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Coronavirus (COVID-19): Stocks to buy and how to invest

Investment ideas and strategies to navigate a market crash

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The coronavirus COVID-19 pandemic has had an enormous impact on stock markets around the world. Since late February, share markets in the US and the UK have fallen by around 30% amid unprecedented volatility.

With countries closing borders and businesses in response to the growing health threat, analysts predict we’re in the early stages of an unfolding global recession.

However, while shareholders have been hit by heavy losses, many will be using the market crash to keep an eye out for new buying opportunities or even profiting from falling prices. Regardless of your approach, it’s a good time to review your portfolio and consider your next steps. We’ve compiled a list of investing guides and stock ideas to help you navigate this turbulent time.

If you’re looking for other coronavirus-related guides, you can head to the World Health Organization (WHO) for further advice. If in doubt, speak to a professional.

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When will the market recover?

Unfortunately, it’s impossible to know for certain how long the market downturn will last as we’ve never encountered a situation like this before. Below are a list of some of the more popular suggestions given by analysts as to when we might see the market start to recover:

  • New global COVID-19 infection rates start slowing
  • Coordinated action from global governments to cull the outbreak
  • It becomes clear a credit squeeze isn’t on the cards
  • Oil prices come under control and OPEC members agree on output
  • The pandemic comes under control

With businesses closing doors and forecasters predicting unemployment rates around the world could hit 30-year highs, the economic fallout will be large and potentially long-lasting.

Depending on how the pandemic unfolds in the coming months, stock markets could either see a V-Shaped recovery (quick rebound) as we saw during the SARS outbreak or a U-Shaped recovery (slow rebound) as we saw following the global financial crisis (GFC).

Source: TradingView, Updated daily at 4.30pm AEST

Which stocks might drop?

Important: No one can say for certain which direction stocks will go – there’s plenty of speculation about where the global economy might be headed. Below are some of the more common ideas among analysts about how stocks could be affected.

When there’s a global event like this, most stocks will react negatively. That means many of the major blue chip stocks, such as the major banks, Telstra and CSL, are also likely to fall, offering a potential buying opportunity at discount prices.

Because of the nature of the pandemic, tourism stocks are expected to be among the hardest hit as travel restrictions are put in place to curb the spread of the virus. This includes airlines, hotels and tour companies.

With major cities in China locked down, some analysts predict Chinese demand for imported goods could lessen as its economy slows. This means companies with a large Chinese exposure could see profits down this year, and investors will be pricing in that possibility.

Mining companies in South Africa have a strong reliance on global demand and the oil price. If the pandemic does spark a global recession, these companies are expected to take a hit.

No one can say how long these stocks will stay down for; however, a steep drop in prices is a good opportunity for bargain hunters willing to wait out the correction.

Travel and tourism

  • Cullinan Holdings (JSE: CUL)
  • Sun International (JSE: SUI)
  • Tsogo Sun Hotels (JSE: TGO)
  • City Lodge Hotels Limited (JSE: CLH)

Blue chip stocks

  • British American Tobacco (JSE: BAT)
  • Naspers (JSE: NPN)
  • Royal Bafokeng Platinum (JSE: RBP)
  • Steinhoff International (JSE: SNH)
  • Growthpoint Properties (JSE: GRT)

Energy companies

  • Efora Energy (JSE: EEL)
  • Erin Energy Corporation (JSE: ERN)
  • Keaton Energy Holdings (JSE: KEH)
  • Sasol (JSE: SOL)

Which stocks could benefit?

A global crisis typically results in safe-haven investing, which means bonds and gold. This tends to send the gold price soaring while bond yields drop as demand goes up. Read our full guide on gold investing for more information.

This often (although not always) results in gold company stocks becoming more popular. That being said, gold stocks are influenced by many other factors including global demand and new discoveries so it’s also possible for stocks to go backwards.

A pandemic also benefits a few specific sectors, such as healthcare, insurance and protective gear manufacturers, such as face-mask suppliers. Meanwhile, companies that support working or studying from home should also react positively as people are forced to isolate themselves.

Many of the biggest beneficiaries might be established US companies such as Zoom (NASDAQ: ZM), Slack (NYSE: WORK) and GSX Techedu (NYSE: GSX).

Gold companies

  • AngloGold Ashanti Ltd. (JSE: ANG)
  • Gold Fields Ltd. (JSE: GFI)
  • Harmony Gold Mining Company Ltd. (JSE: HAR)
  • DRDGOLD Ltd. (JSE: DRD)

Healthcare

  • Dis-Chem Pharmacies Ltd. (JSE: DCP)
  • Aspen Pharmacare Holdings Limited (JSE: APN)
  • Life Healthcare Group Holdings Ltd. (JSE: LHC)
  • Co-Diagnostics (NASDAQ:CODX)

Protective wear/wash

  • Top Glove (OTCMKTS: TGLVY)
  • Zoono Group (ASX: ZNO)
  • Alpha Pro Tech (NYSEMKT:APT)

Working/studying from home

  • Skype by Microsoft (NASDAQ: MSFT)
  • Zoom (NASDAQ: ZM)
  • Slack (NYSE: WORK)
  • GSX Techedu (NYSE: GSX)

How to invest when there’s a market crash

When markets crash, it can be tempting to sell your shares in an attempt to avoid further losses. But this is not necessarily the best strategy, especially if you hesitate on pulling the trigger.

Stock market downturns are a reality, and must be considered alongside the record gains of recent years. It’s often a better idea to ride out the volatility rather than try to time the market.

Know your strategy

Your best course of action in the event of a crash will depend on your trading strategy and overall investment goals, according to Michael McCarthy, chief market strategist for share-trading platform CMC Markets, who spoke to Finder. “In most cases, investors should be reviewing closely and working out what a 10% drop or a 20% drop would mean to their holding. Whereas somebody who’s taking a more active approach might start weeding their portfolio.”

It’s important to know what your goals are and whether a crash has impacted your ability to achieve those goals. It is possible that a crash gives you some good reasons to sell.

Be prepared to buy the dip

When markets dip, you can make money. The key thing is to be ready for this to happen and to have the funds to snap up shares when the prices are low.

Timing the market is incredibly hard and you’re very unlikely to get the stock at its absolute lowest, but as with all investments, if your intention is to hold for the long term, it can be a good opportunity to snap it up at a lower cost.

One way to prepare if you’re an active investor is to keep a list of stocks that you would be willing to buy if a crash happens.

Seek financial advice

When stocks are crashing it is easy to get swept up by your emotions. If 20% of your portfolio value has been knocked off, you might not be in the right frame of mind to be making decisions which could impact your financial future.

Seeking a second opinion, ideally from a financial adviser, can give you some perspective to your thinking and guard against any rash decisions.

What happens after a crash?

Following a market crash, stocks are likely to experience a period of volatility as investors reevaluate the market. But downturns can also represent investment opportunities, especially if there are certain stocks you think may have switched from overvalued to undervalued.

Cautious investors may often flock to “safe haven” investments like gold, bonds or even bitcoin, so a market downturn may be a good time to think about diversifying your investment portfolio.

If history is any indicator, the markets should eventually rebound, but trying to determine when this will happen is the million-dollar question. Stocks may recover within weeks or months, or we may be faced with a years-long bear market, especially if global recession fears turn out to be on the money.

How to profit from a falling market

It’s possible for traders to profit when prices are falling through a strategy called “shorting the market”. Because this is typically a risky strategy, only experienced traders are advised to do this.

The most common ways that people can profit from falling equity, currency or commodity prices is through ETFs, CFDs, Forex or options trading.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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