A few weeks into America’s battle with coronavirus, consumer spending is unsurprisingly lower. But the drop in purchases wasn’t the same across the board, suggesting the stocks to buy on the next pullback come from very specific industries.
While there’s some debate as to how long these lockdowns will last, most agree that in the absence of a vaccine social distancing will become the new normal for the foreseeable future.
That sudden shift will probably topple some industries. But others will reap the benefits—and that’s where investors should be looking.
Data from Earnest Research that’s been compiled by the New York Times offer an important look into the future of spending. The data suggest that industries like gaming and groceries have seen the biggest coronavirus bump while movie theaters and apparel have seen a sizable decline.
The Earnest Research data show, unsurprisingly, that groceries are at the top of consumers’ purchase lists. While online grocers saw the biggest bump in spending, traditional stores also saw spending increase.
In this space, the safest bet is Walmart (NYSE:WMT), whose business has benefited immensely from the pandemic, but will likely continue to thrive once lockdown measures have been lifted. Walmart’s delivery and pick-up services have been a key driver while people are stuck inside.
RBC’s Mark Mahaney pointed out that the firm’s most recent surveys show that WMT has been gaining market share as more people use its online grocery offerings. He sees the firm continuing to gain even after coronavirus fears have subsided.
It’s not just run-of-the-mill groceries that are on the rise. People are also spending more on alcoholic beverages as they forgo bars and restaurants. Picking a booze stock is tricky because of ever-changing consumer preferences, but Boston Beer Company (NYSE:SAM) seems to have a finger on the pulse of what people like to drink.
The firm makes a wide range of beverages from craft beer to hard ciders and alcoholic seltzer.
MKM Partners’ Bill Kirk upgraded SAM stock to a ‘Buy’ rating pointing out the company’s resilience during periods of economic downturns.:
During a period when the fundamental uncertainty plagues valuations, we believe Boston Beer will not experience much operational volatility. We believe Boston Beer is best-in-class at category innovation, participating in, or leading all, major adjacent innovation waves over the last decade.
Boston Beer should continue to benefit from at-home drinking as most expect that even after lockdowns have been lifted, people will be hesitant to pack into restaurants and bars.
Gaming was another bright spot in the Earnest Research data and in that space Take-Two Interactive (NASDAQ:TTWO) stands out as a one of the best gaming stocks.
The firm is well-known for offering some of the best content in the industry, and its decision to hold back on in-game purchases has given it a reputation of quality.
Take-Two has also been making inroads in the esports arena, a sector that’s likely to grow as long as live sports are cancelled. The firm already makes basketball, wrestling and golf virtual sports games, but it’s about to dip its toes into the NFL as well.
The NFL was locked into an exclusivity contract with Electronic Arts (NYSE:EA) for more than a decade, but a new contract will allow TTWO to release NFL 2k in 2021.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities
This article was edited by Sam Bourgi.