The coronavirus pandemic has already wreaked havoc on the share market, with traders desperately trying to adapt their strategies as the situation continues to evolve.
As more sectors of the economy begin to feel the strain, we’ve been keeping an eye on the areas that are under the most pressure at this time.
It is important to note the pressure being put on banks for emergency loans and the impending intervention of governments for financial support. Industries most affected include major infrastructure and vital transport links, amongst others. Our team at Your Trading Edge has compiled a list of industries that have been most impacted by the pandemic. Here’s our round-up:
Airline Companies
It will come as no surprise that stocks related to the aviation industry are plummeting. Airlines have been grounded due to the hefty travel restrictions and it seems this will be on-going for the foreseeable future.
The Australian Government is hinting that international travel will be banned until 2021, with most major airline companies seeking state aid to stay afloat. There are even some questions around interstate travel to be considered as well.
The Steel manufacturing industry
We are seeing usually reliable stock market performers in the manufacturing and construction industries shut down their operations, which has seen a significant drop in the demand for steel in particular.
Many steel producers are ineligible for emergency loan schemes, and while the Government is looking to expand those schemes, any stocks related to steel manufacture are considered a red flag for the time-being.
Road Haulage
While stocks related to all forms of transport should be viewed with caution, road haulage is in particular trouble due to restrictions placed on interstate travel.
While many investors may think to push towards one of the leading systems that is keeping the country fed, the closure of non-essential shops means this industry is moving fewer goods, despite the importance of the cargo they are moving. Trucks are only partly loaded, which means the industry is losing significant cash flow with every vehicle.
Ferry transport
By extension, we feel it necessary also to mention the ferry industry, which has seen a two-pronged hit in both cargo and people. There has been a steep drop in passenger numbers, with most firms significantly cutting back on services, with large companies like P&O Ferries, that found itself at the centre of the COVID-19 disaster, letting go of more than 1,000 staff, relying heavily on the Government’s job retention scheme.
P&O Ferries is looking for the Government to underwrite some of the vast costs it requires to stay afloat.
The Entertainment industry
Movie theater earnings and box office numbers have also taken an enormous hit as all current productions have been frozen and cinemas closed to avoid the spread of the COVID-19. Streaming television is up, but as far as the stock market is concerned, it’s bad news at the moment.
AMC Entertainment Holdings, as an example, is down more than 60% over the past month. A company that owns more than 900 movie theaters, AMC is used to up-and-down financials with a net loss of $149.1 million, or $1.44 per diluted share in 2019. They also have a long-term debt of $9.7 billion recorded at the end of 2019.
AMC sits with $1.2 billion in total equity and a total stock market capitalisation of $258.5 million. Pre-COVID, keen investors would probably like to play on the assets, but the current climate in consideration, some believe this risk may be way too high.
The retail sector
Another interesting industry to look at as we see a significant rise in online shopping but a devastating toll on brick-and-mortar retail. Take, for example, J.C. Penney, which was already seeing declining sales before the Coronavirus outbreak is taking a second hit, as many retail stores have, due to the closing of nonessential businesses.
Comparable-store sales saw a 7.7% decline in 2019, with total revenue down 7.1% to $11.2 billion. Interest expenses of $293 million helped, but retail stores were starting to already look like a gamble long before the Coronavirus.
While most of these companies hustle to adapt to order items online, the length and severity of this outbreak will be the clincher. Historically, retail profits come in the fourth quarter, a clutch move that mitigates the general losses throughout the rest of the year. If coronavirus extends to Christmas, the 27.6% dip in stock over the past month for a large company with a book value of roughly $2.58 per share could be in serious trouble. The $0.51 per share that the stock is currently trading would ordinarily be seen as excellent value for traders who like to play the game, but long-term investors should be very wary.
Navigating the stock market during a pandemic
As these strange times are likely to only get stranger before they return to some semblance of a new normal, the fears associated with a global COVID-19 pandemic will continue to batter the stock market.
As the stock market sells off, investors should take proactive measures in an attempt to navigate the market decline. Protect your investment portfolio from the various impacts that this worldwide pandemic has had on business and the market by getting off margin and raising cash. This strategy will protect your money while helping you to position your portfolio in such a way that you can take advantage of any upturn that may occur when the market finally rebounds. As always, Your Trading Edge is also here as a tool that you can use for sound investing news and to stay in sync with the critical buy and sell information.
