Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.

“Tis the season to be jolly. But ‘tis also the season to be jolly careful”, quipped Boris Johnson at last night’s briefing. What he could have just as easily said, is: “Tis the season to be jolly glum”, at least if you’re a company, worker or investor in the leisure sector. Or indeed a would-be reveller.

England’s forthcoming patchwork quilt of local restrictions has already, and will continue to spell months of further chaos for the leisure sector, which has borne the brunt of the lockdowns throughout the course of the pandemic.

With just a month to go now before we get to Christmas and the New Year period, the nation’s pubs, bars, clubs, restaurants and hotels should be bursting with partygoers and booked up until at least New Year’s Day. Instead, currently shuttered as we reach the end of Lockdown 2.0 in England and either about to reopen or just about to close again in other parts of the UK, 2020 is turning out to have been the year the leisure sector never really got invited to.

Some companies, unfortunately, will not recover from this awful year. Some have indeed already bitten the dust. But there are also inevitably winners so the trick now is to delve deep enough and spot the standouts that will, one day, come out of this and could even turn out to be bargain buys.

This is where individual stock picking comes into its own. And even for more novice investors, such has been the nature of the pandemic and the speed with which it has reshaped our lives, that it has given us all a real-time, ‘on the ground’, front row view of the winners and losers. Certainly for those of us who have been paying close attention, anyway.

They always say invest in what you know. The task then now is to sift through the sectors with the most damaged ‘fruit’ and pick out some worth saving.

The retail sector is a good place to start, because having already been on shaky ground long before the pandemic, it’s a little further along in its evolution. There though, two ‘take away’ messages are loud and clear - adapt or die and make sure you give consumers what they want.

Retailers like Halfords (think bikes), Hotel Chocolat (pick-me-up treats), ABF-owned fast-fashion chain Primark (competitively-price clobber means queues around the block as soon as lockdowns lift) and Pets at Home (helped by the lockdown puppy surge, toys, treats and trims all under one roof) have all thrived for very different reasons, but also for very specific reasons. Only the penny stores and bargain basement retailers like B&M Stores, providing cut-price goods to cash-strapped shoppers, are the generalists to have done as well.

The leisure sector is, as yet, earlier in the process of sorting the runners and riders. But the companies that will be here for the long-term will be those that adapt rapidly and embrace the changes without too much reluctance.

The travel sector is another to take a close look at. The theory is that business and leisure travel will boom again, once the Covid risk has been sufficiently minimised. Airlines and travel operators that are cutting costs, exploring new strategies and are ready and waiting for that moment to arrive will fare the best.

It is also worth taking a side-ways look for potential winners too. There are winners and losers in the supply chain that might not get all the attention, but which stand to rise or fall on the back of their ability to adapt and serve the new consumer needs the best. Paper and packaging companies boxing all those parcels ready for shipping (like DS Smith), delivery companies themselves (think Just Eat Takeaway) and services companies, like Rolls-Royce (engines and service contracts, once planes take to the skies again) are just as much potential post-pandemic winners.

The going is still going to be tough for some time yet and more ‘bargains’ are likely to emerge the longer this pandemic goes on. But taking the time to look a little closer at the companies that are meeting changing needs, adapting to the circumstances and positioning themselves to deliver, come what may, could lead you towards some star performers that are worthy of investing in for the longer-term.

Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

Topics Covered:

UK; Shares; Active investing

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