Choosing the right direction to trade stocks
All those engaged in investing have been probably asking themselves some of these questions: “How not to lose money during the crisis?” or “How to make money when the economy is collapsing and negative trends are dominating the charts?”
Do not go down the anxiety spiral. The market is a place of unlimited potential. When some assets fall, others grow. The dollar crashed? Fine! You can buy gold! Banking sector shares fell? Ok, then. Start buying everything related to online shopping.
Remember, a crisis is not only a predicament, it’s also an opportunity. Let’s figure out what profit-making opportunities the novel coronavirus can provide us with.
The pandemic has already undermined positive economic trends and changed market sentiment. After the spring recession, many assets found their bottom and began to rise. Although experts believe that it’s too early to talk about a transition to positive trends. The markets are cyclical, they cannot just rise or fall. What we are witnessing now is only a correction phase, and the market is far from stable growth.
Let’s talk about investing in the stock market. Today we will not give any recommendations which shares to buy – we all have analytical resources for this. But we will tell you about the general trends and directions an investor should look in.
So, let’s take a look at the coronavirus situation and try to analyze it. What are the current market trends? The tourist industry (hotels, booking and air travel) is now an outsider. So it is better to leave the shares of travel companies and air carriers alone for a while. But food and streaming services, on the other hand, are extremely popular. Due to the lockdown and self-isolation measures, people either work remotely or don’t work at all, which means that companies that deliver food and things, provide communication and entertain people via the Internet are in high demand.
Now, let’s consider examples of profitable investments. Take Aeroflot, Yandex and Netflix.
- First of all, it’s worth noting that the largest American companies showed a drawdown in the market, and given rampant COVID-19 spread in the United States, we can neglect the classic business sector. At the same time, companies that are focused on online business services have almost completely recovered.
- Let’s not to beat around the bush and get right to it. If you take a look at the Yandex chart, you’ll see that the company’s shares skyrocketed, surpassing Netflix. How come, you may ask. After all, Netflix was a pioneer of video streaming. How has Yandex managed to outstrip this streaming giant? It’s simple. Yandex’ business is diversified. Besides offering video streaming services, the company also provides taxi, home delivery and online training services, as well as websites for freelancers. And Netflix has nothing to offer other than video content.
- Aeroflot is in a similar situation. The company is strongly tied to one type of service – transportation of passengers and goods and does not have the means to adjust the line of its work during the crisis. So it’s doomed to lag behind, while other flexible businesses with an expanded infrastructure are already approaching their pre-crisis levels.
What is the conclusion here? It is better to choose companies that have diversified their business. Pick those directions that will be in demand in the coming years. We believe that online delivery, IT developers, HiTech and pharma companies will remain at the forefront of economic growth in the near future.
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