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Many of our users at Stock Card love investing in the companies shaping the future of humanity. Artificial intelligence, 5G technologies, and gene-editing are some of the most researched themes and collections on our platform. We support our users in their quest to invest in the future by maintaining a comprehensive database of growth potential across thousands of industries and markets. Such databases power the first box on Stock Cards' 2X2s, and our Head of LiveOps, Shama Patwardhan, is the steward of this database. When the COVID-19 pandemic hit the world, Shama took on the challenge of digesting the pandemic's impact on its potential. In this blog post, she discusses the result of her learnings and the adjustments we are applying to Stock Card's growth potential database.
What happened in the first quarter of 2020?
Currently, the world is going through a rare phenomenon. One contagious virus brought the whole world to a standstill. COVID-19 virus, also called Coronavirus, was first detected in November 2019 in China and spread globally. The first case of Coronavirus in the U.S. was found in January 2020. By mid-March, all the global economies came to a screeching halt. The properties of the virus made it more difficult to contain or monitor. The majority of businesses, manufacturing facilities, global travel, and retail operations shut down. Consecutively, panic ensued as the uncertainty about jobs and daily normalcy created growing anxiety. Governments around the world announced a "shelter-in-place" policy, and cities around the world resemble apocalyptic scenes of empty streets. There was no hum to the engine of the world's economy.
How did the world's growth get impacted?
The impact of the Coronavirus outbreak was felt differently by different industries and businesses. Some markets, such as airlines and cruises, were struck severely that the companies' survival in those sectors was and is still doubtful. On the other hand, some markets, like pharmaceuticals and digital communications, experienced a surge in demand, well-above the most optimistic forecasts before the COVID-19 pandemic. Such extreme and unexpected negative and positive impacts created the need to review the growth rates and potential of the markets, sectors, and industries that power Stock Cards, and modify them such that they represent a more informed state of forecasted growth.
Hardest hit industries: The decline in demand has severely burnt several industries. Due to the "shelter-in-place" rule, people stepped out of their houses only for essential shopping needs. This change in consumer behavior affected has hit some of the industries the most:
Highest positive impact: While some industries struggled to survive, some could barely satisfy the explosive demands for their products. Among several sectors and industries, some are benefited from an extraordinary surge in demand. Here are a few examples:
Adjustments to Stock Card's growth potential database
Stock Card's growth potential database typically includes three to five years of forecasted growth potential figures for each sector, industry, and market. However, due to the varied near-term impact of the Coronavirus outbreak, we added a new one-year projection to the database for 2020, to incorporate the effect of the impact. We applied short-term adjustment by first short-listing all the sectors, industries, and core markets negatively or positively affected by the outbreak. We then applied the appropriate adjustment factor to each one.
COVID-19 Impact Adjustment Factor
We started the process by quantifying the impact of a partial shutdown across sectors and industries. Researchers at George Mason University studied how the level of digitalization can be used to calculate and quantify the impact of COVID-19 on industries and sectors. The higher the digitalization, the lower the impact. Using the results of this research, a penalty of 2.78% for high-digitalization industries and a penalty of 5.56% for low-digitalization industries can quantify the impact of COVID-19 on sectors, industries, and markets.
Additionally, to incorporate the impact of social distancing on profoundly impacted industries, we took an additional adjustment. We reduced the resultant CAGR from the previous step by industry-specific projected decline percentage. We short-listed the markets that are profoundly impacted by social distancing such as airlines and restaurants and applied an additional adjustment factor to account for the impact. As of May 29th, 2020, we have calculated the rate based on a 3-month partial shutdown assumption.
The above two-step process resulted in a new short-term growth rate database to power Stock Card's growth potential bucket on our iconic 2X2s. Throughout 2020, we will monitor the state and the progress of the reopening of the economy. We would be revising this COVID-19 growth potential figures based on how many months the partial shutdown continues. We assumed that the new growth rates are applicable for at least one year until the economies resume their previous performance level.
The new 2020 growth potential database
The final result is a new 2020 growth potential database that we are pushing live on June 1st, 2020. The outbreak negatively impacted approximately 50 industries, and another 30 reported an unusual surge in demand. You would see the results by visiting any Stock Card page and clicking on the first bucket of any of the 2X2s. The video below shows how you can get to the revised growth of potential data on Stock Cards.
Industries and Markets affected by COVID-19