The global spread of coronavirus continues to wreak havoc on international markets. Last week the S&P/ASX 200 Index (ASX: XJO) shed close to 11% in its worst week since the global financial crisis. But don’t get caught up in the panic selling, because even though the short-term economic implications of the crisis remain difficult to assess, one thing is certain: the world will continue to turn, and in time the effects of the pandemic will pass into history.
For savvy, clear-headed investors with a long-term outlook, a bear market presents great opportunities to pick up strong companies at bargain prices. Here are 5 companies I think will be the quickest to rebound once the panic subsides.
Woolworths Group Ltd (ASX: WOW)
The share price of one of Australia’s largest supermarket chains has plummeted from the 52-week high of $43.96 it hit mid-February all the way down to just $37.05 as at the time of writing, a drop of almost 16%. This seems like an excessive sell-off, especially given that supermarkets are generally seen as reasonably defensive shares in times of market distress.
Consumers will no doubt curb their spending in the coming months, and damage to local and global supply chains will make business harder for retailers like Woolworths. But supermarkets will make money as people will continue to buy food and other staple items. At these prices, Woolworths shares look like a bargain.
TPG Telecom Ltd (ASX: TPM)
Given that the news cycle revolves exclusively around coronavirus at the moment, it’s easy to forget that it’s been less than 2 weeks since the ACCC announced it would not appeal the Federal Court’s decision to allow the $15 billion merger between TPG and Vodafone Hutchison Australia (ASX:VHA).
This paves the way for one of the biggest telecom industry mergers in Australian history. Even the coronavirus shouldn’t diminish people’s demand for telecommunications services, so expect the TPG share price to bounce back strongly once the dust settles on the pandemic.
CSL Limited (ASX: CSL)
CSL has been one of the most dependable ASX healthcare stocks over recent years, but it still hasn’t been immune to effects of the coronavirus. Since hitting a record high share price of $342.75 in mid-February, it has fallen over 8% to $313.83 as at the time of writing – and that’s after a 12% recovery during Friday trade.
The biotech giant specialises in the development of influenza vaccines as well as treatments for rare and serious diseases. It also recently announced that it would be partnering with the University of Queensland to aid in their research into a coronavirus vaccine. While this is outside the normal scope of CSL’s business, the company stated it would lend its technology and expertise.
Cochlear Limited (ASX: COH)
Despite surging 21% higher to $216.11 on Friday, the Cochlear share price is still well off the 52-week high of $254.40 that it posted prior to the coronavirus crisis. It was one of the many companies to downgrade its earnings guidance in response to the virus outbreak, but it still forecasts profit growth in the realm of 2% to 9% to between $270 million and $290 million for FY20.
Cochlear has significant exposure to the Chinese market, which led to its FY20 guidance reduction. But as the number of new infections from coronavirus drops in China, expect to see the economy there rebound quickly with the potential for Cochlear to deliver above its target profit. An earnings surprise such as this could see its share price surge back quickly to the levels seen prior to the outbreak.
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Rhys Brock owns shares of Cochlear Ltd. and TPG Telecom Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.