The digital economy was already pounding the physical economy before we experienced COVID-19......the best example is seeing the new Tesla auto dealership opening in Danvers, Massachusetts where the old Sears Automotive stood for 40 years. A further example is Macy’s continuing struggle to keep up with the digital success at Amazon and Walmart. A physical location clearly is a liability for many businesses these days. Then the health problems of Covid-19 descended on these companies. It was like the knock-out punch for many companies just when they had thought it was as bad as it could get. Macy’s and many other stores deemed non-essential simply closed. The bailout package in Washington was described by famed investor Bill Miller as the “Amazon Enhancement Act”. Like Amazon needed any help.
The point to be made here is that the events over the last three weeks have highlighted many of the advantages of the digital economy and its lack of reliance on the physical and people – which are large liabilities for brick-and-mortar companies during this health crisis.
So who are the winners in this phase? Adobe (digital everything experts), Service Now (automation experts), DocuSign (legal transactions without meeting), Apple, Alibaba, Mercadolibre (I need to communicate with the world at a distance) Amazon (just order and it comes to the door), Salesforce.com (I need to stay connected to all my employees), Sony (I am home and need to be entertained), CDW and Nvidia (masters of all digital equipment), eBay (sell anything without meeting anyone), Alphabet/Google (find it without talking to anyone), Rockwell Automation (have your products assembled by robots that do not get sick or scared), HDFC Bank in India (bank and pay people without meeting them), Tesla (a digital car – drive one and you will understand). All these companies are in Cabot’s equity portfolio that invests in equities directly. There are many other digital-oriented companies shining today like Amazon, Cisco, Microsoft, Accenture, PayPal, Netflix, and Cognizant to name just a few. This crisis has simply acted to accelerate our move toward many digital companies and new technologies.