We shouldn't think of how COVID-19 is affecting the stock market in monolithic terms because the opportunities and risks are very different at the company level, says Sammy Simnegar, portfolio manager of Fidelity® Magellan® Fund (FMAGX).
No company is entirely immune from an economic slowdown, Simnegar says.
However, he believes Microsoft (MSFT)—the fund's largest position at the end of May—is resilient. Microsoft has 2 main businesses—its Office software suite and its Azure cloud-services operation. Because Office and Azure help customers to be more productive and competitive, he believes spending on these products is not likely to be hurt much by an economic slowdown.
Amazon (AMZN)—his No. 3 holding—is another name he thinks could continue to take market share during this uncertain time. The company's logistical advantages allow it to ship essential items to Amazon Prime customers with same-day shipping, Simnegar says, noting that few companies can replicate Amazon.com's breadth of selection and speed of delivery.
Large media and entertainment holdings in the fund as of the end of May included Facebook (FB) and Google-parent company Alphabet (GOOG). Simnegar believes usage of these services has increased among many customers since they started sheltering at home due to COVID-19.
Other top holdings included credit card companies Visa (V) and MasterCard (MA), as well as Home Depot (HD). The first two continued to ride the strong secular trend toward electronic payments, while Home Depot has benefited from customers who have spent more time in their homes and, therefore, have dedicated more money toward home improvement.
In comparison, movie theaters, catering businesses, and sit-down restaurants have been hit very hard, Simnegar says, adding that he thinks it will take time for many people to feel comfortable attending social functions and going into theaters, even after social distancing rules are lifted.
Similarly, there could be a semi-permanent shift toward less business travel that could last several years, he says, largely due to the success of companies that have been forced to use videoconferencing in place of in-person meetings since mid-March.
"This is the kind of analysis I've been running through with our research team, as we try to identify the potential 'winners' and 'losers' in a post-pandemic world," Simnegar says.
Fidelity® Magellan® Fund held securities mentioned in this article on May 31, 2020. As of this date, these companies accounted for the following percentages of fund assets: Microsoft, 6.17%; Amazon.com, 4.76%; Facebook, 2.88%; Alphabet, 4.14%; Visa, 2.10%; MasterCard, 1.83%; and Home Depot, 1.79%.
Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.
Past performance is no guarantee of future results.
Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917