Stay-at-Home Stocks Find Favor With New Age Investors

The past year has been tremendous for e-commerce giant Amazon AMZN. The stock has gained a massive 96.8%, way ahead of the 15.8% rise of the S&P 500 Index. Online media giant Netflix NFLX has surged 88.7%. Leading pizza delivery company, Domino’s Pizza DPZ has risen 40.1% over the past year.

On the contrary, retail drug store industry majors, Rite Aid RAD and Walgreens Boots Alliance WBA have witnessed a steep decline of 52.8% and 11.6%, respectively, in the same time frame.

Apparently, there does not seem to be a connection between these discrete stocks. However, going by Jim Cramer, the link is quite strong. They are all connected by the ‘Stay-at-Home economy’ concept that has become the buzzword of the financial world.

Stay-at-Home Economy at a Glance

In the past few years, the gradually changing lifestyle of people has led to an interesting consumption pattern. This tech-savvy generation is keen on staying indoors and avail a broad range of products and services from the comfort of their couch.

A Hade Platform report states that the term "home" originated in Japan. However, it gradually transformed into “a collective name for those who stayed at home, indulged in personal interests and hobbies, and were out of touch with society.” Needless to say, a number of industries like online retailing or food home delivery are already benefiting from the evolving Stay-at-Home trend.

Undoubtedly, the rise of cloud platforms and smart devices has also contributed to this consumption pattern. For investors, the most important part of Stay-at-Home concept is that the benefits are not limited to any specific industry. Rather, these are felt across a range of business segments and investment arenas.

This still little-known term has already created stir in the investment world and it is time for investors to wake up to this new commercial metaphor. 

Stock Trends Clearly Depict the New Pattern

Be it Amazon, Netflix, Domino’s, or Rite Aid and Walgreens, their performance curves make the Cramer-forwarded concept of Stay-at-Home Economy quite evident.

The first three companies allow people to stay home and lead a convenient life at a minimum cost. The striking performances of these stocks elaborate how their business pattern has been well accepted. Let’s delve deeper.

Amazon crushed earnings estimates in the second quarter. Amazon Prime subscribers have already exceeded 100 million, leading to net product sales of $31.86 billion in the second quarter. Not only that, this Zacks Rank #2 (Buy) stock, while maintaining a huge hold in cloud computing, has expanded into the medical and pharmaceutical world, leading to a new definition of healthcare practice. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Netflix’s subscriber base is expanding at a fast pace, helping it generate significant revenues. This Zacks Rank #3 (Hold) company remains confident of adding more subscribers as the trend of Internet TV/binge viewing catches up. Moreover, the company’s efforts to attract viewers through investing in more regional programming have added significantly to its user base.

Domino’s Pizza stock has gained nearly fivefold in the past five years. The company has become a strong international player while also keeping its domestic dominance. This Zacks Rank #3 (Hold) company is a leader in pioneering consumer trend. It was one of the first companies in the pizza industry to build its mobile and online ordering systems.

Brick and Mortar Losing Ground

While the online players are gaining precedence, traditional brick and mortar is taking a backseat as evident from the performances of Walgreens, Rite Aid or Target Corporation. Going by an article published in Seeking Alpha, “The bricks and mortars are losing in a world where consumers see stay-at-home as an advantage.”

Jim Cramer has elaborated it in a more comprehensive way. Citing Target as an example, he stated that while shopping was earlier treated as a recreation, the new generation thinks differently. According to this investment strategist, now people want document-able, record-able experiences. “Unless they can go out and create memories they can share with their friends online, they mostly watch things at home and order delivery instead of driving to restaurants”- he said.

Additionally, prices at brick and mortars like Target are not quite attractive; more so when compared to what one can gets on Amazon. Further, these brick and mortar stores hardly have sufficient number of proprietary items to lure consumers.

Bottom Line

While the majority will focus on big shot ‘Stay-at-Home’ players, we ask you to minutely study the market to get a list of the lesser known stocks. You never know when one of these stocks will turn out to be as the Amazon or Domino’s of your portfolio. Home improvement supplies online company, Home Depot HD or video games company, Activision-Blizzard ATVI certainly have the potential to make it count. Both the stocks carry a Zacks Rank #3 currently.

5 Companies Verge on Apple-Like Run

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Netflix, Inc. (NFLX) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
The Home Depot, Inc. (HD) : Free Stock Analysis Report
 
Walgreens Boots Alliance, Inc. (WBA) : Free Stock Analysis Report
 
Rite Aid Corporation (RAD) : Free Stock Analysis Report
 
Domino's Pizza Inc (DPZ) : Free Stock Analysis Report
 
Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
 
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