Are ASX tech shares the only way to protect your portfolio against the coronavirus?
2020 has seen something akin to what Ray Dalio might call a ‘paradigm shift’ for investors right around the world. With a rampaging pandemic, the way we spend money has changed, and fast. And when we change how we spend money, it changes the manner in which every company on the ASX receives revenue. As the old adage goes, one person’s spending is another person’s income.
One massive facet of this ‘paradigm shift’ has been an acceleration of the trend towards all things digital. As most of us could barely leave the house over March and April, we had to change how we ate, how we shopped, how we worked and how we entertained ourselves. So it’s no surprise that US tech companies like Slack, Microsoft, Amazon and Netflix have seen their share prices balloon over the course of the year so far.
But what of ASX shares?
Comparatively speaking, the ASX doesn’t have as much exposure to the tech space as our friends over in the US. Lacking big names like Alphabet or Microsoft, our largest companies are still mostly banks and miners. Even the home-grown Atlassian now counts itself as a US tech company — our loss, their gain.
ASX tech shares on fire
But this hasn’t stopped ASX tech shares from receiving a lot of investor attention since March. Just think of Afterpay Ltd (ASX: APT). Its share price is up an astonishing 670% since 23 March. Or Appen Ltd (ASX: APX), up more than 100%. Maybe Seek Ltd (ASX: SEK) with 87%. Or Xero Limited (ASX: XRO) with 57%.
Meanwhile, a blue chip share like Westpac Banking Corp (ASX: WBC) is ‘only’ up a touch over 20% over the same period. Woolworths Group Ltd (ASX: WOW) shares haven’t offered too much relative upside either, with a 6.4% gain. And our largest company CSL Limited (ASX: CSL)? It’s gone backward since 23 March.
So are ASX tech shares (or US tech shares if you’re so inclined) the only way to protect your portfolio against the coronavirus pandemic?
Well, I do think the investing landscape has changed, and semi-permanently so. There’s no question that the pandemic has accelerated technological adoption. But I don’t think ASX tech shares are the only way to protect a portfolio.
Just this week, ASX gold miners like Newcrest Mining Limited (ASX: NCM) have been in the spotlight due to the price of gold breaking its all-time high. That’s one avenue of exploration to consider (no pun intended) for portfolio protection. Ditto with waste companies like Cleanaway Waste Management Ltd (ASX: CWY), which is about as far from an exciting tech stock as you can get.
It may be morbid to consider, but funeral provider InvoCare Limited (ASX: IVC) benefits from the former of the two certainties of life.
Whatever happens with the coronavirus, companies like Cleanaway, InvoCare and Newcrest are going to have solid markets with solid demand. Thus, I don’t think you need to solely chase ASX tech shares for your portfolio if you don’t wish. There’s plenty of fish in the sea!
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares) and Newcrest Mining Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares). The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. and Xero. The Motley Fool Australia owns shares of AFTERPAY T FPO, Appen Ltd, and Woolworths Limited. The Motley Fool Australia has recommended Alphabet (A shares), InvoCare Limited, and SEEK Limited. 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.
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