Even for those willing to hold COVID-19 stocks through 2021 and 2022, there are still risks that could derail a reopening-weighted investment strategy. Positive vaccine new is already baked in here. And with 2021 recovery expectations so high, the stage could be set for disappointment if any setbacks are encountered en route to the post-pandemic world.
So, how should you be investing in the new year?
The odds of the pandemic ending next year, I believe, are quite high. But that doesn’t mean it can’t drag into 2022, delaying the recovery trajectories of many firms further. Mutated strains and potential vaccine logistical issues are risks that shouldn’t be discounted. That said, things could also go smoothly with the vaccine rollout, and the pandemic could end in the latter half of next year.
Even if you’re optimistic about a timelier end to the pandemic, you should still hedge your bets, just in case things don’t go according to plan. That means rotating into beaten-up reopening plays, but also maintaining a position in the bruised defensives that have limited room to run in a post-pandemic environment.
Pandemic-resilient growth? You got it!
In a prior piece, I urged investors to continue adopting the COVID-19 barbell strategy, but with a slightly heavier weighting on the at-risk COVID-19 stocks or “reopening plays.” A stock that’s thrived in the era of the coronavirus is Goodfood Market (TSX:GOOD), a meal-kit and grocery delivery service that’s been in high demand amid quarantines and periods of self-isolation.
Meal-kits are pretty pricy, even for millennials who’ve shown they’re more than willing to pay-up for the added comforts and conveniences. In this pandemic, though, more people are willing to pay-up for a weekly Goodfood subscription if it means avoiding some (or all) of the visits to the crowded grocery store down the street.
COVID-19 is a horrifying disease, and with a more contagious U.K. strain that may be spreading asymptomatically across the country, meal-kit delivery services, I believe, will continue to face overwhelming demand. With a wide range of meal kits and a growing roster of compelling grocery products that range from DIY smoothies, cold brews, loaves of bread, ready-cooked chillies and soups, sides and all the sort, Goodfood is about to get another massive jolt to its top- and bottom-line.
Goodfood stock is white-hot right now, after having soared over 18% over the last two days and nearly 50% over this past month.
Although the momentum stock is dirt-cheap at 2.5 times sales, the stock could face a considerable amount of pressure once the pandemic ends and subscribers hit that pause button or cancel their memberships entirely. There are downside risks, but for a portfolio that’s already heavily weighted in COVID-19 reopening plays, I’d say the risks involved with FOOD stock are well worth the potential rewards.
Foolish takeaway on COVID-19 stocks
Sure, there’s light at the end of the tunnel with a growing number of safe and effective COVID-19 vaccines. But there’s no telling how far away that light is just yet. There’s more clarity on the vaccine timeline, but there’s still a bit of haze that’s clouding the new year.
As such, Goodfood stock remains a compelling play, both in the near-term and as a hedge against a lengthening of this pandemic into the latter months of 2021.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Goodfood Market.