A consumer rush to prepare for the spread of the coronavirus is creating a small class of winners in the US stock market, as makers of soup, disinfectants and video games buck overall declines in share prices.
Shares in the Campbell Soup Company have experienced their best run in two decades, despite the broad sell-off in equities. Kroger, which operates convenience stores, is the second-best performer since the market peaked on February 19, gaining 13 per cent. Clorox, maker of the popular disinfectant wipes, is up 7 per cent and Electronic Arts, the video game producer, has gained 0.4 per cent.
The disparate group of companies are linked by investors’ expectations they will benefit from the potential near-term impact of the virus, such as people staying home for long periods.
“They’re all related,” said Jim Paulsen, chief market strategist for the Leuthold Group. “All of this is combined into a big corona trade.”
Campbell Soup Company gained 11 per cent since the stock market reached its mid-February peak, including its best day in two decades on Wednesday, when it rose 10 per cent. Since its mid-February peak, the broader market has fallen 11 per cent in sharp sell-offs punctuated by volatile rallies, injecting fresh volatility into the markets.
The coronavirus has increased “the potential for consumers to stock-up on soup and eat at home more often in general,” JPMorgan Chase analysts said on Wednesday evening, after the stock’s swift rally.
People are buying household goods and video games in case they have to quarantine themselves. “It reflects the panic you see in Target and other places with stuff flying off the shelves,” Mr Paulsen said. “If it gets really bad, at least you have soup for the kids.”
These are not the only companies that have performed well on the stock market during the recent bout of volatility. Gilead and Pfizer have gained on expectations they will help find a vaccine. Exchange operators MarketAxess and CME Group are up after trading volumes surged. Gold miners have gained after the price of the precious metal, a popular haven for investors, rose.
The stock price increase for groups that may benefit from the effects of the virus opens up the risk for investors that the share price could quickly reverse should the outbreak dissipate.
“It’s foolish to have too much confidence in the pace of this viral outbreak,” said Charles Lemonides, chief investment officer at ValueWorks, a hedge fund in New York.
“The structural challenges facing Campbell’s Soup will come back to them and face investors,” he said. “People are likely to go back to the amount of soup they were eating.”
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