Best post-Covid stocks
Tancredi Cordero, founder & CEO of Kuros Associates, picks out his best stocks for investors to absorb any post-pandemic inflationary rises.
A decidedly US flavour Our model asset allocation portfolio has a decidedly US flavour to it because the world's largest economy is forecast to outpace the UK and Europe for years to come.
It is also home to many of the disruptive companies in tech and e-commerce that have benefitted from the digitalisation trends that accelerated during the pandemic.
Investors should look deeply at fundamentals and select stocks with sustainable EPS or earnings-per-share growth and cashflows that should benefit from the reopening of the economy.
The case for commodities Investors should start thinking about adding some commodities to their portfolio or increasing their current weighting. Bloomberg's Commodity Spot index comprising metals, oil and agricultural commodities is up almost 70% from 2020's low point as the global economy accelerates.
Recently, we added silver and platinum to our portfolio for their inflation-hedging qualities as well as industrial applications.
As for gold, we are adopting a watch-and-wait strategy. The metal closed at a record in 2020 and has had a terrible start to the year, yet we feel it could still perform well in the coming months as central banks come under pressure to keep benchmark rates lower for longer even as economic growth accelerates.
No green revolution without dirty metals Investors should also consider adding some exposure to industrial metals. Record steel prices in China are pushing coking coal and iron ore higher.
We like miners such as Freeport-McMoran and Kaz Minerals (which runs the Bozshakol mine in Kazakhstan, pictured), which will not please ESG purists at first glance, but might on the second once they understand that there is no such thing as a green revolution without the dirty metals.
Western governments have made sweeping pledges to decarbonise their economies by 2050. More recently, they have promised 'green recoveries' after Covid-19. Industrial metals are a crucial ingredient in boosting clean energy production.
For instance, it is estimated renewable energy systems such as wind turbines require the use of up to seven times more copper compared to fossil fuels.
A meatless millennial play Beyond Meat is our favourite 'reopening trade'. In our minds, it is also a millennial play as Covid-19 has accelerated a drive for healthier living and wellbeing. As its name suggests, the company produces plant-based meat substitutes.
Even big brands are beginning to embrace this trend, and PepsiCo as well as McDonald's recently signed deals with Beyond Meat to jointly produce plant-based drinks and snacks. That pushed the share price of Beyond Meat up almost 20% on announcement day.
Today, it has a whopping $9bn market cap despite remaining unprofitable – at least for now. This is an expensive stock but with a very long-term growth trend underpinning the valuation.
Puppy craze The humanisation of pets is a trend that has underpinned growth in the pet food and petcare market, as owners have gravitated to premium foods, accessories and services that reflect their lifestyles.
The global petfood market today is worth more than $80bn and is growing almost 5% a year. Locked-down families have been buying more cats and dogs during the pandemic, according to pet retailer Pets at Home.
Our favourite pick to profit from this trend has been, and still is, pet supplies retailer Chewy. It is also a great play on a US consumer that is rebounding thanks to stimulus cheques and President Biden's economic stimulus, and which is also embracing e-commerce.
The stock is up more than 200% over 12 months and it has further to climb.
The paperless office Remote working is expected to accelerate the so-called paperless office: fewer lawyers and accountants, for example, want to print off reams of documents to review with a red pen.
At the same time, contracts that once had to be signed in person can now be authorised electronically.
DocuSign is one company that provides this technology allowing organisations and individuals to manage electronic agreements, accelerating digital transformation for businesses and boosting their productivity.
In September, DocuSign reported a 45% jump in annual sales. We expect the trend for e-signatures will endure and accelerate post pandemic.
Conclusion Our last investment theme will remind investors about the singular importance of consumer spending in western economies, and even more so as lockdown has boosted their savings.
Like a coiled spring, they are waiting to unleash their spending firepower on the great summer holiday.
We like stocks with strong market positions or with a technological edge, such as airport duty-free shop operator Dufry, and online travel platform Booking.com.
Tancredi Cordero, founder & CEO of Kuros Associates, picks out his best stocks for investors to absorb any post-pandemic inflationary rises.
Tancredi Cordero, founder & CEO of Kuros Associates, picks out his best stocks for investors to absorb any post-pandemic inflationary rises. Chancellor Rishi Sunak primed the fiscal pumps with another...
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