Just a few short months after the COVID-19 market crash, we’re already seeing a new bull market taking shape. TSX stocks are up more than 30% from their March lows and appear poised for further gains. With the economy starting to reopen, positive signs are beginning to emerge. In May, Canada added 290,000 jobs. That was driven by the gradual reopening policies in most provinces, which saw many businesses reopen in May.
With that said, not all businesses will benefit from the next bull market equally. Airlines, cruise companies, and hotels are facing major financial problems that could cause them trouble, even after they’re allowed to go back to business. In this environment, a few industries will reap the lion’s share of the rewards. The following are three you should keep your eye on.
Tech stocks were among the biggest winners in the COVID-19 market crash. The NASDAQ has already reached new highs for the year after surprise earnings beats from FAANG companies.
In Canada, we saw a similar story from Shopify (TSX:SHOP)(NYSE:SHOP). Its stock actually tanked early in the crash after announcing it had suspended its guidance. However, it pulled a rabbit out of a hat when it released its Q1 earnings. Showing 47% revenue growth and 210% growth in adjusted earnings, the release was greeted with wide approval, and SHOP went on another major rally.
As a growing e-commerce company, SHOP could still rise further from here. E-commerce is a long-term growth industry that was averaging 9% annualized revenue growth, even before the COVID-19 boost. Should that trend continue, SHOP will continue to benefit from it.
Related to the growth of e-commerce is the growth of shipping. E-commerce packages need to be sent, and companies involved in transporting them stand to gain. A classic example here would be Cargojet. It’s a small cargo airline that specializes in small overnight shipments — including many e-commerce deliveries.
This lucrative niche helped the company achieve a surprising earnings beat in Q1, with revenue up 12%, gross margin up 52%, and adjusted earnings up 24.5%. As the economy grows, companies that ship vital goods will grow along with it. This is doubly so for shipping companies like CJT that specialize in sectors with particularly strong performance.
Last but not least, we have healthcare.
Healthcare has been one of the defining concerns of 2020, and the amount of money being poured into it is unprecedented. While the current pandemic will pass, healthcare spending will still increase long term, thanks to an aging North American population.
In this environment, pharmaceutical companies and other healthcare-related businesses could benefit massively. The more money is spent on pharmaceuticals, the more revenue pharma companies will generate. This represents an opportunity for savvy investors. Nobody knows which individual companies will profit from current trends, but a healthcare ETF that owns a representative cross section of the industry could do well.