Give me a Molotov cocktail thanks

The end of panic?
Data from the Centers for Disease Control and Prevention shows that for people younger than 70 coronavirus is less dangerous than the flu. However, governments' response, such as lockdowns, is not reflective of that data. But the markets seem to be one step ahead of the government.

In today's Exponential Investor…

Drinking with Mrs. V
Heading to the pub in lockdown
Pick your poison wisely

Why is it that booze tastes better when you're not at home?

Our pantry is always carrying a few bottles of something. Be it red wine, whiskey, rum, vodka, port, etc.

And I'm not impartial to a cheeky Ron Zacapa and coke after a manic day on the tools.

But it's never quite as nice than when you're at a restaurant or bar. Therefore I can only conclude that alcohol taste has a correlated relationship with atmosphere.

The more "social" the atmosphere, the better the booze tastes.

It's why the first cold pint of Peroni after a round of golf with mates is always so much sweeter than a pint of it straight out the "Xtra Chill" section of the fridge.

But the sweet taste of beer, wine and/or spirits may be in danger once again.

We might all (again) be having "sad ones" at home with the company of ourselves and our better halves.

Don't get me wrong, I love a drink with Mrs. V. In fact she's way more fun to drink with than a lot (if not all) of my mates. But the social aspect of a drink is what makes the whole experience and event so desirable.

We are all social creatures at heart (even though some like me prefer the social company of less than six anyway).

What happens if we're all deprived of that freedom again though? What will you do when you're forced into lockdown again?

I know what I'll be doing. And it ain't pretty…

Going straight to the pub

If, as expected, the British government decides to lockdown the north again, I feel that the idea of a nice social drink with friends may be well off the cards.

Instead it might turn into a nice social revolt with mates. Instead of a cheeky pint of lager at the local, it'll be a cheeky cocktail… the Molotov style… lobbed at the local establishment.

Social unity will turn into social disarray.

You only need to look at how poorly the pub 10pm curfew has been going to see a glimpse of our near future.

People all spilling on to the street at 10pm. All going to the off-licence to just stock up more and have a few more in the street.

It's actually a glimpse of social cohesion, and a bit of a big middle finger to the establishment. Imagine what comes when lockdown number two comes.

Particularly for young people, they know they're not at risk of Covid-19. Therefore it's difficult for them (and admittedly me) to wrap my head around why you can crush a demographic because of something that poses them next to no risk at all.

If anything, lockdowns lead to worse health ramifications for under 40s than Covid-19 itself. But then again the government can't be seen to be discriminatory against any sub-section of the community, regardless of the damage it does to the wider population.

The other considerable damage that locking down any part of the UK will do is of course the economic damage. In particular, the hospitality and leisure retail sectors.

The pubs and restaurants copped it in the neck during the first lockdown. It's likely that in a second lockdown it will be the death knell for many more.

I've said it before, there's not too much more quintessentially British than popping to the local for a cheeky pint. Take that away and you ask for blow-back.

Blow-back from the industry, from the patrons, from the country.

When it happens again, and I do fear that it's a "will" not an "if", there's one thing I know I'll be doing the minute it's officially announced….

I'm going to all the pubs.

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The most expensive round of all time

If I were to rock up on the doorstep of my local in the event they're shut down, they won't let me in. I know that. They wouldn't be able to wear the massive fine if they get busted letting patrons in for a drink.

But while I can't go to a pub physically if they're shut down, I can go to the pub stocks listed on the London Stock Exchange.

If pubs and restaurants are locked down again, that's exactly what I'm going to do. I'm going to head to the market, gather up all the pub and restaurant and hospitality stocks, and I'm going to start buying the good ones.

It might end up being the most expensive round at the pubs I've ever had. But in the long run, I think it'll be the smartest round I'll ever make.

How old is the United Kingdom?

I don't know, bloody old. I'll Google it later.

In the very long time that the UK has been in existence, has there ever been a period where there have been no pubs?

I doubt it. I'm going to say no.

Therefore, I can quite comfortably assume that in the next thousand years and then some, there will always be pubs in the UK. I doubt you'd disagree with me on that one.

Of course, some individual pubs will come and go. But there will always be pubs. Also there's a pretty good chance there will be pub stocks to invest in.

If they all get hit by another industry lockdown, then I believe we'll see some bargains in pub stocks that we haven't seen since… March 2020.

Not all of them will make the most compelling case to buy. That's why you need to go through them all like I will be.

You need to look at all aspects though, not just blindly punt on any old pub stocks.

Think about their cash flows before, during and after this year. Look at their balance sheet. Look at their debt obligations, when they fall due and how they've negotiated them during all this.

Consider more lockdowns and how they'll manage. But also think about where they could be in 18 months' time, three years' time, ten years' time.

That's when I think you'll see what I see…

A UK where we're all happily having a cheeky one at the local just like we should be. And if you've made the right call during the weird times we're in now, a whole packet load wealthier because of it.

Regards,

Sam Volkering
Editor, Exponential Investor

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Selasa, 29 September 2020