Four surprise stock market winners to buy in a second lockdown

Virus cells and arrows pointing upwards
Virus cells and arrows pointing upwards

When investors think of lockdown winners, stocks such as online supermarket Ocado and video conferencing firm Zoom tend to be the first to spring to mind. But there have also been some less obvious beneficiaries.

Online dating sites, pet shops and craft retailers have all received a big boost this year, as people got bored or lonely while stuck at home. Selecting companies not on people's radars could provide investors with far better returns in the long run when everyone else catches up.

Here we take a look at the surprise coronavirus stock market winners that could continue to do well in a second wave.

Match Group

Online dating giant Match Group owns brands such as Match.com, Tinder and Plenty of Fish. In 2019 it had almost 10 million users globally. A number of its sites and apps adapted to the pandemic by introducing features such as video dating and between April and July the group’s revenues grew by 12pc, beating analysts’ expectations.

James Thomson, manager of the Rathbone Global Opportunities fund, holds Match Group in his portfolio. He said: “During the early days of lockdown, engagement with online dating sites fell, suggesting that users were wondering what was the point of finding a match online if they couldn’t meet.

"But, as people adjusted, engagement grew rapidly and daily usage of Tinder by women under the age of 30, for example, jumped more than 40pc in the months after lockdown.”

Although some dating sites are free, Match’s brands make money by offering “premium” paid features such as access to a dating coach. Mr Thomson added that as countries entered second lockdowns and opportunities to meet people in person were postponed, online dating would increase.

Pets at Home Group

Another beneficiary of the rise in loneliness was pet shops. One, Pets at Home, has said it will make more money than expected this year as people rushed to buy dogs and cats to spend lockdown with.

The firm had already been showing strong growth before 2020 and was considered an essential retailer so able to stay open during the virus’ peak, said Georgina Brittain, manager of the JPM UK Smaller Companies fund, which owns the stock.

“It is involved in the entire life cycle of pets, and runs loyalty clubs for its cat and dog owners, with almost six million active users. This active membership not only promotes brand loyalty, but also provides Pets at Home with significant data,” she added.

Etsy and Pinterest

Online marketplace Etsy sells home-made crafts and gifts. Between January and April sales rose by 35pc and the number of active buyers and sellers using the sites jumped by 16pc and 26pc respectively.

Demand for craft materials and items such as hand-made masks increased as the pandemic went on and Etsy sold 12 million in April alone, worth $133m (£101.5m).

The firm was growing rapidly before coronavirus. Revenues rose by 85pc to $818m between 2017 and 2019. The stock is owned by the MFM Technology fund.

Another creative company that has grown its user base during lockdown is Pinterest. The site allows users to create ideas boards for craft projects and makes its money via advertising. Pinterest had 416 million monthly users in July, up from 367 million in March.

This summer the company said it expected revenues during the second quarter of the year to rise by more than 30pc. It is owned by the Artemis US Smaller Companies fund.

Darius McDermott of Chelsea Financial Services, an advice firm, said:  “Zoom, Amazon, Ocado, Netflix have already enjoyed big surges in their share prices. They should continue to do well in a second lockdown, but are unlikely to see share prices rise to the same extent.

"These niche and less likely winners could do a lot better this time as change becomes more permanent.”

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