It is becoming clear that investing in a post-pandemic world will require a significantly different approach. This is not a time to dogmatically stick to past strategies. The world has changed and we need to change with it.
So with this in mind, here are 3 trends that I can see emerging and the ASX shares best placed to profit.
Post-pandemic travel
Virgin Australia Holdings Limited (ASX: VAH) has shown clearly the pressures in the travel and tourism sectors. We can all see that the recommencement of international travel is still a long way in the future. Personally, I cannot see it becoming as profitable as it was in January for some time. Possibly several years or more.
However, Australia is not like other countries. During my 20 years of working internationally, it became clear that we are unique in the fly-in-fly-out arrangements for our workers. There is no way this will stop any time soon.
This may be too small to feed giants like Virgin and Qantas Airways Limited (ASX: QAN). However, in post-pandemic Australia, I believe it will favour smaller players such as Alliance Aviation Services Ltd (ASX: AQZ) or even Regional Express Holdings Ltd (ASX: REX).
More business will be local
Aside from tensions over the coronavirus itself, it is clear that the world is more unstable than it was 2 months ago. No one is even looking at the tensions created in the petroleum-dependent nations due to low oil prices. I believe these tensions are likely to exacerbate trade wars at the least. At the same time, confidence in international structures and institutes has been shaken.
Additionally, the virus has exposed many issues with supply chains. Profit levels post-pandemic are likely to take a hit as companies try to reduce the risk in supply chains.
Companies like Fortescue Metals Group Limited (ASX: FMG) have worked very hard to develop local supply chains and are well-positioned to continue operating profitably even if ore prices dip further.
Debt and inflated prices
The world has been running on very high debt levels for the past 3 decades. This has helped to push valuations very high. For example, CSL Limited (ASX: CSL) has a price-to-earnings ratio of 43.8 at the time of writing. In a strictly linear manner, this means it would take all of the earnings for nearly 44 years to pay for it. While this may be okay for the big blue chips, it isn't going to work for small to medium companies that are still overbought.
For me, this means a post-pandemic portfolio built on individual shares and their valuations, and less attention to index funds and passive investing. Index funds, in particular, buy both good companies and bad companies blindly.
So personally, this means buying good companies at reasonable prices. Companies like (say) Ansell Limited (ASX: ANN), Austal Limited (ASX: ASB) or Ausnet Services Ltd (ASX: AST).
