The FTSE 100 index closed above 5,000 yesterday. But it’s still much lower than where it started the year. In other words, a stock market crash is well and truly underway.
This is despite the US Fed’s sharp policy actions over the weekend. It cut interest rates to zero and announced bond purchases worth billions of dollars. I reckon that the resulting increased liquidity in the system will help markets get back on their feet.
However, the economy will take longer to recover, especially if COVID-19 continues to keep the world at a stand-still. Even if the economy does recover soon, not all sectors are going to be back in health. Travel is an obvious example, which impacts the likes of airlines and cruises.
But many others segments of the economy will recover. Indeed, some won’t need to recover, as they are doing well right now, despite all. One example is delivery companies. The first news item I read yesterday morning was about Amazon ramping up hiring by a 100,000 people in the US, as online sales rise.
I haven’t found any announcements from UK-based companies yet, but share prices and anecdotal evidence suggest that the segment is gaining here too.
The stock market crash benefits grocery deliveries…
The FTSE 100 online grocer Ocado (LSE: OCDO) saw a 10.4% jump in share price yesterday despite the stock market crash. The likes of OCDO are part of the big disruptive change sweeping across retail that will define the future of the sector in any case.
The current times have added another layer of disruption, which is benefiting these change makers. Now more than ever, there’s little reason for the long-term investor not to bet on OCDO. Its share price has been on the rise on average for the past four years. If I had invested in it in 2015, I’d be laughing my way to the bank by now.
…..as well as food delivery services
Similarly, the FTSE 100 food delivery service Just Eat Takeaway.com (LSE: JET) saw a 10.5% increase in share price at the last close. It’s evident why. According to a report by The Guardian, takeaway and fast food sales rose by 8.7% in February because of the coronavirus outbreak and recent storms. Further, to address the risk of spreading coronavirus, it’s launched a ‘no contact’ policy, where food is delivered to the customers’ doorstep, with no engagement with the person delivering the food. This could further boost sales while they are already on the rise.
Over the longer term, the segment is only likely to benefit from the increase in online sales, much like OCDO. JET’s already in a leadership position, with Just Eat and Takeaway.com’s merger having created one of the largest food delivery companies in the world. The future of the entity is yet to play out, but the latest developments give room for positive expectations.
If the COVID-19 crisis continues and spurs deliveries further, at a time when many other businesses are languishing, both OCDO and JET could be miles ahead by the time normalcy returns.
