When the world emerges from the coronavirus crisis, things are likely to be very different to how they used to be and the analysts at Killik & Co have identified a number of key themes – and the companies geared into them – that investors might want to consider exposure to. 
Nicolas Ziegelasch, head of equity research at Killik & Co, said: “While there is still significant uncertainty surrounding the severity and duration of the coronavirus pandemic, there is one thing we are confident of: the post-coronavirus landscape will be different to the world of yesterday.
“Amongst other things, the crisis has exposed flaws in global supply chains, the real cost of pollution, poor healthcare infrastructure, outdated working practices and fragile retail ecosystems. Businesses and governments are already recognising that much needs to change and we believe the post-coronavirus world will trigger a forced acceleration of a number of our key themes.”
Below, we find out which five themes Killik believes will emerge in the post-coroanvirus world – and the stocks it thinks are best-placed to benefit from them.
Deglobalisation
The pandemic has highlighted the vulnerabilities of global supply chains and the over-reliance on a handful of countries for the supply of certain key goods. Because of this, Killik expects supply chains to start to shift closer to developed markets.
Any higher wages associated with this move are likely to be offset by moving to an increasingly automated production system that requires fewer workers, while increased production costs could be balanced out by lower transportation costs, fasters time to market and the ability to offer more customised products.
Global trade volume growth since 2000
Source: CPB World Trade Monitor
“On the corporate side, we believe the winners to be factory automation equipment supplies, industrial software providers and developed market industrial property owners,” Ziegelasch said. “We expect the losers to be global shipping, contract manufacturers and emerging markets in general.”
Specific stocks that could benefit from the deglobalisation theme include technology giant Microsoft (because of its Azure cloud business), enterprise resource planning firm SAP and sports brand Nike, which had already started moving production closer to developed markets.
Decarbonisation
One thing that was immediately noticed about the coronavirus pandemic was how some of the regions that had the worst incidences of the outbreak – such as Wuhan in China and Lombardy in Italy – also have high levels of air pollution.
“We believe that a lasting impact of the coronavirus outbreak might be an increased focus on air quality, speeding up the decarbonisation of energy supply,” Ziegelasch said. “In addition, we expect tighter regulation around emissions, both at an industrial level and at a local level, with potentially more cities banning polluting vehicles and driving a shift to electric vehicles.”
Killik said the winners of this theme will be renewable energy generators, grid network operators, electricity infrastructure suppliers, electric vehicles and energy-as-a-service providers. It highlighted Orsted, a leading renewable energy company specialising in the development and operation of offshore wind farms, and integrated utility company SSE, which is increasing its focus on its networks and renewables businesses, as stocks to watch.
Long-term losers, on the other hand, would include the oil and coal industries as well as other heavy-polluting sectors that might face significant environmental regulation as a result of this theme.
Healthcare
The coronavirus crisis has highlighted the “poor state” of healthcare systems in many countries including the UK, Killick’s analysts noted. However, the post-coronavirus world is likely to see increased spending on healthcare infrastructure to prepare for future crises.
Hospital beds per 1,000 members of population
Source: OECD
“The days of having a healthcare system designed to operate at high capacity under normal conditions may no longer be acceptable,” Ziegelasch added. “We also believe that we will be moving towards a next-generation healthcare system, where many face-to-face interactions will be removed for general practice, replaced with online doctors and computers powered by artificial intelligence.”
Diagnostics companies, hospital equipment suppliers, next generation digital healthcare providers and health insurers are the most-likely beneficiaries of this trend. Those losing out will include the taxpayer and GPs.
The broker picked out Danaher, which is one of the world’s leading suppliers of diagnostics machines for hospitals, and Philips, which offers a best-in-class patient monitoring systems, as two companies that are well-placed under this theme.
Digital transformation
Even in today’s tech-driven business world, many companies rely on meeting clients face-to-face, partly because this helps build trust and partly because documentation still needs to be completed in person. But the inability to do this currently could encourage news ways of doing business.
Ziegelasch explained: “The inability to do this during population lockdowns will encourage business processes to accommodate apps, video conferencing and electronic contracting to close deals remotely. The days of travelling across the world to sign deals may be over.
“Similarly, the inability of many employees to go into the office during the crisis has led to a greater focus on how to effectively enable employees to work remotely. Again, we expect that business processes will be redesigned and new software built to make the process of working remotely as seamless as possible.”
Killick’s analysts expect that firms like enterprise software providers, technology services businesses, cloud computing providers and telecom networks to be the main winners from this trend. As the world’s largest technology service group Accenture is likely to be a key enabler for firms looking to digitally transform their businesses while Tencent is well-placed to work with Chinese companies making the same move.
The losers under this theme would be office property owners, the travel industry, transportation networks and the casual dining sector, according to the broker’s research.
E-commerce
While e-commerce has been a powerful trend for some time, the coronavirus lockdowns and need for ‘social distancing’ has forced more people to shop online. Once the crisis is over, it may prompt a large number of consumers to question whether they need to visit bricks & mortar retailers for many of their frequent purchases.
“Despite the strong growth in ecommerce over the past decade, it is still a small portion of overall retail sales,” Ziegelasch said. “We believe that penetration will continue to grow, with e-commerce growing at a multiple of underlying retail sales.”
US e-commerce as % of total retail
Source: Killik
Killik sees the winners as being the e-commerce players, customer facing software providers, electronic payment platforms, local logistic networks and food delivery, while the the losers as undifferentiated physical retailers and commercial property owners.
Unsurprisingly, Amazon was highlighted as a stock that will benefit from this theme, given that as the world’s leading online retailer it has an “unrivalled” global distribution and logistics network and a loyal membership base from Amazon Prime.
Online payment company PayPal would also benefit from a secular shift to e-commerce and the associated increase in electronic payments. Meanwhile, Tesco is the UK’s leader in grocery e-commerce with a market share of around 35 per cent, giving it a significant competitive advantage against its rivals.