Chart of the Month for April 2020

We know that when this epidemic is beaten, life will return to “normal”. Normal will inevitably be a “new normal” and many things will likely never return to where they were. We foresee a large shift in attitudes to business travel in total and large conference attendance in particular. This is going to have a devastating impact on large convention style hotels, cities those hotels are located in and surrounding businesses, not to mention transportation to get to the convention. That is the bad news.

The good news is the impact this societal change will have on the environment and on the growing sector of Video Conferencing. Platforms such as Google Hangouts; Microsoft Teams and Cisco Webex are all reporting sharply higher usage and many new accounts, particularly those on free trials.  However, to benefit from this as an investor, one needs to find a listed stock that has video conferencing as a major component to their earnings. The three platforms listed above are barely rounding numbers on the profitability of their parent company. There are some companies that are listed, whose main product is video streaming conferences. Zoom Video Communications and Logmein (Go to Meeting) are two such companies.  Zoom initially looked to be winning this battle until hackers started “zoombombing” meetings and displaying hate speech and pornography instead of school lessons and business plans. Many new subscribers retreated to older more established technologies like Skype (owned by Microsoft).

On the video streaming front, well-known companies like Netflix and Disney are seeing large numbers of new subscribers and an even larger number of existing subscribers increasing their viewing volume. The question here is, will the new normal revert to people attending movie theatres or has home entertainment received such a boost that people will stay at home? Or will they revert to the almost obsolete drive-in theatres?

There are many other applications of remote communications whose ascent will be accelerated by the pandemic. Indeed, this is history repeating itself as it is just one hundred years ago that the telephone found a huge boost in popularity, so much so that the traffic overwhelmed the telephone utilities. Other industries that will benefit from remote communications are agriculture as farmers move towards remote operations of farm equipment for both planting and harvesting. In this case, tower erectors will be required to raise signal repeater stations to ensure communications in remote parts of the country.

Other industries that we expect to move ahead rapidly are remote security systems that will make security guards superfluous, more transport systems being remotely driven, possibly even taxi services, and education will require that students spend time in front of their screens for learning purposes.   

What this pandemic is teaching us is:

• For every event or disaster there are winners and losers
• Consumers can be extremely quick to replace consumer items whether physical or digital
• Security is paramount if new winners are to hold their new-found success
• Fear makes society quite malleable