The novel coronavirus presents the opportunity for a novel response: innovation. Current conditions are forcing consumers to change the way they access products and services, and businesses must respond and adapt to this changing environment.
As an investment manager, we look at this type of innovation as a key consideration when deciding how and where we invest your money.
Companies that can adapt, change and move forward often signal good opportunities for sustainable growth. Those with high quality characteristics (stability and financial strength) have the potential to weather economic uncertainty such as we’re seeing today.
The coronavirus has impacted the world and global economy perhaps more than any other outbreak in more than a century. As a result, many health care-related businesses have dramatically shifted their capabilities in the short time since the pandemic began.
There’s no shortage of investment opportunities in the health care technology, biotechnology and pharmaceuticals industries.
There are obvious areas of innovation in response to the coronavirus pandemic: new medicines and devices to treat patients with COVID-19; accelerated development of vaccines; and evolving health care techniques to test for, track and prevent the spread of the virus.
With hundreds of current and planned clinical trials for COVID-19 treatments, there’s no shortage of investment opportunities in the health care technology, biotechnology and pharmaceuticals industries.
These companies are researching and testing new and existing drugs; studying inflammation and immune responses and prevention; and developing vaccines and plasma and antibody treatments—all of which may benefit world health as a whole, as well as appeal to investors.
Additionally, we’ve seen a ramp-up in production from smaller firms that make up the supply chain to these larger health care companies.
Lockdowns, stay-at-home orders and social distancing have changed the way other businesses and consumers interact, helping speed up adoption of products, services and technology that make life at home easier. Companies are doing all they can to get their products into the hands of people who are willing to try new things.
Video conferencing has surged: From remote work to distance learning to get-togethers with friends and family, video technology is being widely used in the absence of face-to-face interactions. Telemedicine, too, has seen an increase in usage as doctors and patients limit in-person appointments.
Demand is up for home office furniture and technology upgrades, maintenance and remodeling supplies, and gym equipment.
Digital options are extending to food and other essentials. For many, online shopping or restaurant and grocery delivery service has gone from an occasional convenience to their primary means of acquiring meals and other goods.
We’ve also noted an uptick in spending on home improvements and amenities. As people spend more time in their houses, demand is up for home office furniture and technology upgrades, maintenance and remodeling supplies, and gym equipment.
And not surprisingly, the extended time at home has changed the way we dress. The daily need for suits and business attire has oftentimes been replaced by more casual selections. Athleisure (a cross between athletic clothing and loungewear) was already a popular trend, but could be on its way to becoming the unofficial work-from-home uniform.
While we are a bottom-up investment manager and evaluate innovation and opportunities on a company-by-company basis, we can’t ignore the global economy.
The current environment will certainly weigh on individual businesses, but a long-term view is crucial. That’s one advantage of active management. By focusing on each company, we believe we can build portfolios that contribute to your financial success.
We make investment decisions not just on the perceived near-term benefit of innovation driven by the coronavirus pandemic, but on the sustainability of future growth and profitability. Companies that have the ability to innovate and benefit over time from the changing landscape are likely to be most attractive to us.
We are committed to providing you with news and insights that help you make investment decisions. Later this month, we’ll also highlight specific areas of interest—trends, industries, individual companies—in our third quarter Investment Outlook.
The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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