The COVID-19 pandemic has reshaped the way that the business world operates. The pandemic has forced certain industries to close long-term and is still threatening their operations. If you’re an investor, there are definitely certain industries that would be smart to avoid over the upcoming months.
These are three industries that you should avoid during the COVID-19 pandemic.
There are a few reasons that it would be wise to avoid investing in the airline industry. Here are some of the most common:
- High overheard – Have you ever filled up an SUV at the gas pump and shuddered? Now imagine filling up an entire fleet of 747 airliners. And when you consider the cost to buy each airplane, the crew to run them, maintenance, and other employees it becomes apparent how expensive it is to run an airline.
- Low-profit margins – A profit margin is the amount of profit that a company earns per individual product/service sold after expenses. Because there is such high overhead and strong competition, the airline industry has notoriously low-profit margins. This means that they’re not earning a lot of profit per passenger.
- Non-essential – If there is one business that would be deemed “non-essential” by the COVID-19 rules, it’s airlines. People are supposed to be quarantined at home, not flying around the world.
These three reasons are all good indicators that the airline industry is not designed to weather a months-long shutdown. Combine this with the fact that travel is being strongly discouraged and we would definitely avoid investing in airline companies at any point in the upcoming months.
For many of the same reasons listed above, investing in cruise companies should be avoided during the COVID-19 pandemic. A few cruise lines actually got very negative publicity during the start of the pandemic due to cases being identified onboard. These cruise liners were unable to return their passengers to their destination and were under the spotlight.
Months later, cruises are still struggling. This is another industry that has an abundance of costs associated with it. This means that they are not prepared to go months without revenue.
For most of 2020, cruise lines were not even allowed to cruise to most parts of the world due to government restrictions.
The final industry we would avoid investing in during the pandemic is live entertainment. This is quite a large category but would include any companies who are involved in:
- Theaters or show productions
- Sporting events
There is still no stable deadline for when people will be able to return to live events. Even when that time comes it is likely to be at limited capacity and will hurt the profitability of these companies.
The exception to this is if the company you’re considering offers a streaming service. Streaming services are in a good position to profit off of stay-at-home orders.
We hope that you’ve found this article valuable when it comes to understanding a few industries that you should avoid during this pandemic. To get alerted of new articles when we publish them, make sure to subscribe below!