On Thursday we saw stocks continue to do something they had been starting to do the past few days in contrast to the rest of the past month of the coronavirus bear market sell-off. While the overall markets rallied moderately sectors and stocks were no longer moving in unison as they had been, whether up or down, almost the entirety of the past month. Even the major indexes saw some significant variation with the Dow up 0.95% while the S&P 500 was up 0.47% and the Nasdaq Composite up a notable 2.30%.

As I said on Cheddar News on Thursday afternoon it seems investors are realizing that not all companies face the same severity of deteriorating fundamentals and projections. Some companies are far better positioned, due to their balance sheets, to survive this crisis with ample liquidity and to avoid stock-price destroying capital-raising mechanisms or reorganizations. Other companies may actually see a benefit to some of their business lines as a result of the economic and social effects of coronavirus such as the at-home isolation of much of the United States population at the moment. Other companies, and even entire sectors like technology production and communication technologies, may benefit from both.

Not Everyone Is Going To Go Bankrupt

One of the biggest fears shedding value from the market right now is concern over the liquidity of many companies and their ability to meet cash needs to weather coronavirus. Investors pulled over $35.6 billion this week from investment-grade corporate bond funds amid this, far ahead of the $15.4 billion record last set in 2015. This is an issue particularly affecting industries such as airlines - many of which have declined well over double the markets percentage decline - which are deeply stretched for cash. It was thought to potentially be an issue for Uber which had already even before the coronavirus pandemic faced persistent skepticism over its cash flow burn until today CEO Dara Khosrowshahi stated that the company had over $10 billion in cash at the end of February, sending the stock rocketing up 38.26% by close.

The key takeaway from these moves is that investors are worried about sheer survival. Companies could not have possibly planned for such a black swan event like coronavirus, as shown by how the airline industry was spending heavily on stock buybacks just before nearly their entire industry shut down in just the span of a month, and therefore were not planning appropriate cash reserves as contingency for coronavirus and thus putting stretched, leveraged, or even just unprepared companies at sudden severe financial risk. The turmoil across the corporate bond market right now as previously investment-grade debt is suddenly being downgraded to levels previously thought unimaginable is evidence of this concern.

Raising Capital Can Come At The Cost Of Share Price - And That's What Worries Investors

Even with bailouts on the horizon for some affected industries the stock prices aren't safe. The 2008 bailouts to companies like General Motors (GM) completely wiped out shareholders as various government-terms, equity stakes, and other mechanisms resulted in the company essentially beginning again almost akin to a bankruptcy. It is not unfathomable that some of these companies may be in such dire straits that such an equity reset may happen again - and in fact, many are already calling for such.

And then comes the fear of bankruptcy itself as even the government can't, or won't, save every imploding sector. Shareholder-hostile capital dilution seems unlikely, but still possible in desperate times, at these prices for many suddenly distressed companies. Even the companies just on the line for liquidity issues still may be made to issue debt at terms they wished were far better.

"Cash is king" has been the most profitable mantra of this coronavirus bear market and will be for companies as they each struggle to make it day-by-day in reacting to the unprecedented disruptions coronavirus has brought and continues to bring. While the methods of counting current assets vary and particularly with the bond market shakeup, as investment-grade corporate debt may not truly be a slightly more risky cash equivalent anymore, nonetheless almost all the companies that are stuffed full of cash reserves are tech - Google, Apple, Microsoft, Facebook, Cisco, Nvidia, PayPal and more.

Those companies that have a true moat of sheer, hard cash will have a higher chance of being tided over from the operations disruption due to coronavirus and not need to have them resort to share-price-crushing capital-raising mechanisms. In such desperate times it is unfortunate, but the reality, that is an essential concern.

Some Companies Were Made For This

While coronavirus and the empty streets and roads it creates is apocalyptic to many industries - retail, movie theaters, restaurants, travel, energy, hospitality, etc. - it has a cushioned effect on other sectors and is even a boon to a select few. As shown below companies that benefit from people being at home tumbled with the market at the start but lately, rightly, have found some footing as the market seems to realize this may not be the end for them after all:

Data by YCharts

As shown above, many of these companies are, once again, tech.

Companies that benefit from people being at home or from people suddenly seeking to stock up on food supplies have been cushioned in their declines and some even rallied - and as shown above, many of these gains have been recent. I believe this trend is likely to continue as many stocks reach bargain levels and investors are more careful with what they buy and sell rather than just flipping over the whole table.

It's Still Going To Be Painful For A While

On Thursday night California ordered a lockdown for all 40-million of its residents. We still haven't seen any earnings or economic numbers actually post and the coronavirus testing results and unemployment claims still are only ramping it. It is clear this is still going to last a while.

In the meantime, the market seems to have slowed down on its "sell everything" mentality and is becoming more discerning. There are companies and sectors out there that are better positioned than others - with strong cash and solid lines of business - that can weather this pandemic.