Winners from staying home
The stock market slide has been widespread and, broad brush, both sectors and individual stocks have fallen equally far. This makes it smart to seek out stocks with a good chance of resisting the coronavirus impact, and this impact is likely to be a pronounced. If we can also identify stocks with valuation support, these are well set to ride out the waves.
Chinese data suggests a recent upturn in video gaming, and game streaming services have seen new record highs. This sector is a fairly logical winner as people go out less. We are already upbeat about video gaming, which has a clear trend of taking market shares from other entertainment industries, and this is not about to slow down. We have chosen to invest in Stillfront. This company is growing strongly, both organically and through acquisitions, but is valued well below the stock exchange and the sector.
Nent is another company that should do relatively well since it makes sense for TV viewing to be buoyed up by people staying home more. Netflix has shown strong data from China. Of course, financially pressured advertisers could trim back their marketing budgets, but higher viewer numbers should make this marketing channel more attractive. In 2019, advertising revenue was 24 percent of Nent’s total revenue, so if an individual sector gets into trouble Nent has been able to offset it. Paid subscriptions and Viaplay account for the lion’s share of Nent’s revenues. We see the stock as attractively valued and regard the company as a winner in the wake of the virus.
Telecom operators are likely to be unaffected by events. Småbolagsfond is invested in Millicom. The company had a difficult year in 2019 when Kinnevik was first rumoured to have rejected a bid for the company, and then announced a large stake would be sold. It finally U-turned and decided to distribute the entire holding to its shareholders. This process depressed the valuation. The company has a remarkably low valuation, recently delivered very decent numbers for 2019, and launched a buyback programme. An attractive alternative in times like these.