Which Investments Will Survive the Coronavirus Pandemic?

Investors across the world have come to realize that the coronavirus is going to spread and that we will have a global pandemic. If you are not sure where to get your facts in this regard, we suggest reading an article published in The New York Times and written by the public health expert, Michael Osterholm.

It’s now clear that the epidemic was never going to be contained. At most, its spread was slowed by the lockdown imposed in China and other countries’ efforts to identify infected people and anyone they might have been in contact with.

The coronavirus that causes Covid-19 seems to spread like influenza, through the air, person to person. Unlike Ebola, SARS and MERS, it can be transmitted by individuals before the onset of symptoms or even if they don’t become ill. An infected person appears to spread the disease to an average of 2.6 people. After 10 generations of transmission, with each taking about five or six days, that one initial case has spawned more than 3,500, most with no or mild symptoms, yet probably infectious. The fact that mild cases are difficult to differentiate from colds or the flu only complicates the diagnosis.

The “take home lessons” from what this expert says are these:

  • Covid-19 is going to end up spreading to every corner of the globe just like every new strain of influenza does
  • The vast majority of people who contract this disease will have symptoms like a mild cold or almost nothing but will briefly carry and spread the virus.
  • Unlike influenza, there is no vaccine

What scares a lot of people is that Covid-19 has a death rate substantially higher than seen with influenza. Like influenza, it is more dangerous for babies, the elderly, and those with complicating diseases.

The stock market has now caught on and is in a steady selloff.

Which Investments Will Survive the Coronavirus Pandemic?

In our article about investments for when the market falls, we noted the comments of Warren Buffett who says that he looks for stocks that work well with his long term investment horizon of twenty or thirty years. We also noted that in order to survive what may well be a global economic slowdown, stocks with a strong margin of safety in the form of low debt would be a good idea.

In this regard, the level of debt spread out across Chinese businesses coupled with the damage the infection is causing to industries far and wide, is of concern. Almost four years ago we were concerned about Chinese debt. The virus situation only compounds these worries.

Closer to home, companies like Tesla and Amazon.com both carry large amounts of debt but are forgiven by investors who expect to see continued extraordinary growth. What happens when that growth slows and reverses? This is more of a concern for Tesla than Amazon as Amazon’s sales could increase if people decide to stay home and avoid crowds while shopping!

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