Markets & Research
Like many other people who have adapted to working from home during the coronavirus, Cheryl Frank has become a master of improvisation.
Capital Group is among the hundreds of U.S. companies whose employees have temporarily set up shop at home as a precaution during the COVID-19 outbreak. Face-to-face meetings, collaborative research and portfolio management have all moved online.
That’s meant a new daily routine for Frank, a portfolio manager and equity analyst with Capital Group Private Client Services. But rather than dreading those changes, she’s embraced them, taking the opportunity to exercise when it’s convenient for her, work in a way that better suits her rhythms and even eat a little healthier.
“I’ve been excited to take this chance to rethink my schedule and daily priorities,” Frank says. “I look at everything in life as an opportunity rather than a challenge.”
The positive changes aren’t just personal, though. Working from home has provided a variety of professional perks. She’s meeting more management teams and talking with them more often. And the flexibility of her schedule has helped her better stay on top of this year’s turbulent events.
One of the biggest changes Frank had to make was a simple one: She needed a new workspace if she was going to work from home.
“I had to make some major upgrades,” she says. “A new monitor, keyboard, mouse, headset, webcam, ring light and a new printer. I brought in a plant and rearranged the furniture. It’s not perfect, but it’s very comfortable.”
There are also a few creature comforts. “That’s one upside, the Peloton in my office,” she says. “And I have the most amazing homemade salad for lunch every day. I use ingredients from my weekend trip to the farmers market.”
Once Frank settled in to working from home, she found that she was communicating a lot more than she used to. “I’m guessing I’ve done 20% to 40% more management meetings during this time period than I would have done in a normal year,” she says. Part of that stems from less travel — the time once spent in airplanes and rental cars can now be spent working with people. “Things are changing so fast that we have a lot to talk about from week to week. Having more small data points has given me more context than I would during a normal environment.”
That higher flow of information has translated directly into investment decisions. Frank points to a high-quality company that was forced to cut its dividend during the pandemic. “We had a good context of what this company was facing because we were communicating so closely with them. Given their situation, we understood what their options were. We anticipated that their best decision would be to cut their dividend,” she says. “I sold it from income funds before the cut came. After that, we were able to buy it in nonyield funds when they raised equity capital.”
That communication happens inside Capital Group, too. In the early days of COVID-19’s spread in Asia, Capital Group offices in the East were able to share insights about lockdowns, working remotely and the economic effects they were seeing. This provided “an incredible warning” of what the U.S. could expect from a COVID-19 infection, Frank says.
The portfolio manager is careful to warn against drawing a one-to-one correlation between the Asian and U.S. COVID-19 experiences. Countries like China and South Korea took much more drastic action than what was feasible in America, so the disease is likely to last longer in the U.S.
But even then, Frank says, “talking to people in Hong Kong really helps me believe that we’ll come out of this, that there’s another side.”
Even in the best-case scenario, Frank expects COVID-19 to stay around for at least a year. It takes time to develop and produce a functional and well-tested vaccine, and many people will likely be cautious as they return to everyday life. And there’s the possibility of a resurgence that demands a second shutdown, which could add another layer of economic damage to what we’ve already suffered.
Trends are already emerging from the lockdown. “The falloff in March was this amazing moment of opportunity where everything was on sale,” Frank says. “But there are also opportunities in some companies that benefited from the shutdown.”
She points to a few places she’s moved her portfolios in recent months: “I opportunistically added to small caps that were hit even harder by illiquidity. I added to video games in early March, and I’ve been adding insurance companies that suffered due to fears that they would be liable for costs associated with business-interruption losses.”
Frank also trimmed in some places. Early warnings around COVID-19 and the price war between Saudi Arabia and Russia gave her a chance to exit energy before the sector really suffered. She also cut hotels early based on Capital analysts’ forecast that travel would be much more deeply affected than expected.
And she believes there are more opportunities. For example, grocers received a boost during the lockdown as shoppers sought out basic supplies. “Think about walking into your grocery store the first couple days of the quarantine — entire meat departments sold out. It was a wonderful revelation of what the average American eats for comfort food,” Frank says. “A lot of these companies have been priced on the assumption that they’ll have this one big quarter. But the fact of the matter is that we’re going to be indoors for a long time.” With the restaurant industry taking a large hit, people will be eating at home a lot more in the next several months — even if they don’t want to.
Smaller habits have changed, too. Professionals working remotely are likely making more coffee at home. “I now have two different coffee machines, and someone just sent me a pour-over kit,” Frank says. “I have seven different ways to get coffee, and I’m going through pods like crazy. People are developing new habits. Maybe they won’t go to a chain as much after this.”
For herself, Frank says she’s excited to take advantage of some of the unexpected freedoms this period has offered. “I want to keep this flexibility when our world goes back to normal,” she says. “Before this, I never worked from home. Now I have this great setup. I can see myself working from home more often.”