UBS outlines 3 major investing themes the coronavirus crisis is shaping today - and breaks down they'll play out in the years to come
- Analysts at UBS issued a report describing three main investing themes the coronavirus is shaping, and will continue impacting over the next decade: healthcare, technology, and global supply chains.
- They detailed how the sectors are shifting, and how investors would be prudent to position around them.
- For instance, with a renewed focus on genetic research, analysts said they recommend investing in the genetic therapies theme through a diversified portfolio of companies operating in that space.
- Visit BI Prime for more investing stories.
The novel coronavirus has killed thousands of people around the world, roiled financial markets, and upended entire economies in a matter of weeks.
Many economists are calling for a recession to hit the US this year, with the possibility of a recovery sometime next year. Some say a full-blown economic downturn is already upon us.
This rapid deterioriation in conditions has also flipped some investors' playbooks on their heads, and some investment experts say COVID-19 's ripple effects will extend across industries for years to come.
UBS analysts issued a March 27 report digging into the heart of that, laying out major investing themes the coronavirus is altering for the long-term: healthcare, technology, and global supply chains.
"While we expect the global economy eventually to recover, we may see changes to lifestyles and business practices, as well as new healthcare and digital technologies, influence the post-pandemic economy," the firm wrote.
To that end, analysts in UBS's global wealth management division's chief investment office, led by Laura Kane, offered recommendations for how investors can best position themselves around those fundamental shifts.
Here's a rundown of their outlook.
Theme No. 1: 'Health, from genetic therapies to food systems'
The coronavirus - which originated in Wuhan, China and has spread around the world - has "ruthlessly exposed the cracks in our global healthcare system," the analysts wrote, health-tech and telemedicine are two industries they expect to grow in popularity.
With a renewed focus on genetic research, too, analysts said they recommend investing in the genetic therapies theme through a diversified portfolio of companies operating in that space "to manage the risks associated with clinical failure."
Gene therapy is an experimental approach to treatment the National Institutes of Health defines as harnessing "genes to treat or prevent disease."
While UBS did not provide specific stock recommendations around that theme, the US biopharmaceutical company Sarepta Therapuetics is one company operating in the space that UBS has noted in the past.
The spread of the virus is also placing a fresh spotlight on the food supply chain, UBS said, one analysts think is going to drive innovation and create investment opportunities.
To capture those themes, they recommend "investing in a basket of food-related opportunities across the consumer, technology, and industrial sectors."
Theme No. 2: 'Digital technologies and cross-sector disruption'
The pandemic should accelerate consumers' shift toward fintech-based products, the analysts said, as more people are staying home and paying for items online. That won't change anytime soon, they contended.
"Anecdotal evidence suggests fintech app downloads across Europe and other developed markets where penetration has been low have risen significantly over the past few weeks," they said.
Revenues sourced from financial technology firms are expected to grow over the next decade, UBS said, and the space is enjoying a bump as the World Health Organization encourages cashless payments to stem the outbreak's spread.
A WHO spokesperson told Yahoo Finance earlier this month that people should use contactless payments "where possible," and wash their hands after handling cash.
UBSRetailers with strong online presences, too, are set to keep benefiting with more consumers confined to their homes are engaging with e-commerce, they wrote.
For instance, Nike in its recent earnings report for the quarter ending in February that its digital sales in Greater China rose by more than 30% while brick-and-mortar retail sales were impacted by stores temporarily closed during the COVID-19 outbreak.
"Against this backdrop, we continue to believe fintech as a trend should continue to deliver double-digit growth opportunities over the next few years, thus growing at least three times faster than traditional financial services," they added, suggesting investments exposed to the fintech ecosystem could benefit.
Theme No. 3: 'De-globalization and its effects on manufacturing and supply chains'
One major theme the pandemic underscores is the global supply chain's interconnectivity and complexities - a feature of the US-China trade war on full display.
For instance, the analysts pointed out nearly three quarters of elevators' global components are produced within 60 or so miles of Shanghai.
In turn, the pandemic may push companies to consider more domestic supply chains with less reliance on outside ecosystems.
"It doesn't necessarily mean on-shoring to high wage countries in Western Europe or North America, but perhaps Eastern Europe, Mexico, or other attractive countries in Asia, to become less dependent on China," UBS said.
This would directly benefit companies with more modern factories using fewer humans and more automation, they said, pointing to the German industrial conglomerate Siemens and its efforts around modernizing its manufacturing processes.
"We believe this trend will continue and become even more relevant. Factory automation equipment, robots, and automation software will play an important role to achieve a higher level of automation," they wrote.
And get the latest coronavirus analysis and research from Business Insider Intelligence on how COVID-19 is impacting businesses.