“All happy families are alike; each unhappy family is unhappy in its own way.”
Russian novelist Leo Tolstoy’s famous quote about families could have been written about the markets.
Happy bull markets are all alike; each bear market is unhappy in its own way.
Wall Street has its own clichés about this, too. In the bull market, “the rising tide lifts all boats.” In a bear market, certain stocks outperform – and even blast higher – while the market indexes are tanking. And it’s been interesting to see how this current bear market differs from, say, 2008.
In 2008, the best performing stock in the S&P 500 was Dollar Tree (DLTR). The discount retailer posted a gain of 61%, twice that of the No. 2 stock, Vertex Pharmaceuticals (VRTX). Below you can see how it compared to the rest of the S&P 500:
Now here’s the current one-year chart. As you’ll see, DLTR struggled when the market was at its highs…and got dragged down even further in this bear market:
The reason for Dollar Tree’s weakness is clear: The United States, like much of the world, is locked down to avoid further spread of the COVID-19 coronavirus. While its Dollar Tree and Family Dollar stores remain open, sales in “discretionary categories” are down, and supplies are running low – leading DLTR to join many other retailers in withdrawing its first-quarter guidance. (Vertex Pharmaceuticals, by the way, is up 21% in the last three weeks.)
To stay on top of the supply-chain disruption, Dollar Tree announced that it is “temporarily suspending online ordering in order to keep the stores in your communities as full as possible.”
But are online sales a better play now?
Well, I won’t give you my opinion. Instead, I’ll share the latest picture for internet retail stocks from my most recent Saturday scan with Portfolio Grader.
- Wayfair (W) and Overstock.com (OSTK) were upgraded to a “C” in my Portfolio Grader. Previously, the stocks were an “F” and “D”-rated Sell, respectively.
- Amazon (AMZN) remained a “B”-rated Buy, and Shopify (SHOP) remained an “A”-rated Strong Buy.
- Meanwhile, Land’s End (LE) and iMedia Brands (IMBI) – which operates the shopping TV channel ShopHQ – were downgraded to “D.”
- IMBI’s main competitor, Qurate Retail (QRTEA), which owns QVC, Home Shopping Network and Zulily, is also a “D”-rated Sell.
- Waitr Holdings (WTRH), with its food-ordering and delivery app, was upgraded to a “B”-rated Buy.
What’s more, some of the best opportunities in online retail are actually found in the Asian markets.
As the epicenter of the coronavirus, China was hard-hit – but its people are finally starting to get back to work. China will lift its lockdown on Wuhan, which had the original coronavirus outbreak, on April 8. The announcement comes on reports that new coronavirus cases in the Hubei province dropped to zero for five consecutive days.
That’s not only good news for those of us in countries who are behind China in the coronavirus cycle.
It also creates an incredible opportunity to invest in e-commerce stocks there.
According to Alibaba (BABA) and Tencent (TCEHY), two leading e-commerce platforms in China, online sales of grocery items and consumer goods, soared during the Chinese lockdown. In fact, China’s online sales of grocery items increased 26.4% year-over-year in the first two months of 2020. And iiMedia Research now expects the country’s online grocery market to surge 62.9% this year, up from 29.2% growth in 2019.
Now, while sales of food items and consumer staples were rising during the quarantine period, Chinese consumers limited their more discretionary purchases. That included home furnishings, clothing and cosmetics.
However, JD.com (JD), another major Chinese e-commerce company, revealed that cosmetic and skin care item sales soared 97% year-over-year on March 8. The company’s International Women’s Day campaigns around this time clearly showed that Chinese consumers are ready and willing to spend as the quarantine and lockdown restrictions are lifted.
Now, at Growth Investor, we’re tiptoeing into this space with one new addition to my High-Growth Investments recommendations.
The Chinese company I chose has astounding growth prospects. I’m talking 423.5% earnings growth, year-over-year, and 512.6% revenue growth in the first quarter! Analysts have also upped earnings forecasts by a whopping 242.3% in the past two months alone, so a fifth-straight quarterly earnings surprise is likely.
That link includes my free briefing on a much bigger story than any single online retailer: the worldwide upgrade to 5G wireless.
With the 5G infrastructure market set to grow at an annual rate of 67% over the next 10 years, the entire market will go from $780 million to nearly $48 billion.
Cable companies can do their best to fight back with fiber optics … but they can’t compete with the convenience of a smartphone, once it’s got ultra-fast 5G. That’s how 5G infrastructure companies will capture more market share from the broadband cable companies.