Post-pandemic opportunities for investors

Despite the challenges ahead, including the potential for rolling shutdowns for months to come, disruption from the pandemic could strengthen certain sectors, a report from BMO Capital Markets Economic Research says.

“Some sectors will naturally rebound quickly as distancing measures lighten, and others could even see accelerated growth in the new circumstances,” the report said.

BMO highlighted many opportunities for businesses and investors, in everything from banking and remote work to real estate and tech.

More users of online and mobile banking services will benefit financial firms as they “restrain their physical footprints without sacrificing customer service,” the report said.

Businesses that supply office equipment and services will see increased demand as working from home is embraced.

The shift to remote work will require support for telecommunications companies, a report from the C.D. Howe Institute said.

Next generation networks will be essential for helping Canadians adjust to sustained remote work and restarting Canada’s economy post-crisis, the think tank said.

“Governments could ensure ongoing network resilience post-crisis by providing incentives to accelerating capital outlays by telecom providers.”

The shift to working from home is expected to negatively weigh on commercial real estate, but an increase in online shopping could continue to drive demand for industrial and warehouse space, the BMO report said.

Remote work could also be a plus for residential real estate, as rural locations draw increased interest — including workable farmland.

The BMO report also said the demand for tech, such as for self-driving cars used to make deliveries, will likely “surge” once life returns to normal.

Another opportunity is e-learning, including learning management systems software and analytics software to measure learning effectiveness. Although the report said the traditional classroom won’t disappear, “blended learning” approaches that encompass e-learning should become the new norm.

In tourism and travel, altered consumer behaviour during the pandemic could result in more domestic trips, including driving vacations. Businesses that would benefit include motels, eating spots, service centres, and RV dealers and manufacturers (usually highly cyclical).

The report also noted that outlays and activities related to preparedness could become permanent fixtures on the economic landscape. These include supplies for emergency pantries and money market funds for emergency savings.

A playbook for the path ahead

The C.D. Howe Institute report outlined principles and milestones to guide re-opening the economy.

“Principles and contingent timelines will help manage expectations and address current commercial paralysis,” the report said.

It also noted that some businesses may be challenged to qualify for federal support. For example, take-up of the co-lending program for small and medium-sized enterprises (administered by the Business Development Bank of Canada) has been slow, potentially a result of the “complex” requirements to qualify, it said.

It also highlighted the need for support in sectors such as oil and airlines, though such support should serve as a bridge rather than permanent subsidy programs, it said.

For full details, read the reports from BMO and the C.D. Howe Institute.