By Nina Lagron, CFA, Head of Large Cap Equities, La Française AM.
1.- What kind of companies or sectors do you think could benefit from the coronavirus crisis?
We believe that the most significant long-lasting effect will be felt in the technology sector as digitalization is going to play a major role in the post Covid-19 world.
We believe hyperscalers, data center providers, communication infrastructure software providers, cybersecurity, digital gaming and other streaming entertainment companies, online education and the outdoors to indoors movement players are the main beneficiaries of the current confinement period.
2.- Why do you think they will benefit?
The current sanitary crisis will have long lasting effects on how work is organized. During the current confinement period corporates are forced to operate with a close to 100% work-from-home setup. Until recently in many countries work from home was still not deployed largely.
As the confinement period gets longer the communication and collaborative software infrastructure needs to be more comprehensive, and more specific/customized.
We believe that the normalization out of the confinement will be very slow and gradual and corporates will continue to work for many months offsite. Once this modus operandi has proven to be resilient during the crisis period corporates might allow workers who have requested to work from home for many years to continue to work off site.
Software companies that allow collaborative work will see significant growth which should last over the long term.
This move to the home office as the new norm will increase the demand for cloud space from which the hyperscalers as well as the data center providers should benefit.
Cybersecurity will become even more important in this setup as absolutely all exchanges of information are done via online applications.
Gamers are currently discovering streamed games and the switch towards streaming and mobile gaming is certainly going to be accelerated and growth should be strong over the medium-term period.
The entire entertainment sector’s move to digital apps is being accelerated as well: downloadable books, podcasts, audiobooks and off course movie streaming are seeing massive tailwinds. Our guess is that a significant proportion of new subscriptions to streaming services will not be cancelled after the crisis as convenience and user experience prevails
The current confinement period allows for a formidable real-life laboratory for online education across all classes and ages. Until now, online education was rather a tool for university level education. Now it is even deployed for primary schooling. Whilst face to face teaching can never be entirely replaced, more digital applications will be deployed in the future.
Last but not least many consumers are trying to reproduce indoors what they usually love to do outdoors. Typically, within sports this outdoors to indoors move via IOT will create a whole new way of doing sports and communicating about it.
Disclaimer
This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.