COVID-19 cases are on the rise in many regions around the world, including parts of the UK. As a result, the government has enacted a three-pronged mitigation plan introducing local "COVID alert levels" to properly control outbreaks.
Given the ongoing impact of this pandemic, it is critical to publicize companies that can better adapt to this “stay-at-home, work-from-home” environment. The market reaction when lockdown measures were first implemented has shown that some companies are better equipped to resist and even take advantage of lockdowns.
With that in mind, these two FTSE stocks are in a strong position to outperform if local lockdowns continue:
1. Mondi
Paper and Packaging Company Mondi (LON :), (OTC :), with a market capitalization of £ 7.8 billion (approximately $ 10.1 billion), is listed on the index.
Its activities extend to more than 30 countries and multiple industries. Mondi manages forests, produces pulp, paper and plastic films and provides packaging solutions worldwide. It has also been proactive in offering sustainable products. In 2019, revenues were € 7.27 billion (£ 6.62 billion or $ 8.55 billion).
On October 15, the group issued a trading update and announced its third quarter results. While widespread global lockdowns earlier this year caused some disruption to Mondi & # 39; s business and especially industrial sales, the company saw strong demand for consumer products and e-commerce packaging products.
Despite generally stable sales, lower selling prices and currency headwinds have impacted margins and profitability. Profit in the third quarter decreased by 13% compared to the previous quarter.
However, there are reasons for optimism in the coming quarters. Management stated:
"In corrugated packaging, demand from e-commerce and consumer applications remained strong …. Demand for Flexible Packaging (NYSE 🙂 remained resilient over the period and volumes in our paper bag business grew year on year. … It is encouraging that the demand for uncoated fine papers improved as lockdown restrictions in Europe, Russia and Southern (NYSE 🙂 Africa decreased with gradual increase in activity in schools, offices and commercial printing. "
Exports to China are also recovering since the beginning of the summer.
The industry may sound boring, but as e-commerce continues to grow, the demand for Mondi & # 39; s products and services is also likely to remain stable and even grow.
Since the beginning of the year, the stock has fallen about 8%. On October 20, the MNDI stock closed at 1,602.5p ($ 41.29 for US stocks). The current share price supports a 2.8% dividend yield. Forward P / E and P / B ratios are at 13.85 and 1.24, respectively.
2. Royal Mail
Postal and Courier Company Royal Mail (LON :), (OTC 🙂 has stood the test of time, with a history dating back to the 16th century.
RMG shares started around 231p (or $ 6 for US-based shares) in 2020. They hit a multi-year low of 118.86p on March 16, while US stocks fell to $ 2.99 on April 3. However, over the past six months, the stock has seen a remarkable recovery, with stocks now floating. at 244p (or $ 6.30 in the US).
For long-term shareholders, the recent recovery may not be good enough. Since May 2018, Royal Mail's inventory has fallen by more than 60%. Investors have been concerned about a number of issues affecting growth and earnings. Management has also been at odds with unions over changes in business practices.
On September 8, the group published its annual general meeting trade statement, which showed that total sales had increased by £ 139 million, or 33.1% year-on-year (year-on-year). The improvement was driven by a 34% year-on-year increase in package volumes. More e-commerce meant that Royal Mail delivered 177 million more packages.
As expected, letter revenues declined 21.5 year over year as 1.1 billion fewer letters were sent (down about 28% year over year).
Royal Mail currently handles more than half of all UK parcel deliveries. We expect the upward trend in parcel volumes to continue in the coming months. With a company history of about 500 years, management is also likely to take the right steps to move the group forward.
Bottom Line
The pandemic has changed consumer trends worldwide, affecting valuations and outlook for a large number of stocks. While some winners are easier to predict, others may require further research. Mondi and Royal Mail are two FTSE companies worthy of your attention.
We also like stocks of e-commerce giant Amazon (NASDAQ :), cleaning and consumer products group Clorox (NYSE :), cybersecurity provider Crowdstrike (NASDAQ :), chip giant NVIDIA (NASDAQ :), retailers like Home Depot (NYSE: ) and Target (NYSE :), Canada-based Shopify (NYSE :), whose platform allows merchants to open ecommerce sites, and the virtual healthcare company Teladoc (NYSE :), among others.
These companies are likely to see strong demand for their products and services as millions of people are expected to spend more time at home. A busy earnings season is causing volatility in the US markets. Any short-term profit taking in robust names could give long-term investors better access points to these stocks.
Finally, there are thematic exchange traded funds. Examples are the Amplify Online Retail ETF (NASDAQ :), the Direxion Work From Home ETF (NYSE :), and the iShares Virtual Work and Life Multisector ETF (NYSE :). They may be suitable for investors who prefer to buy a fund rather than individual stocks.
