“Stay at home” stocks are a rare winner in today’s market bloodbath. But which are the best?
Looking for bright lights within the current market meltdown is a tough task but stay-at-home stocks like Netflix (Netflix Stock Quote, Chart, News NASDAQ:NFLX) and Electronic Arts (Electronic Arts Stock Quote, Chart, News NASDAQ:EA) may be your best bet. So says Middlefield Capital’s Shane Obata, who likes Activision Blizzard (Activision Blizzard Stock Quote, Chart, News NASDAQ:ATVI) best among the gaming names.
Stocks across the board opened lower on Monday as the rout continues in the wake of the coronavirus pandemic. As economies around the globe grind to a half and governments scramble to support businesses and industries on the verge of collapse, there appear to be no safe spaces to park you money — if you have any, that is.
But while whole sectors keep burning, gaming and streaming stocks are going against the grain. In comparison to many indexes which lost upwards of 30 per cent in recent weeks, Netflix’s share price dropped only 14 per cent at its worst and is now down just five per cent from its most recent high. For the year, NFLX is still up nine per cent.
The scene is similar in gaming where stocks are down but noticeably less so than in other sectors. Electronic Arts is down 14 per cent for the year, Activision Blizzard is down seven per cent and Take-Two Interactive (Take-Two Interactive Stock Quote, Chart, News NASDAQ:TTWO) is down 14 per cent. Obata says the sector play is a good one here.
“These are stay-at-home stocks,” said Obata, director of investments and portfolio manager at Middlefield, speaking to BNN Bloomberg on Friday. “What are people going to do when they're cooped up inside? They’re probably going to play more video games, they're probably going to stream more music and watch more Netflix. Those kind of things.”
“So, in terms of near-term tailwinds, or at least not near-term headwinds, we like these stay-at-home stocks. And we would say that gaming is one of those areas,” Obata added.
“We’ve owned the major US gaming stocks. We’ve owned Nintendo. We like Nintendo and we think the Switch is a great product.”
“I would say Activision is probably our favourite stock in the US. But we have owned Electronic Arts in the past and also Take-Two,” Obata said.
Netflix chief content officer Ted Sarandos recently spoke on CNN to insist that while the company was temporarily shutting down production of original series like “Stranger Things” and “The Witcher” during the current COVID-19 crisis, viewers won’t be lacking in new content anytime soon, as the company has a backlog of already-made shows at the ready.
“What’s happening now is we work pretty far ahead with delivering all the episodes of our shows at once,” Sarandos said. “So there will be no disruption over the next few months, maybe later in the year as physical production is not operational.”
Sarandos said he hopes having Netflix to watch will help people “feel a little less isolated while we are being physically isolated.”