Despite recent rises in the stock market, a few sectors remain stuck in the mud and some shares look as if they could move lower still. For example, I’m avoiding banks, such as Lloyds and Barclays. And I’m giving International Consolidated Airlines a miss, along with the rest of the sector.
But as one-time US hedge fund manager Jim Cramer recently mentioned, some sectors look well-placed to thrive in a world featuring Covid-19. So, I’d look for shares in those perky-looking industries, such as Healthcare, IT, Consumer Staples and Drinks.
Healthcare
It’s fair to say the market has recognised the improving prospects of AstraZeneca (LSE: AZN). A significant rerating has occurred in the company’s valuation over past few months and years. Now, with the share price near 8,750p, the forward-looking earnings multiple for 2021 sits just below 22.
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However, the firm has been punching out some impressive double- and treble-digit percentage projections for annual increases in earnings. For many years the word among the investing community was AstraZeneca had a lot of potential in its research and development pipeline. And the community was correct. New products are now hitting decent sales figures and driving the re-rating in the shares.
Indeed, the dark days of the firm’s patent-cliff headaches seem but a distant memory now that the stock is flying. But I’d still buy on dips and down-days because I believe the company has a bright future.
I’d also consider cheaper looking alternatives in the FTSE 100, such as GlaxoSmithKline and Hikma Pharmaceuticals.
Information Technology
Integrated accounting, payroll, and payments solutions provider Sage has been busy migrating its customers to cloud-based services. There’s a strong recurring revenue base and the company has long been a consistent cash flow grower.
Meanwhile, engineering, design and information management software provider Aveva has been a darling of the stock market over the past 10 years or so. Indeed, the share has multi-bagged for its shareholders. But with the forward-looking earnings multiple for the trading year to March 2021 above 30, it looks expensive. Nevertheless, this is a strong company and a robust-looking stock. I’d want to own it.
Consumer Staples and Drinks
The consumer staples and drinks sectors are renowned for producing defensive and gently growing companies with stable cash-generating businesses. This is fertile ground for finding firms capable of paying steady and rising dividends.
We can find fast-moving consumer staples providers in giants such as Unilever and Reckitt Benckiser. And I’d widen the definition of what’s considered a consumer staple to include cigarette and tobacco providers such as British American Tobacco and Imperial Brands.
Meanwhile, the FTSE 100 is home to premium branded alcoholic drinks giant Diageo, which has been a great performer over the years. It looks well-placed to shine for its shareholders in the future as well.
