Investor Column | Unlikely beneficiaries of the COVID-19 crisis
The biggest life lessons that this crisis has taught us is that without notice, there are times when external forces can and will shift our work, activities, and habits overnight. Are those changes temporary or will they be permanent? That question is linked to our ability to create a vaccine. The sad reality is that the U.S. has surpassed 100,000 deaths due to COVID-19. That fact has created a justified concern to avoid re-entering into society as it was prior to the virus. Even when a vaccine is created, does our country and world have added value for independence, open spaces, and a greater flexibility with business going forward?
The natural reaction to feeling confined at home with our recent shelter at home rules is to get out locally and stretch our legs in parks, beaches, and the outdoors in general. The new rules require that we keep our distance in those open spaces that we are desperately seeking.
Movie theaters, like other similar public entertainment venues, have been targets for closure and have stayed closed during the Florida phase 1 of reopening. That has created the unlikely renaissance of drive-in theaters. The drive-ins give plenty of distance, open air, and some social connections with others. Will this be short term? Who knows? The Miami Dolphins Hard Rock stadium will be creating a drive-in theater able to handle 230 cars and provide food service! AMC theaters expects to survive 2020 with their heavy debt load and will be less of a recent target of Amazon with the expectation that theaters will open in July. Unfortunately, we will now have to wait to see Tom Cruise in Top Gun 2 until December.
Being an avid boater, I enjoy my social distancing by fishing and cruising the many miles of waterways and open Gulf of Mexico. Boat production and sales are a huge economic driver in our area, and it has been on hold during the shelter at home orders. According to early reports, sales are up since the country has begun to reopen. The marine industry believes that this crisis will negatively affect their industry short term, but that they will recover more quickly than 2008. Wednesday, May 27, was a big day for Brunswick Corp. (maker of Mercury Marine) and a sad day for BRP, Inc. (maker of Evinrude and Sea-Doo). Effective immediately BRP will stop building Evinrude outboard motors (NO more Etec outboards!) and Brunswick will supply Mercury motors for the boat packages that BRP is still selling. Talk about a big change. Many local boat owners now have a motor that is not being produced!
Another notable success story with our new social distancing requirements is the sale of RVs. Cabin fever has now become cabin and RV demand! Marcus Lemonis, CEO of Camping World and TV star of CNBC’s The Profit, has indicated that Camping World’s web traffic is up 30%! Flying on an airplane and taking a cruise will be back soon, but for now the great outdoors is calling.
As an investor, you expect to be invested in companies well positioned for the future. Many companies that were well positioned prior to COVID-19 have and are taking steps to reposition their businesses to handle these drastically changing times to again be well positioned. Some companies will adapt better than others. Now is a great time to find those companies with the innovations and the aggressive pursuit to gain market share from their competitors.
Danny Wood is a principal and founder of SeaCoast Financial Partners. To learn more visit MySeaCoastFinancial.com. The opinions expressed in this material do not necessarily reflect the views of LPL Financial.