BAILOUT: Which Stocks Will Benefit?

The United States Senate is on the verge of adopting a $2 trillion bailout to help American industries hardest hit by the coronavirus crisis.

The proposed plan includes more than $350bn in loans and loan guarantees for corporations.

Let’s analyze which industries and companies may benefit the most from this liquidity injection.

AIRLINES

The bailout’s big winner will be the airlines:

  • Passenger air carriers will get $50bn in loans, loan guarantees and a holiday from paying fuel tax
  • Cargo air carriers will get up to $8bn in loans (this includes both Fedex and UPS)

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CRUISE SHIP COMPANIES

Cruise ship companies have been battered by the recent travel restrictions, with all cruises now cancelled. Many argue against bailing out an industry who ignored the first signs of the coronavirus outbreak on its vessels and is notorious for using “flags of convenience” to evade taxes.

However, U.S. President Donald Trump remains a huge fan so they may receive some bailout money to help them offset their recent losses.

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DISTRESSED INDUSTRIES

The proposed bill plans to earmark funds to help “distressed businesses” – without clearly identifying them. Lobbyists from numerous industries are actively trying to convince lawmakers to name them in the bill but there is still plenty of uncertainty over who will get what.

Here’s what we do know:

  • The National Association of Manufacturers wants $1.4 trillion
  • The hotel industry wants $150bn
  • The restaurant industry wants $145bn
  • The International Council of Shopping Centers wants a guarantee of up to $1 trillion
  • The International Foodservice Distributors Association estimates that if the shutdown continues, the industry will lose up to $24 billion over the next three months

There is still too much uncertainty to identify potential winners but investors can prepare themselves by drafting a shortlist of companies who may receive government aid.

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CONCLUSION

There is still plenty of uncertainty over which specific industries and companies will benefit the most from this bailout.

Investors should remember that plenty of corporations who will receive government aid were already struggling before the coronavirus outbreak. Receiving bailout money doesn’t mean that all of their structural problems will magically disappear or that they will be managed properly.

Traders will relish the market’s current volatility and the bailout news will present them with mouthwatering short-term plays. However, long-term investors should, as always, perform due diligence on all the stocks mentioned before investing.

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DISCLAIMER: This is not financial advice. Do your own research before investing in any asset.

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