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Covid-19 stocks: here’s where I’d invest in case we see the virus flare up again

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Young woman wearing face mask while walking in the streets of London
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There is still a lot of uncertainty in the economy about the state of Covid-19. Although the vaccination rates in the UK are some of the highest globally, mutations of the virus might not be covered. Further, the effectiveness of the vaccine over time hasn’t been proven, with calls for booster jabs for the vulnerable. As we head into the winter, there is the possibility of a circuit-breaker lockdown. Therefore, here are the Covid-19 stocks that I’m considering buying to hedge my portfolio.

Learning from the last year

As a disclaimer, I don’t think that we will see another stock market crash to the extent we saw last March. That was a completely different picture of our understanding of the virus at the time. It was also a shock reaction as many companies didn’t know how to effectively carry out business remotely, or service clients in lockdown.

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The situation is different now, but I still think the lessons learned can help me when it comes to consider which Covid-19 stocks to buy. 

The first place I’d consider investing is in companies with a strong online presence. The likes of Amazon and Ocado have well-constructed websites that allow users to shop and get fast delivery without having to leave their homes. As far as convenience and safety goes, these stocks performed well during the last lockdowns and could do the same again.

Looking at key trends

Another area where I’d look to find Covid-19 protective stocks is within consumer trends. For example, during the last year or so there has been a large trend towards streaming TV shows. Another trend has been in online gaming.

These are largely a feature of having more time inside. But going into the winter, the demand here could pick up again. If I add in another potential lockdown, or simply companies pushing workers back to working from home full-time, I think stocks in these areas could do well. As an example, I’d consider buying Netflix.

Defensive Covid-19 stocks

A final area I’d look to is defensive stocks. This is a broad category that includes utility stocks such as SSE and also supermarkets like Tesco. In theory, the type of companies included here offer necessities. Due to this, demand for the products and services will likely remain constant even during economic uncertainty.

So if we do see the virus flare up again, these kind of defensive Covid-19 stocks could see a share price rise as investors try and find low risk shares.

The risk with all of the above stocks that I’ve mentioned is that I’d be buying them for a negative scenario. None of the issues I mentioned in the beginning relating to the virus might happen. In that case, I’d expect these stocks to potentially underperform competitors that are relying on the economy staying open.

Ultimately, I’m considering adding a small allocation towards the above stocks as a Covid-19 buffer as we head towards the end of the year.

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jonathansmith1 has no position in any shares mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Netflix. The Motley Fool UK has recommended Ocado Group and Tesco and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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