As we start to see lockdowns spread across Europe again and Covid-19 rates rise we have scanned the market for a selection of stock that will benefit if lockdowns continue to spread. In this report we highlight a few of the key beneficiaries of the new world order, so to speak and highlight what they bring to the table.
Ocado is a British online supermarket that describes itself as 'the world's largest dedicated online grocery retailer. The firm was founded in April 2000 by Jonathan Faiman, Jason Gissing and Tim Steiner, former merchant bankers with Goldman Sachs. Ocado started trading as a business in partnership with Waitrose in January 2002. The company has no chain of stores and does all home deliveries from its warehouses. The company was floated on the London Stock Exchange in 2010.
Recent statements from the firm have been quite bullish as customers look to take full advantage of the online delivery service. Ocado Group PLC recently stated it was experiencing “exceptionally high demand”, with more people than usual placing particularly large orders. Ocado delivered a bumper 52% rise in its sales in the three months to the end of August. Its market capitalisation is already over £17bn, just to put that into perspective Tesco’s market cap is £19.8bn and Sainsbury £4.5bn. So the market is showing what many already know, online grocery retail is not the future, it is already here.
Ocado do still have a relatively small market share with less than 2% of the groceries sold in the UK compared to Tesco’s near 27% share of the market. A sharp increase in the shift to online shopping during the coronavirus pandemic has certainly been beneficial for Ocado, Before the coronavirus crisis, just 7% of grocery sales were online, but lockdown has changed habits fast to raise that to 12.5%.
Possibly one of the biggest beneficiaries of the previous lockdown has been Amazon. an American multinational conglomerate technology company based in Seattle, with 750,000 employees. It focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. Amazon was founded by Jeff Bezos in Bellevue, Washington, in July 1994. The company famously started as just an online marketplace for books as Jeff Bezos needed a product that was easy to store and send through the post, later it expanded to sell electronics, software, video games, apparel, furniture, food as well as a wide range of consumables.
The company, particularly in the US, is increasingly serving as an important source of food, cleaning supplies, and other household items as the public embrace lockdown and look to buy as much as possible online. Demand for the online service has increased to such a point that the firm has added 100,000 positions across fulfilment centres and delivery services. This not only has positioned Amazon strongly in the current environment but will also position the business well if there is a retail downturn after the lockdowns have been lifted as there will still be consumer hesitation regarding returning to crowded shopping spaces. and indeed, if there are any further waves.
Just Eat Takeaway.Com
Just Eat is a British online food order and delivery service. It acts as an intermediary between takeaway food outlets and customers, it does not create the food product itself. It is headquartered in London and operates across countries in Europe, Asia and the Americas. Founded in Kolding, Denmark, the platform enables customers to search for local takeaway restaurants, place orders and pay online, and to choose from pick-up or delivery options.
In July 2019 Takeaway.com announced proposals to takeover Just Eat, In January 2020 80.4% of Just Eat shareholders approved Takeaway.com's deal to acquire Just Eat. Although Just Eat became a subsidiary of Takeaway.com on 3 February 2020, it wasn’t until April 2020 the Competition and Markets Authority announced it was unconditionally approving Just Eat's merger with Takeaway.com
In the UK, Just Eat charges restaurants a flat fee to join the service, and for each order placed through the website or mobile app, a 13-14% commission. If lockdowns take hold again then there will certainly be an increased demand for food to be delivered, and plenty of potential staff looking for part time work as delivery drivers, and whilst there are other operators in the market Just Eat is certainly in a strong position to benefit.
Novacyt Group is an Anglo-French biotech focused on clinical diagnostics. The Business has its main offices in Camberley in the UK and Vélizy-Villacoublay in France. They produce in vitro and molecular diagnostic tests, supplying an extensive range of assays and reagents worldwide. They have become an international specialist in cancer and infectious diseases and has gone on to diversify sales from diagnostic products used in LBC, oncology, microbiology, haematology and serology testing. The company has gone from relative obscurity at the start of the year and trading in pennies to being one of the leading players in the sector with their testing kits.
They support a large and growing global customer base which spreads across the board from hospitals to large corporates, with their proprietary technology platform NOVAPREP®, which is a unique next generation liquid-based cytology solution focused on cancer management. The need for testing capabilities led to huge benefits for Novacyt PLC which makes the Primedesign diagnostic test.
Founded in Neenah, Wisconsin, in 1872 and based in Irving, Texas, the company has approximately 42,000 employees. The British subsidiary holds Royal Warrants from both Queen Elizabeth II and Prince Charles. The firm is an American multinational personal care corporation that produces mostly paper-based consumer products. The company has been in business for 148 years, employs 40,000 people, and sells its products in more than 175 countries.
The company manufactures sanitary paper products and surgical & medical instruments. It operates non-woven fabric mills and paper mills. Brand names include Kleenex facial tissue, Kotex feminine hygiene products, Cottonelle, Scott and Andrex toilet paper, Wypall utility wipes, KimWipes scientific cleaning wipes and Huggies disposable nappies and baby wipes.
Due to the pandemic, the company's products should see a spike in demand as more people rush to purchase toilet paper, tissues, wet wipes, and paper towels. As more and more people hunker down in their homes to avoid exposure to the disease, they will start to hoard essentials, providing a boost in demand for Kimberly Clark's products.
Zoom Video Communications
Eric Yuan, a former Cisco engineer and executive, founded Zoom in 2011, and launched its software in 2013. Zoom's aggressive revenue growth and perceived ease-of-use and reliability of its software resulted in a $1 billion valuation in 2017, making it a "unicorn" company. In 2019, the company completed an initial public offering. headquartered in San Jose, California. It provides videotelephony and online chat services through a cloud-based peer-to-peer software platform and is used for teleconferencing, telecommuting, distance education, and social relations.
As many businesses now have staff working from home to help control the virus and as a response to government orders to self-isolate, Zoom's services should see a significant increase in demand. Before COVID-19, Zoom was already becoming popular with companies that sought a cloud-based solution to connect colleagues and co-workers based in different parts of the world. The virus outbreak has accelerated the migration to audio and video conferencing as many companies implement business continuity plans to continue to operate during this unique situation.
Reckitt Benckiser Group plc is a British multinational consumer goods company headquartered in Slough, England. It is a producer of health, hygiene and home products. The company was formed in 1999 by the merger of British company Reckitt & Colman plc and Dutch company Benckiser NV. The firm’s origins are engrained into English history with Reckitt and Sons starting out in 1840 when Isaac Reckitt rented a starch mill in Hull. He diversified into other household products and after his death in 1862, the business passed to his three sons. In 1886, Reckitt opened its first overseas business in Australia. The firm was first listed on the London Stock Exchange in 1888.
Reckitt’s range of brands is vast and include many well-known household names including the antiseptic brand Dettol, the analgesic Disprin, the sore throat medicine Strepsils, the hair removal brand Veet, the immune support supplement Airborne, the indigestion remedy Gaviscon, the baby food brand Mead Johnson, the air freshener Air Wick, Calgon, Clearasil, Cillit Bang, Durex, Lysol, Mycil and Vanish.
Being one of the biggest players in the disinfectants market they have already highlighted seeing “increased demand” for cleaning products such as Dettol and Lysol amid a surge in hygiene consciousness among consumers and with health authorities recommend extra handwashing as a result of the outbreak.
Activision Blizzard is a US based computer game manufacturer, designing games for video games consoles, personal computers, and mobile devices. It currently has over 9000 employees and had total revenues of over $6.4bn in 2019 and gross profit of $4.4bn. It was previously a unit of French conglomerate Vivendi, but bought out Vivendi its majority owner in 2013. Activision Blizzard entered the S&P 500 in 2015. Activision acquired social gaming company King for $5.9bn in 2015, the maker of the Candy Crush Saga title. In 2017 Activision joined the Fortune 500, only becoming the third gaming-based group to do so, after Atari and Electronic Arts.
Due to Covid cinemas globally remain either shutdown completely or running at drastically reduced capacity, Disney is attempting to re-open its theme parks but again with limited capacity. Leaving few options to keep the kids entertained. Over the upcoming Black Friday and Christmas period home gaming divisions will be the only game in town for many families The price of all gaming companies have virtually doubled from the 2019 lows and on any Covid-19 weakness ahead Activision Blizzard would be expected to ride out the market volatility.
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