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The growth of the world’s stock markets continues unabated. While all the signs are that the pandemic is pushing the global economy down to depths not seen since the Great Depression, optimism of a bounceback, the like of which has never been seen before, appears to be winning the argument and keeping markets riding high.
Big stimulus packages from governments and central banks, which could have just as easily heightened worries about how and how long it will take to get us out of the slump, only seem to have contributed to the belief that very soon everything will be OK.
We are in interesting times. Yet despite the unprecedented uncertainty of the situation we are in, there is a seemingly growing appetite for optimism.
Across Europe and the United States, the prospects of a speedy recovery have undoubtedly buoyed markets. So much so that the US stock benchmark S&P 500 index is now only around 10% below its all-time high.
Whether you put the markets’ defiant bullishness down to proof that life goes on, or take it as further evidence that so many of the events of 2020, so far, defy logic, it is clear that opportunity abounds and there are plenty who are keen to seize it.
None of the companies thriving in the current climate will be complaining. Just as desperate shoppers have shown willing to switch out of their favourite brand of bread flour/pasta/ loo roll when it was in short-supply, giving a boost to smaller brands that have hitherto struggled to make headway, so too lesser-known companies are catching investors’ eyes.
Anglo-French healthcare group Novacyt has seen orders flooding in from around the world for its Covid-19 testing kits, including from Public Health England and the US Food and Drug Administration.
With the test sold into more than 130 countries, sales and confirmed orders for its Covid-19 test have reached £120 million. It had sales of just £12.8 million in its last financial year.
Meanwhile, Xaar (XAR), a Cambridge-based inkjet printing technology group, is showing how being in the right place, at the right time, pays off. While it had been through a difficult few years, as tough competition and a cooling construction market in China, its key market, led to a string of profit warnings, it is China’s re-emergence from the pandemic that is now getting its business flowing again.
Small Xaar may be, but it also shows how a bad situation can be turned into success for companies poised and ready to take advantage of the re-starting of the world’s economies following the pandemic. Following a profit warning in November, news that it is still working towards its target of £220 million in revenues in 2020, will be welcomed by investors.
It hasn’t exactly been plain-sailing, even for the likes of Ocado (OCDO), which struggled when the lockdown brought in sweeping changes and shifts in consumer buying patterns overnight, but after a little trial and error, it has shown how being at the forefront of change can be very good for business. Meanwhile, the likes of Zoom and Discord, which are cashing in on the video-conferencing trend, can only hope that once the worst of the pandemic is over their phenomenal success doesn’t die-out along with the virus.
And let’s not forget that there are also companies that quite blatantly make their money out of others’ demise. You may not have heard of FRP Advisory, a boutique insolvency and restructuring firm based in London. But you will have heard of BHS, Carluccio’s and Debenhams.
FRP was the administrator brought in when the former British Home Stores chain collapsed, as it also did when Bonmarche and Patisserie Valerie hit the buffers.
Bad news is big business for the likes of FRP, which floated on AIM just three months ago, a time during which it has made £11.5 million. And it makes no bones of the fact that, as a direct result of the pandemic, its caseload has grown in “size and complexity”. Revenue for the year to the end of April is expected to be 16% higher than last year’s, at £63.2 million.
Picking winners isn’t easy - especially at a time like this. But the appetite for a rapid return to normal, whatever that ends up looking like, means there will always be opportunities, as long as you look in the right place.
And this is where an expert eye and a balanced approach could pay dividends in the longer-term. A good starting point is the Select 50 Balanced Fund, led by the highly-experienced Ayesha Akbar, who has been running it since its launch just over two year ago.
Read more about the Fidelity Select 50 Balanced Fund.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Select 50 is not a personal recommendation to buy or sell a fund. 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. 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.