Here's a quick thought experiment: If you could borrow a time-travel machine and go back to the time before Covid-19, what stocks would you buy? It might seem counterintuitive to look backwards at great investments you never made, but it's not. A clear-headed examination of missed opportunities can help inform your choices in the future.
Just because you missed out on a 400% return — yes, some stocks have soared that high during coronavirus — doesn't mean you should make a reckless bet today. But it does show that risk-taking sometimes has its rewards, and even during a pandemic, there is opportunity.
A few dates are helpful to keep in mind for this exercise. The first day of trading before the market had reacted significantly to pandemic news was on February 3. March 25 was when the market started to rally after its initial Covid-19 collapse. For simplicity, you can calculate the growth of a $1,000 investment in stocks — not including transactions and dividends — between market close on February 3 or March 25, and market close on August 7.
It's always important to compare individual investments to the larger market as a whole, so here is that marker: $1,000 invested in the S&P 500 at the beginning of February was worth almost exactly the same by August. If you put $1,000 in an S&P 500 index fund on March 25, it was worth about $1,335 on August 7.
Looking back, the obvious sectors to examine for opportunity include firms that make it easier to work at home or simply be at home when consumers were stuck there during lockdowns. Some other high fliers weren't so obvious, however.
The most obvious missed opportunity is Zoom, the popular video-conferencing platform. It took off like a rocket when the pandemic hit. If you were lucky or smart and bought $1,000 worth of Zoom on February 3, you would have held a $2,950 investment on August 7. That's a tidy return.
Maybe, as Zoom meetings became commonplace, you considered buying the stock during March, but decided you'd already missed the opportunity. While there's some truth to that notion, it's incorrect. $1,000 invested in Zoom on March 25 was worth $1,870 on August 7.
In other words, it's not always too late to invest in a fast-growing company when it seems like everyone else is talking about it.
Zoom isn't even the best stock performer of the last few months. Cloud platform company Fastly, Inc., which helps websites and apps perform more quickly, fell sharply along with most of the market during February and March. But its recovery was dramatic: $1,000 invested in Fastly on March 25 was worth $4,470 on August 7.
Like Fastly, cybersecurity company CrowdStrike has seen most of its growth since the market bottomed out in late March. A $1,000 investment in CrowdStrike on March 25 was worth $1,835 on August 7 — almost double your money.
Investors also seem to be following a theory that most tech firms are enjoying increased demand created by telecommuting. A $1,000 investment in Microsoft on March 25 was worth $1,445 on August 7.
Specific technology sectors, such as virtual payments, have also seen impressive growth. A March 25 $1,000 PayPal investment was worth $2,080 on August 7.
Video by Stephen Parkhurst
Plenty of companies that made it easier to be stuck at home during Covid-19 have also risen. Netflix might be the first stock that comes to mind in this category — binge watching being an obvious antidote to Covid boredom — but the video streaming firm isn't up as much as one might expect. A $1,000 Netflix investment on February 3 was worth about $1,436 by August; a March 25 $1,000 investment was worth $1,381.
Amazon, which has kept delivering its trademark cardboard boxes to American homes throughout the pandemic, has fared better. A $1,000 investment in Amazon on March 25 is now worth $1,680. Even a pre-pandemic investment in the firm has grown to $1,580.
To get returns in the 100% range, food delivery firm Grubhub was the better choice. A $1,000 bet on Grubhub on March 25 was worth $2,100 on August 7. Individual restaurants that already had delivery infrastructure in place performed well too.
Though Chipotle took a big hit in February and March, a $1,000 Chipotle investment on March 25 was worth $1,815 on August 7. Many people also fretted about making sure their pets were properly fed, which probably helped push a $1,000 pre-pandemic investment in Chewy up to $1,950 on August 7.
Even better still, as homebound consumers realized they had to work off all that food delivery, exercise equipment makers benefited. A March 25 $1,000 investment in Peloton is now worth $2,800.
Consumer staples have performed well during the pandemic. Clorox investors weathered the initial market panic just fine, and those who stuck with the firm were rewarded. A $1,000 Clorox buy on February 3 was worth $1,435 on August 7. Procter & Gamble didn't fare as well initially, but a $1,000 March 25 investment is now worth $1,325.
Finally, some firms just seemed to capture the market's attention and investors' admiration during this time. High-tech car-maker Tesla took a sizable hit early on, but it has performed handsomely since late March. A $1,000 investment in Tesla on March 25 was worth $2,700 on August 7.
It's true that bad news could send some or all of these stocks plummeting in the future. Past performance is no guarantee of anything, and double-your-money stock investments are rare. But this is a good reminder that when the news seems negative, that can be the right time to make an optimistic investment, and that your safest bet is to invest for the long term in an index fund or ETF.
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