Trying to predict how things are going to pan out with regards to omicron is very difficult. The FTSE 100 is falling again today after the Moderna boss said that existing vaccines will struggle to be as effective against this new strain. If things get more serious and force the UK government to add restrictions, here are some stay-at-home stocks that I think could perform very well.
It’s not just 2020 over again
Stay-at-home stocks is a term that was coined last year. It refers to companies that typically perform well when the population is forced to stay indoors. Now I might think this is an easy trait to identify, as I can just look at what happened last year. This is true in part, but the current situation is different in many ways to 2020.
For example, I might think that it’s a smart play to buy shares in Zoom Video Communications. Yet in reality, the share price is already at elevated levels after the jump last year. Also, we haven’t really stopped using Zoom that much even during periods without any lockdowns. So some of the stay-at-home stocks that I’d have bought last year might not be the best investments for this winter.
Stay-at-home value in DIY improvements
One stock that I do like is Kingfisher (LSE:KGF). The DIY retail operator owns Screwfix and B&Q. It performed well over the past year, with the share price up 20%. If we’re directed to stay indoors again, I think people will look to complete more DIY projects at home over the winter.
Another reason why this could be a good performer is that we’ve seen a boom in the property market over this summer. This means that many will be needing to complete projects in new homes. So Kingfisher could benefit from this increased demand.
One risk for the company is supply chain disruption. Most of its products are manufactured abroad and brought in on shipping containers. The current bottle necks at ports and labour shortage is an issue.
A robust stock to consider
A second stay-at-home stock I’d buy is Aviva (LSE:AV). The insurance company has seen its share price move 16% higher over the past year. Even though the pandemic has provided a hit to earnings, it’s in no way a material stumbling block. For example, in the first half of 2020, operating profit was only down 12% versus the same period in 2019.
I like the robust nature of the business. Key areas of operating include annuities, savings, investments, and health protection. Even with higher claims for the health division, Aviva saw an increase in new business on this front during the pandemic.
Therefore, I think this could be a good stay-at-home stock as, unlike a lot of companies, the business can still perform regardless of a lockdown. A risk is that profit could be put under pressure if a high number of health claims are paid out.
Overall, if we see signs pointing towards tighter restrictions in coming weeks, then I’d consider buying the above two shares.
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Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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