The news is changing rapidly. To stem the coronavirus, some governments around the world have implemented travel restrictions and others have advised populations to socially distance themselves.
Although people’s well-being is a priority, these steps will have ramifications for the economy. Investors need to remember this.
Some industries will be affected more than others, which makes picking individual stocks challenging. However, I realise that this could be the best option for investors to take, in order to maximise returns.
Before identifying individual stocks, let’s take a look at which industries could feel ramifications from the coronavirus news and where we might find safer shares.
Before news of the coronavirus hit, I said that shares in International Consolidated Airlines might be ones to watch. Now it is clear that travel restrictions will severely affect airlines.
With flights cancelled and capacity down, only the very brave might consider purchasing stock in the company in the current climate.
In the past three months alone, its share price is down 65%. Shares in other airlines have also fallen, with Easyjet also down 65% in the same period at the time of writing.
In the long-term, I remain hopeful that the industry will be ok. But who knows which airline companies will survive this crisis. At the moment, it is an industry I will certainly be avoiding.
Likewise, with social distancing occuring, and the government advising the public to avoid pubs and restaurants, I would not be comfortable buying shares in leisure companies in the current circumstances.
Cinema operator Cineworld has seen its value plummet by 75% in the past three months. Similarly, in three months the InterContinental Hotels Group share price has dropped by 49%.
With the uncertainties surrounding the length of the outbreak and government guidelines, I would steer clear of these stocks at the moment. I could be missing a good buying opportunity, but preserving my money and lessening risk is more important to me than getting rich quick.
There is, however, an industry I have been taking a closer look at.
Previously, I have favoured consumable stocks that offer products at low-prices and with a strong portfolio of brands. In hard times, I figure that customers will not necessarily swap their favourite products for own-brand alternatives.
Two stocks immediately spring to mind: Reckitt Benckiser and Unilever. The Unilever stock price has dropped by 5% in the past three months, but Reckitt Benckiser shares are trading broadly at the same level. The stocks might not be trading at bargain price levels, but I feel my money would be safer invested in them.
There will be concerns over maintaining supply chains, and whether or not any restrictions over importing goods will be implemented. However, over the long term, I would favour stocks in these industries.
If I was going to pick individual stocks in the current situation, I would hunt out consumable stocks first.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
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T Sligo has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended InterContinental Hotels Group. 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.