The All-America Research Team: The Crisis Responders
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The All-America Research Team: The Crisis Responders


On everything from the future of airlines to the potential of Covid-19 vaccines, these are the experts investors looked to for answers.

It was, in the words of airlines analyst Hunter Keay, “the worst crisis in the history of the industry.”

The coronavirus pandemic dealt a devastating blow to airlines, among other consumer sectors, as their customers went into lockdown and revenues dried up overnight. In the restaurant sector, Hall of Fame analyst John Glass says it’s been “the most challenging period we’ve ever had in terms of forecasting.”

Adds the Morgan Stanley managing director, “Essentially, you had to take all the work you had done year-to-date and throw it out.”

As Covid-19 cases mounted in the U.S. and abroad, sell-side analysts were suddenly bombarded with questions about the industries at the center of the economic and public health crises. Some, like Glass and Keay, had the impossible task of predicting the future of companies that had been completely disrupted. Others, like pharmaceuticals analyst Umer Raffat and telecom researcher Tal Liani, watched investor demand surge for their stocks, which were seen as part of the solution to 2020’s biggest challenges.

Below, five crisis stars share their views on some of the sectors changed by the coronavirus pandemic — for better or worse.

John Glass, Morgan Stanley

Consumer — Restaurants (No. 1)

How has Covid-19 impacted the sector you cover?

It turned the industry on its head. 

Covid-19 was initially believed to be the worst thing that could ever happen to an industry like restaurants. There was a significant amount of doubt about the future for these businesses.

What’s happened since then is investors have gone from thinking it’s the worst thing to maybe it’s a positive catalyst for the industry. Restaurants were forced to make the tough decisions and quickly pivot.

The restaurant industry comes out probably stronger than it went in. Digital adoption has been accelerated by years in a matter of months. We’re not out of the woods yet; sales are still down, but off the bottom, sales are improving. Consumers have proven they want restaurant food one way or the other. At least for larger chains, many of these may end up being stronger.

How has Covid-19 impacted your job as an analyst?

Overnight we went from stock analysts to business analysts. Historically, we’ve cared about balance sheets and cash flows, but they weren’t [our] primary focus. We cared more about earnings. It really was a different job. Essentially, you had to take all the work you had done year-to-date and throw it out. And obviously we’re all doing this remotely, so there’s added layers of stress.

I think we’re now back to what’s more normalized, but there’s still a task ahead. How do you forecast 2021? How do you sort out those that did well in ’20 and whether they will do well in ’21? How fast can adversely impacted restaurants come back in ’21? 

This is the most challenging period we’ve ever had in terms of forecasting. You can’t just take last year’s trends and extend them out — there’s just so many more open questions.

Which stocks are you watching most closely? Why?

Of the names early on that we were recommending, some of the names that ended up being pretty good were Domino’s and McDonald’s.

Now we really have to think about later recovery stories: How is Starbucks going to unfold as people go back to work — or don’t go back to work? How is Domino’s going to lap their significant increase in sales in 2020 in 2021?

I don’t think there are any stocks I can say I don’t need to focus on. Whether or not it did well in ’20, we still have to worry about how it will do in ’21. Everything matters always right now.

What will your sector look like after the pandemic is over?

I think there could be more significant changes over time. What is the real estate landscape going to look like? Are there going to be a lot more available sites, and will that provide growth opportunities? What are formats that need to change? If you were focused on urban customers, do you need to focus on suburban? Do you need the same amount of dining rooms? Do you need separate facilities for delivery or takeout?

It has been said Covid-19 didn’t change things, it just accelerated changes that were already occurring. Consumers were already consuming more restaurant food off-premise. That’s been accelerated. Yes, people will still gather in restaurants, but there will be more demand for other sources, whether it’s off-premise or delivery or the ability to digitally order your food.

We haven’t seen it yet, but will new virtual-only competitors emerge? Traditionally, when a new competitor started you could see them coming because they would open one restaurant, then another, then another. Now brands have potential to emerge overnight. Will competition be more agile?

If a client needed to know one thing about your area of coverage, what would it be?

People still gotta eat. 

I don’t think demand ultimately is being destroyed here. Restaurants serve a role; it’s how they serve that role that’s different. But the function of restaurants is not going to fundamentally change; people want to eat food not prepared by themselves. This industry may be stronger, not weaker, as a result of the pandemic.

Hunter Keay, Wolfe Research

Consumer — Airlines (No. 1)

How has Covid-19 impacted the sector you cover?

It’s been devastating — the worst crisis in the history of the industry. It’s worse than 9/11 and the global financial crisis combined. The industry has seen shocks to the system before, but nothing like this.

It really has undone ten years of productive growth and what a lot of people considered at the time to be very smart management decisions have completely come undone in a matter of six months. And the stocks reflect that.

How has Covid-19 impacted your job as an analyst?

I travel a lot less — which as an airline analyst is certainly interesting.

It changed the way I think about stock recommendations. We still try to stay focused on the long term, but realized we live in a world where the duration of these investments and holding periods have become incredibly short-term–oriented.

Also, unfortunately, it has made me focus on a lot more uncontrollable factors, like politics and vaccine progress — things that are external. That always makes the job less enjoyable when you are forced to consider so many factors that are totally out of control. It makes your role as a fundamental analyst less relevant. People don’t want my opinions on politics and vaccine progress; they want my opinions on balance sheets and cash flow — and that’s a secondary consideration right now.

Which stocks are you watching most closely? Why?

Certainly American Airlines. 

They are perceived by most investors to be the tip of the whip — if things get a little better or a little worse, their stock is getting a lot better or worse. There’s a lot of short interest in the name; it’s a very liquid stock; they were underperforming on most metrics going into the pandemic. It’s piqued the interest of investors on a potential turnaround story: The pandemic is either going to make them a lot better, or it’s going to be the final blow. Really, it’s a fascinating company to cover, because it embodies everything going on in the airlines industry.

In terms of the stock I’m most optimistic on, I would say it’s probably Copa Airlines.

What will your sector look like after the pandemic is over?

It’s going to be saddled with about 40 percent more debt than it had prior to the pandemic. The prospects of paying that debt down are probably going to be measured in multiple-year time frames. The entirety of the next business cycle will be consumed by trying to chip away at this debt, which is a fairly depressing thought.

I think there’s going to be a certain amount of demand destruction that’s not going to come back, and there’s not much airlines can do. You’ll see an evolution in the airlines’ business model. You’ll see certain airlines more clearly pursuing certain types of customers, whether it’s based on where they live or based on travel habits. You’ll see industry carved up more clearly. 

The reality is the industry can’t get that much smaller, just because of the sheer amount of debt they’ve raised that has to be repaid. There’s a certain amount of raw dollars that have to be generated that airlines are going to need to fix their balance sheets.

If a client needed to know one thing about your area of coverage, what would it be?

This industry is generally at its best when the challenges are the greatest — but there is a limit to that statement. The shock to the demand has been incredible. It’s been absolutely devastating.

Usually the way the industry works is the recovery is W-shaped. There’s probably going to be a pretty big W in here, and I’m not talking about what we saw this summer. I’m talking about a big W. We saw this after the global financial crisis. It took a modest recovery followed by another mini shock that really drove the industry to restructure and improve itself. There was a period of pain in 2011 that had to occur for airlines to really understand that this problem is not going away.

I don’t know what that second hit is going to be — it could very well be something completely exogenous. In 2005 it was Hurricane Katrina.

You really got to be careful with recoveries because history suggests there could be a pretty big false start. So you should plan accordingly.

Tal Liani, BofA Securities

Technology, Media & Telecommunications — Telecom & Networking Equipment (No. 1)

How has Covid-19 impacted the sector(s) you cover?

Networking and cybersecurity are two segments that were impacted the most from the work-from-home migration. Consumer traffic spiked about 30 to 50 percent, driven by family Zoom sessions, Netflix, and other such video services, and employee traffic also increased. This spike has created strong demand for networking gear to support the sheer growth in bandwidth requirements, but also demand for specialty equipment that enables employees to securely connect to the office, like firewalls and application delivery controllers. If, before the pandemic, network managers had to manage traffic generated within a single building in midtown New York, now they have to bring in traffic from 6,000 homes that are widely dispersed geographically all along the Northeast coast. 

In addition, Covid-19 expedited processes of migration to the cloud. In the first wave, service providers like AT&T and Verizon purchased new equipment as well as utilizing existing capacity of equipment already installed. Yet after a few months, they put forward plans to utilize cloud-based solutions that are more suitable for a work-from-home environment. 

How has Covid-19 impacted your job as an analyst?

On a personal basis, I had to extensively use video conferencing solutions that replace the face-to-face meetings with corporates and investors. It has increased my efficiency, and the production of reports and ideas went up dramatically. My analysis didn’t change, as my covered companies adapted quickly to the new situation. Most companies migrated their quarterly conference calls to Zoom sessions. I had more free time to increase the frequency of contacts with the corporates and clients, and in general, outside of the social aspect of work-from-home, my work efficacy only improved.

Which stocks are you watching most closely? Why?

Covid-19 expedited the move to the cloud, and related stocks appreciated in value substantially. 

Cybersecurity names like Crowdstrike and Zscaler are benefiting from this trend, and their valuations increased accordingly. The interesting part, however, is related to 5G. 

Covid-19 had a negative impact on carrier spending, and 5G system vendors like Nokia, Ericsson, and Commscope faced general pressure, mostly stemming from their pushing out deployment plans. Nevertheless, 5G is a key investment area for the service providers, and we expect to see spending recovery next year, benefiting the stocks in our 5G basket: Qualcomm, Nokia, Ericsson, Commscope, and, to a smaller extent, Amdocs.

What will your sector(s) look like after the pandemic is over?

We don’t think there will be a major change in our views post-pandemic. The cloud migration, which was expedited by the pandemic, is a secular trend that has tremendous financial benefits to enterprises. While the pandemic drove customers to take a decision and start migrating workload and services to the cloud, the change itself is independent of the pandemic and will likely stay at the current pace. We also believe that 5G, cybersecurity, and migration to software (from hardware) are long-term secular trends, and systems which enable these migrations will continue to see superior growth rates. The one risk we are highlighting is the valuation risk. Twenty-twenty was surprisingly a good year for the vendors that enable cloud migration and vendors that benefit from work-from-home in general, and the valuations are high in comparison to recent history. 

If a client needed to know one thing about your area of coverage, what would it be?

Be contrarian. It pays off in the long run. And to apply it to the current time: We find more value in neglected 5G stocks [that] could benefit from an upcycle in the coming years than high-flying 25x revenue stocks that already have high street expectations.

Umer Raffat, Evercore ISI

Health Care — Biotechnology/Large-Cap (No. 1)Health Care — Pharmaceuticals/Major (No. 1)Health Care — Pharmaceuticals/Specialty (No. 1)

How has Covid-19 impacted the sector(s) you cover? 

Perhaps more important, the progress made by biopharmas on vaccines and therapeutics enabled the industry to finally find itself mentioned on a positive note in media and policy circles after a very long time.

How has Covid-19 impacted your job as an analyst?

As a therapeutics analyst, tracking Covid vaccine and drug data created an entirely new therapeutic area to track. In addition, [the] biopharma industry benefited from fund flows during Covid, which created an unusual amount of capital raises and new offerings, thereby creating a substantial increase in workload from an ever-expanding coverage universe.

Which stocks are you watching most closely? Why?

Pfizer and Merck for Covid vaccine. Eli Lilly and Gilead for Covid therapeutics. Biogen for a possible disease-modifying drug approval in Alzheimer’s.

What will your sector(s) look like after the pandemic is over?

I expect more innovation in the vaccines space — and we’re already seeing early signs of increased development in respiratory viruses beyond Covid, starting with RSV [a common respiratory virus].

If a client needed to know one thing about your area of coverage, what would it be?

The sector thrives on innovation, and there is an unusual convergence of scientific advances and capital into biopharma.

A.J. Rice, Credit Suisse

Health Care — Health Care Facilities & Managed Care (No. 1)

How has Covid-19 impacted the sector you cover?

At the beginning of the year, we were worried Covid-19 would cause extra costs for managed care companies, but it actually caused people to defer procedures. So all year long, managed care companies have been looking to do what they can do to be good corporate citizens.

On the flip side, the providers have experienced people not wanting to go to facilities. In the second quarter we saw as big a dip in utilization as we’ve ever seen covering the space for 20-plus years. It’s on the rebound, but it’s had quite the impact and there’s been economic spillover.

How has Covid-19 impacted your job as an analyst?

Back on September 11, 2001, I was at Merrill Lynch and we were across the plaza from the World Trade Center. We were knocked out for three months before we could [get] back.

This was sort of déjà-vu all over again. 

Having that experience, I remembered what clients wanted: the ability to get in touch with you, even when it wasn’t easy. It just went from a local issue to a national scale, and we pulled all those things off the shelf and have continued to just stay in front of clients and, as the world has evolved, try to be responsive as possible.

Which stocks are you watching most closely? Why?

Certainly, the most interest has been on the managed care names in general. I find in these types of environments people tend to gravitate in times of uncertainty to what they perceive to be the biggest and best. That’s led people to focus on names like UnitedHealth this year.

There’s also companies that are in secular growth areas that are somewhat immune from the economy. Names like Humana, which is the closest thing to pure-play Medicare.

What will your sector look like after the pandemic is over?

In managed care they’re trying to give back the upside they’ve made on the pandemic in the form of premium relief for customers — and they’re trying to contain that to this year, so if they look at 2021 it can be as normal as possible. They’re thinking about what the vaccine is going to look like, what therapies are going to look like. They’re trying to position their companies to get back to normal dynamics, with the senior population being a driver of growth. These guys are part of the answer to the problems of rising medical costs.

For the providers side, we have some areas like nursing home care that have really been impacted. All the bad publicity has made people averse to going into nursing homes, and there’s a question: Will it recover? The flip side is it’s really helped home health, because people are looking more at how we can provide some of the care we’ve provided institutionally at home. There are some sectors that face long-term challenges and some that face long-term opportunities.

If a client needed to know one thing about your area of coverage, what would it be?

At the end of the day, having lived through a bunch of these external shocks, it’s always best to focus on the high-quality names and assume a reversion. Extremes seldom happen; the worst-case scenarios don’t persist for very long. This is a very resilient sector that has a lot of secular growth to it.


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