Life after Covid, part 2
More sectors with potential for post-pandemic growth
The dreary news reports we read daily sometimes make it feel like this surreal world we find ourselves in is going to last forever. It’s not. Yes, it will be a long haul. We need to develop an effective vaccine before the crisis can truly end, but that day will come. However, life on the other side may be very different from the one we remember from just a few weeks ago.
Last time I looked at some of the changes I expect to see. They included more people working from home, significantly greater use of eCommerce, and an acceleration in the use of robotics. Here are more of the differences I envisage for the post-Covid world.
More distance education. Schools are not going to close permanently. Colleges and universities will eventually reopen. But this experience has showed us that more learning can take place through the use of technology, and I expect that trend to continue.
There is nothing new about distance education. It was being used prior to the inception of the internet, through mail distribution of course material. But, as we’re now seeing in homes across the country, the schoolroom can be brought into the living room through the use of increasingly sophisticated teaching materials and interactive programs.
This will benefit those who live in remote areas, children who have to stay home while ill, adults seeking to upgrade their skills, and more. We may even see a reduction in the number of days students actually must attend classes.
One of the companies that stands to benefit is Chegg Inc. (NYSE: CHGG). It operates an interconnected learning platform, which is on-demand, adaptive, personalized, and backed up by a network of human help. The company hit a record 3.9 million subscribers in 2019, up 29% year-over-year. Chegg has not released any estimates for 2020, given the uncertainty of the Covid-19 crisis. But the share price has been gradually moving higher from a mid-March low around $26 to the $75 range, suggesting that investors feel this company is in the right place at the right time.
Increased use of telemedicine. Recently, I received an email from Toronto’s University Health Network (UHN), a group that includes Toronto General, Toronto Western, and Princess Margaret. It said that all in-person appointments that are not urgent are being cancelled for the foreseeable future.
Instead, patients may be contacted to arrange for “virtual visits” with their doctor that will take place by phone or, increasingly, by computer. According to the UHN website, during these visits “Your health care team talks to you about your current health status, any symptoms you are experiencing and your needs. If your care team feels that an in-person visit is needed instead of a virtual visit, they will discuss your options and next steps with you.”
The site goes on to say that this is not new. “UHN and health care teams across Ontario have been using virtual visits for some time through the Ontario Telemedicine Network.”
Although UHN says this action is being taken due to Covid-19, it’s not hard to see it becoming the new norm in a post-crisis world. Telus Corp. (TSX: T) has invested $2.5 billion over the past decade to develop a wide range of telemedical services, including general medical advice, personalized diagnosis, prescriptions, and more. The company announced recently that its Health division now enables 26,000 family doctors to conduct virtual visits with their patients.
In the U.S., the hot stock in this field is Teladoc Health Inc. (NDQ: TDOC). The shares opened the year at US$83.72 but then shot up to US$176.40 when the Covid-19 crisis hit. At the time of writing, they were in the US$225 range. Teladoc is a growing company with a global platform and first-rate technology. But it’s not making a profit yet. Investors don’t seem to care.
Reluctance to travel. It’s going to be a long time before people will be comfortable boarding a cruise ship. Even before Covid-19, ships were a breeding ground for disease, such as the norovirus. I was on a cruise last Decemberm and everywhere you turned there were hand sanitizers – and this was before anyone but a few doctors in China knew of the existence of the novel coronavirus. The images of helpless passengers stranded on infected cruise ships with ports refusing them entry will remain with us for a generation.
Airlines may recover sooner, but I expect schedules will be continue to be cut back and many planes grounded for some time. Business travel will drop as videoconferencing replaces face-to-face meetings and tourism will probably suffer as families apply any extra money to paying off debts incurred during the crisis.
The bottom line is that I would not buy any airline or cruise company stocks at this point, no matter how cheap they appear.
Bigger government. On a macro level, get used to big government. The Covid-19 crisis has revealed how much we depend on our elected officials to provide leadership – and money – in critical times. You won’t hear any talk of balanced budgets for the foreseeable future.
Specifically, I see three things happening.
The first is a permanent guaranteed minimum income. The Canadian Emergency Response Benefit will help people survive financially until the crisis is over, but I don’t think the support will stop then. Spain has already announced that its temporary income support plan will be made permanent. There’s going to be a lot more talk about it here as we emerge from the crisis. The NDP is already onside if the Liberals decide to push ahead with such a plan.
Second, governments are going to take a more proactive role in industrial policy. This crisis has ripped apart the fabric of globalization and has shown how vulnerable we are to the self-interest of other countries, notably the United States. We’re not going the way of China in terms of a directed economy, but I expect to see more programs aimed at providing political and financial support to the creation of industries deemed essential to national security. Sadly, the pandemic and the policies of Donald Trump are making isolationists of us all.
Finally, the economy will need to be revived after the shutdown. What better way than through a national federal-provincial infrastructure program, aimed at creating jobs and rebuilding our decaying bridges, highways, and airports? A twenty-first century version of Franklin Roosevelt’s New Deal, if you like.
Of course, none of this will be cheap. Don’t expect any tax cuts for years to come.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
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