Taking an Extra Step to Look Farther
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Disponible en anglais seulement
Taking an Extra Step to Look Farther.
Our view is that at some point this global pandemic dissipates and that life returns to some semblance of normalcy. While timing for this to play out remains a critical unknown, equally important is that we do not believe we will fully return to life as we knew it. What is almost certain is that both behavioral patterns and social practices will be changed by this experience.
We also do not believe the new normal will be a radical departure from what it is was. Rather, life will be conducted with a level of preparedness to detect, prevent, and react to this new reality. As with the attacks on September 11, which resulted in increased security and intelligence vigilance, lessons learned from this pandemic will be implemented. Better use of data, testing, technology, and triaging will become the norm. Before society gets back on a plane or boat, or goes to a sporting event they are going to want to know there are measures in place to mitigate the risk. Ultimately our society is defined by the need for persistent social interaction, and we believe that normalizing force will dominate over the long term.
But near term there is still a tremendous amount of uncertainty given we have effectively pulled the “emergency brake” on social interaction and the economy. Millions are out of work, the healthcare system is taxed, non-essential businesses are shut down, we have yet to develop protocols to ensure we do not have a repeat, and there is an anxiousness to get back to normal as soon as we can, risking a secondary outbreak at a time of severe economic fragility. While it appears that there is some light at the end of the tunnel, near-term risk nevertheless remains highly elevated.
As fundamental analysts, it is our craft to make long-term as much as short-term financial forecasts that are based on a business’s strategy, positioning, financial strength, and view of the macro backdrop. It is with that lens that we are publishing this report, and specifically looking farther into the future to assess which companies will be great investments on a multi-year basis, well beyond the 12 months that is the anchor of our standard framework. Sector by sector, we take a view on the world post COVID-19, evaluating which business models should not only survive but also prosper based on new behavior patterns, while assessing corporate financial strength to weather this storm, levers to pull to conserve cash, and the leadership necessary to navigate through. In this context some of the names are intuitive as work-from-home and virtual meetings become ingrained in the new normal, while others less so, including Market Perform rated names that surface to the top when viewed on a much longer-term time horizon. This report has our most current thinking on each sector and our best ideas for a post COVID-19 world, focusing on those companies best suited to survive, prosper, and deliver superior alpha over a two- to five-year period. We welcome your feedback, and look forward to discussing all these ideas in greater detail, albeit now at a safe distance.
Stay safe. Stay healthy. Stay in touch.
