With the Coronavirus spreading around the world, the major US and world markets have moved lower in a big way. I recently noted why these moves lowered occurred. While I don't believe at this time, we have enough information to accurately determine if this new virus is going to be a Black Swan and crash the world economies. I do believe we should all start thinking about what we are going to do if the situation does get worse.
With that in mind, let's take a look at a few industries and ETFs that you may want to avoid investing in if the Coronavirus situation does continue to get worse.
The travel industry would be high on my list of businesses to avoid right now. The US airlines have already stopped flying to China and have announced plans to cut flights to other profoundly affected countries around the world. Hotels also are seeing lower fewer guests as tourism and business travel have rapidly declined as travel restrictions have been put in place by both governments and corporations. Think Marriott, Southwest Airlines, Delta, even Boeing.
And of course, we shouldn't forget about the gaming and casino industry. While these stocks could be lumped in with the Hotels, most people consider this industry to be separate from the rest of the leisure industry. Think MGM Resorts, Wynn Resorts, and Las Vegas Sands.
The next types of business we should be looking at are those that operate in very public events. Think big concerts, political rallies, sporting events, or even just festivals. We have already seen several big events such as marathons, trade shows and conferences canceled due to the fear of spreading the virus. Large gatherings of people are not likely going to be very 'popular' events in the coming months if the spread of the coronavirus continues. Think Live Nation Music, Madison Square Garden's Company, or even the World Wrestling Entertainment Inc.
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Another area to look would be amusement parks, ski resorts, and even movie theaters. The types of companies that are open for business every day and unlike sporting events or concerts which draw massive crowds in very tight areas, these businesses still attract a large number of people in rather close proximity. Think Walt Disney, Six Flags, Vail Resorts, and AMC Entertainment.
And finally let's not forget about who is feeding all these people who have left, or in this case have not left their home. The restaurant companies are also likely going to get slammed if we see quarantines or even just fewer people wanting to leave their homes for fear of contamination. Think McDonald's, Starbucks, Chipotle, Darden Restaurants, YUM! Brands, and even companies like US Foods Holding and Sysco Corp. who supply these restaurants with the product.
ETFs such as the Invesco Dynamic Leisure and Entertainment ETF (PEJ), the ETFMG Travel Tech ETF (AWAY), the VanEck Vectors Gaming ETF (BJK), the First Trust NASDAQ Food & Beverage ETF (FTXG), and the John Hancock Multifactor Consumer Discretionary ETF (JHMC) would all be the types of ETFs that I would start considering what to do with if the Coronavirus continues to spread rapidly throughout the United States.
The ETFs I mentioned hold in different forms most of the companies and or types of companies I mentioned above, which will be the first companies hurt by any sort of government or even corporate quarantine orders or just widespread mass fear of being in public and possibly being in contact with someone who is infected with the Coronavirus.
In the next part of this series, I will discuss some of the Exchange Traded funds that you may want to consider owning if the virus continues to spread and the situation worsens.
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor did not hold a position in any investment mentioned above at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
One thought on “5 ETFs To Avoid Because Of The Coronavirus”
Great article! I would love to know more on this subject. Maybe an alert if and when the fed goes to congress to get permission to buy equities! Thanks, Scot
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