health.
What neither you nor I can disagree on is the impact this year’s situation has dealt the economy.
GDP, one of the most referenced indicators of an economy’s health, has been smashed. Unemployment numbers continue to climb. Central bank intervention in the economy is going to leave a decades’ long impact on the country and generations to come.
The market here in the UK has been dealt a savage hand and the valuations of companies in key industries to British growth have been decimated.
Now we’re left with the question, how long does this last? Does our post-Covid-19 world carry the scars of this year? Or is it a lightning-fast bounce back to activity when the realisation sinks in that perhaps this year wasn’t as bad as we were led to believe?
My view is the collective memory of society is as effective as a brick. By that I mean, society as a whole will fast forget the traumas of this year when it ends.
With that, I see there being nothing but rampant bounce-back capability as soon as we step beyond this. This is not something that will linger in the mind of the many more than a year or so.
It won’t last forever, it will end. Some people realise this, some don’t. I’m just trying to open your perspective to the realisation that maybe things aren’t that bad, and that maybe things will be significantly better a lot faster than most people can comprehend right now.
Again, you don’t have to agree with my views on the current situation. But surely you must consider that with a long-term investment window, what we’re seeing right now could present one of the best times to invest in the market we’ve ever seen.
If you’re toying with that idea, or perhaps agree with me that’s the inevitable outcome for the UK market, then where oh where should you be looking for opportunities?
Ten stocks to take a hard look at
I see three distinct areas you should be focusing on.
- Aviation and transportation
- Hospitality and leisure
All of these have suffered at the hands of this economic and social crisis. Aviation has been crippled at the hands of shut borders and travel restrictions to “Covid-19 hotspots”.
Hospitality and leisure has been strung along as a political pull toy, weirdly the sole focus of political attention even though the data suggests only 5% of cases come from pubs, bars, restaurants and cafes.
The automotive industry has also been pummelled. Car sales are down, dealers are literally selling new cars cheaper than second-hand ones in some situations. Offers hit my inbox from dealers on a daily basis trying to drum up business.
But for all the devastation of these industries, they’re all areas I’d be looking at if you’re looking to build a long-term “post-Covid-19” portfolio.
Companies in aviation like easyJet (LSE:EZJ), Rolls-Royce (LSE:RR) and IAG (LSE:IAG) are three aviation industry companies that should be given consideration with a long-term view.
In hospitality and leisure, I don’t think you can ignore companies like the City Pub Group (LSE:CPC), Mitchells & Butlers (LSE:MAB), Marston’s (LSE:MARS) and believe it or not, Cineworld Group (LSE:CINE).
In automotive, you should be looking at Vertu Motors (LSE:VTU), Marshall Motor Holdings (LSE:MMH) and Aston Martin Lagonda (LSE:AML).
That’s ten stocks that have all taken a hit in 2020. Will they all bounce back to bigger, better stronger days? It’s hard to say. Each company needs to be looked at on its own merits. You need to assess its financial position, its market position and its ability to weather a longer storm and still come out the other end.
But if I was to be looking at sectors and stocks that could fit into a portfolio, I’d start with these ten.
Editor, Exponential Investor