Battle of the bounce back: Coronavirus investment recovery

Posted: 13 January 2021 12:56 pm
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Next steps for investors navigating the COVID-19 market recovery.

It’s easy for any investor to get caught off guard during unprecedented times, but how you recover from downturns – and maybe even buy the dips – can affect you long term. When it comes to financial turbulence, investing cash on hand when the markets tank is a strategy older than Warren Buffet, though he arguably made the idea famous.

Hindsight is 20/20, so let’s dig into the largest five cryptocurrencies and blue-chip stocks to see how bullish their recoveries were from the lows of March 2020 to today. (Spoiler alert: Apple’s sizable 148% return isn’t the highest.) Plus, we’ll touch on three potentially bullish industries to watch as the US market begins its pandemic recovery.

Cash is king — and here’s where you could have spent it

Using market cap as the common thread among cryptocurrencies and blue-chip stocks, we pull the top five from each respective category for an apples-to-apples-esque comparison. It’s not perfect; rather think of it as information you can use with discretion to move forward.

Top 5 blue-chip stocks by market cap

  1. Apple: $2.2 trillion market cap
  2. Microsoft: $1.8 trillion market cap
  3. Amazon: $1.7 trillion market cap
  4. Alphabet: $1.5 trillion market cap
  5. Facebook: $917 billion market cap

Top 5 cryptocurrencies by market cap

  1. Bitcoin: $1 trillion market cap
  2. Ethereum: $379.2 billion market cap
  3. Binance Coin: $103.3 billion market cap
  4. XRP: $71.5 billion market cap
  5. Dogecoin: $52.3 billion market cap

Excludes Tether (USDT)

While Warren Buffet claimed in 2011 that his company keeps more than $20 billion in cash for financial turmoil, according to a letter to investors, it’s safe to say the rest of us don’t have that liquidity. For the sake of appealing to both small and large investors, let’s use $1,200 and $20,000 as our cash on hand, respectively.

The clear winning investment of the bunch would have been cryptocurrency, according to data from CoinMarketCap and Webull.

  • Dogecoin (ADA) comes in first with a massive 29,385% return
  • Binance Coin pulls a distant second with an ROI of 7,947%
  • Microsoft comes in dead last with a still impressive 91% ROI

Your $1,200 investment could have netted you $2,292 with Microsoft or $353,820 with Dogecoin. Based on the same ROI, that $20,000 you invested could have returned $38,200 with Microsoft and a whopping $5.8 million with Dogecoin.

Coronavirus investment recovery: stocks vs. crypto

The unprecedented times of 2020 were just that: unprecedented. But what you can do with this going forward depends on your ability to evaluate the risks and potential rewards. Stocks in this period were coming off a market-wide pullback, of which the major indexes have now recovered. The stocks mentioned in this article may well outperform the market again in 2021, but the huge gains posted from the pandemic low are highly unlikely.

Still, with blue-chip stocks you own a piece of an established business with a track record of sales and growth, which can’t necessarily be said for cryptocurrencies. Digital, decentralized cryptocurrencies are harder to predict and to value because they are based on more abstract concepts. Binance Coin is only four years old and might be viewed more like a small-cap stock than a blue-chip. This means higher risks and often more volatility — but potentially higher rewards. But keep in mind that Microsoft’s stock price, or any stock, doesn’t have a guarantee tied to it and could crash just as fast as a cryptocurrency.

Coronavirus investment recovery: industries to watch

Each of these industries took a heavy dip during the pandemic. As such, these are the industries to keep an eye on as the economy begins its recovery.

Travel

As stay-at-home orders blanketed the nation, business travel in 2020 dwindled to an all-time low, reports Statista. Global air travel dropped by over 60% and cruise ships were docked following a no-sail order from the CDC.

But as pandemic restrictions begin to ease, travel is an industry that investors will want to keep an eye on. Airline and cruise stocks are all poised to bounce back from pandemic lows but bear in mind that a full recovery could take years.

Sports

It’s no secret that the pandemic hit the sports industry hard. With large gatherings prohibited, packed hockey arenas and filled-to-the-brim football stadiums became an obvious no-no. But this is another industry we expect to bounce back in the coming years as fans yearn for the thrill of in-person action-packed games.

Keep an eye on event venues, stadiums, publicly traded teams, sports equipment companies and sports betting companies: all are likely to move upwards in tandem as the world opens up to in-person sports events.

Entertainment

Analysts bullish on the pandemic recovery say they expect a roaring 20s style bounce back — which would bode well for the entertainment sector.

Theaters, concert venues, theme parks, film studios and restaurants may all see an explosive uptick in business as people become eager to leave their homes and spend time out on the town. Entertainment stocks will be one to watch through 2021.

Bottom line

There’s a place for riskier assets in everyone’s investment portfolio; how big a place is an individual decision. We’ve written a guide on blue-chip stocks to help you learn about traditional stocks and a guide on cryptocurrencies to help you learn enough to understand the risk. Educating yourself now could help you be in a better position if, or when, the next unprecedented market event occurs.

Photo: Getty Images

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