Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Rachel Winter. She is Investment Director at Killik & Co. Hello.
Rachel Winter: Hello.
Black: I'm glad we could still see each other even though we're both on lockdown.
Winter: I know. All the tech seems to be working all right so far.
Black: And something you're looking at through this is stocks that are potential buying opportunities or companies that are poised to do quite well out of this new situation. So, where would you like to start?
Winter: Yeah, absolutely. So, obviously, it's been a really, really difficult month for the market. The entire market has come down. But what we're trying to do is look at the current situation and try and pick out some industries or particularly companies that could potentially benefit from this. So, we've got three areas that we're looking at.
We've got thousands, or millions, of people in lockdown across the world. A lot of those people who have never worked from home before, and now they're having to work from home. So, any companies offering collaboration software which will help people to work from home that we think will do quite well. And you've also got millions of people who have never ever trusted or tried online deliveries or online payments. And a lot of those people have now been forced into it. And we think a lot of those people will never go back. So, online working, online payments, online deliveries, we think all of those industries will do particularly well.
So, let's start with working online. We've been buying Microsoft. So, Microsoft owns Microsoft Teams, which is one of the leading collaborative working software programs, and they've seen a huge increase in demand since we all went into lockdown. I think back in November, Microsoft Teams had about 20 million users. And as of the middle of March, they've now got over 44 million. So, that's a huge increase in a very, very short space of time.
Black: And crucially, you say there, you know, these are behaviours – once we change and embrace these things, we're probably not going to go back. So, it's not like a short-term spike in users. This is something that will continue on this situation resolves.
Winter: Absolutely. So, if I think about my company in particular, we've never ever worked from home before. And I think now we've all been forced into it. And we've shown that it does work. I think in future we will be allowed to do it more regularly. So, I think that's probably the case for thousands of companies across the world. So, I think in future, we will see much higher levels of home working.
Black: Okay. What's stock number two?
Winter: Next one is Amazon, the world leader in online deliveries. Clearly, we've got thousands of people in lockdown across the world. And a lot of those have no choice but to be ordering items, food items, online. So, Amazon is a leader here. We've always liked Amazon. We've always said that in the U.S. in particular the penetration of retail sales online is still less than 12%. So, still less than 12%. So, there's still a huge opportunity for growth for online retail. And I think the current situation is going to force that issue and make it happen more quickly.
Black: And one thing that's incredible about Amazon I think at the moment at a time when a lot of businesses are being pushed to the brink is talking about hiring another 100,000 workers.
Winter: Absolutely. So, they're one business that really is seeing a huge increase in demand because of this. And something else we like about them is that they have got their own delivery network. And we've seen that the company is currently in talks with various governments around the world to help deliver essential medical items, in particular coronavirus testing kits. So, I think Amazon at the moment is very, very well positioned.
Black: Okay. And what is our final stock for today?
Winter: Finally, PayPal. So, this is a leading digital wallet company, and I think they will be a beneficiary of people buying more things online. I personally use PayPal all the time. I think it's so much easier to use PayPal than it is to have to enter your credit card or debit card details every time you buy something online. So, I personally have been using PayPal a lot more recently. And I think that will be the case for many billions of people all around the world. Something else about PayPal – you can now use it on your app to make an in-store purchase. I think when this lockdown situation ends, I think there will be much more of an awareness of hygiene. And I think people will be quite reluctant to handle cash. And so, I think any digital wallets that can be used on a phone in a store will do better in future.
Black: And this is something again, where there could be a real permanent behavior shift, because perhaps maybe it's the younger generations that have been using an app for payment. But now, the older generations are embracing that, they too might not go back.
Winter: Yeah, I completely agree. So, I think the current situation has opened up PayPal's customer base to a much wider range of people. And I think a lot of those people will continue to use it quite heavily in future.
Black: Rachel, thank you so much for your time. For Morningstar, I'm Holly Black.
