People often use themes to organize ideas and make sense of the massive changes the world is undergoing. These themes are used in the financial market to adapt to new trends, emerging from geographical, political, environmental or technological changes.
At the beginning of this decade, the world was hit by a life-threatening disease that has led to drastic changes in human lifestyles and also the stock market. Investors have been focusing on a special bucket of stocks to play safe during the slump. Now, with economies reopening, investors are focusing more on building their portfolios around several investment themes to trade safely during the market volatility.
Top Themes to Look Out For
With new cases rising daily and no effective vaccine available yet, the coronavirus pandemic continues to aggravate and chances of a second wave are high. The current conditions demand highly-resilient investment options and strategies. Thematic investment helps investors diversify their portfolios, incorporating the latest trends and coronavirus-triggered structural shifts.
The coronavirus pandemic has forced businesses to close down offices and has locked people indoors. Thanks to advancement in technology, several companies were operational to the maximum available capacity and the work-from-hometrend became an attractive theme to invest in.
This theme encompasses businesses offering technological infrastructure and services that can help people work remotely. Stocks of companies dealing with cloud technology, cybersecurity, remote communications, online project and document management have been performing well even during the coronavirus-let market slump. In fact, their outperformanceresulted in the creation of the Direxion Work From Home ETF (WFH) that began trading on Jun 25.
With social-distancing orders in place and lockdowns imposed, stadiums, movie theaters, restaurants and public places remained closed. Hence, people had to resort to delivery services and online gaming and streaming for entertainment and shopping. A stay-at-home stock bucket comprising online shopping, video streaming, communications, healthcare, food, beverages, and restaurants companies is performing quite well.
Over the last decade, companies have invested millions in the research and development of AI, ML and IoT. The coronavirus pandemic has only helped in speeding up the adaptation and transition. With deficit in manpower, factories had to resort to robotics and AI to keep workspaces operational. In fact, robots had been doing odd jobs like sanitizing, patient health monitoring, contactless delivery, surveillance and much more. Hence, with AI & Robotics implementation gathering momentum, this space is under the spotlight.
When talking about thematic investment, we cannot ignore sustainable investing. Environmental, social and governance (ESG) investment has gained investors’ attention even during the pandemic. The importance of ESG issues on a company and its long-term value are playing a significant role in the current scenario. Investors have been shifting to strong ESG stocks more as these are stakeholder-focused, and follow adaptive-governance structures. These stocks will continue to soar even post the pandemic as the economy gains traction backed by focus on long-term goals over near-term profit.
What’s more? Technology-themed investment was a hit last decade. While 2019 was all about software stocks, 5G is set to make a mark this year. The 5G rollout will help companies dealing in supply of equipment and components soar.
5 Stocks to Buy
Given the current scenario, thematic investment can help investors wade through market volatility. Hence, we have shortlisted five stocks poised to grow from the work-from-home and stay-at-home trends, AI and robotics, ESG and 5G rollout. These trends have now become significant investment themes, earning good returns for investors.
Fortinet, Inc. FTNT provides security solutions to all parts of IT infrastructure. The company has an expected earnings growth rate of 13.8% for the current year against the Zacks Security industry’s estimated decline of15.1%.
The Zacks Consensus Estimate for its current-year earnings has moved 2.2% up over the past 60 days. Acacia Communications sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Telefonaktiebolaget LM Ericsson ERIC is a key player in the global 5G technology rollout. The company is helping telecom companies upgrade networks to higher speeds. The company’s expected earnings growth rate for the current year is more than 100% against the Zacks Wireless Equipment industry’s projected earnings decline of 2.2%. The Zacks Consensus Estimate for its current-quarter earnings has moved up 8.3% over the past 60 days. Ericsson carries a Zacks Rank #1.
Zoom Video Communications, Inc. ZM provides a video-first communications platform and offers an enterprise cloud phone system. The company’s expected earnings growth rate for the current year is more than 100% compared with the Zacks Internet - Software industry’s estimated earnings growth of 4.9%.
The Zacks Consensus Estimate for its current-year earnings has climbed more than 100% over the past 60 days. Zoom Video sports a Zacks Rank #1.
AbbVie Inc. ABBV discovers, develops, manufactures and sells pharmaceuticals. The company’s expected earnings growth rate for the current year is 17% compared with the Zacks Large Cap Pharmaceuticals industry’s projected earnings growth of 6.2%.The Zacks Consensus Estimate for its current-year earnings has moved 1.2% up over the past 60 days. AbbVie carries a Zacks Rank #2 (Buy).
Etsy, Inc. ETSY operates online market places for buyers and sellers. The company’s expected earnings growth rate for the current year is 46.1% against the Zacks Internet - Services industry’s projected earnings decline of 2.7%.The Zacks Consensus Estimate for its current-year earnings has moved 5.7% up over the past 60 days. Etsy carries a Zacks Rank #2.
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Ericsson (ERIC): Free Stock Analysis Report
Fortinet, Inc. (FTNT): Free Stock Analysis Report
AbbVie Inc. (ABBV): Free Stock Analysis Report
Etsy, Inc. (ETSY): Free Stock Analysis Report
Zoom Video Communications, Inc. (ZM): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.