Saturday, May 16, 2020

Opportunities in the time of COVID-19

So recently, almost all news is bad news regarding the economy and especially in certain industries.
Mass layoffs, huge losses, and request for government bail-outs to stop companies and their associated workers from going under.

I'll leave the government policy question to others, but instead ask, "Where are the new opportunities?"

New Opportunities:

I stress the world new, because we already know many of the businesses that are thriving in this environment: Zoom, Amazon, Instacart, Gojo (Purell), Retail flour, Peloton....

Instead, what are the new opportunities?  

Some of the largest and generally smartest buyers are private equity funds, and they have recently raised huge distressed funds:

Some recent investments have included AirBnB and Expedia -- effectively a 'buy-low' of the best companies, betting that when travel recovers, the best will lead.

But, for those of us without billions of dollars to invest into these, what are we to look at?

So, here are some areas that I believe are ripe to explore:
- Retail real estate:  Many of the closed retailers will never re-open.  The retail apocalypse/mallpocalypse was already in motion, and my big names (J.C. Penney's, J. Crew) have already filed for bankruptcy.  So, what will happen to all this space in prime locations?  Well, there will soon be the deals of the century for people who can find alternative and profitable uses for the space.   

- The best of the public companies:  Follow the Silver Lake playbook, but go for the public companies which are depressed, but have models that allow them to greatly reduce costs at the moment.  For example, hotels brands are effectively OpCos, which revenue share with their landlords.  As travel dried up, they took a huge hit, but probably not as big as some people expect, because of their rev-share model, as opposed to being on the hook for a mortgage like many other companies.

- Technologies which were fringe, but now appear to be the new normal:  These need to be evaluated carefully.  Many products might have a temporary shortage (ventilators, toilet paper), but will either be too many, or overall usage is simply deferred as supply is stockpiled.  However, it does feel like a world where N95 masks and gloves will become more common.

- Go beyond demand, but try to think of any structural change to the economy which may be necessary to prepare for.  For example, if gig workers become more common, does that lead to car-sharing model where a pool of cars is used during the day by one group, and in the evening by another?  Or, does child care change in some fundamental way?  

Finally, what does this mean for our careers?  Are certain careers basically over?  And, if we do retrain, what areas are most promising?

Stay tuned.  This is moving fast.

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