Just a few months ago, the coronavirus pandemic gripped the people and economy of the United States. Most states have put their populations in lockdown for much of April and May, which has slowed the spread of the virus. Yet people cannot stay at home forever, and the reopening of much of the economy has led to a still high number of reported COVID-19 infections. The good news is that the death rate of reported cases is a fraction of what it was in March and April.
A big change from the pandemic has been a shift in what people do with their free time and how they spend their money. Based on current events and my own personal observations, here are some trends and investment ideas for the new economy driven by the pandemic.
People still want to travel, but they don’t plan on staying in hotels or going on cruises. Instead, people are looking for recreation options that include social distancing, including myself (you might remember I bought a trailer a few months ago.)
Let’s take a look at three trends that are increasing share as the population moves away from full lockdown.
Trend 1: Home improvement and relocation
The third trend in the pandemic is focusing on homeownership and home improvement. I know the number of home improvement projects in my neighborhood has exploded from April to June. There is also a growing trend of relocation from urban centers to the suburbs, where COVID-19 infection rates are much lower. This trend is very positive for home builders and real estate companies.
Home Depot, Inc. (HD)
Home Depot, Inc. (HD) is a clear beneficiary of the explosion in home improvement projects. When the company released its first quarter results in May, same-store sales growth of 7.5% significantly exceeded Wall Street’s estimate of 5.8%, and reported revenue exceeded the estimate of $ 690 million.
Home Depot has aggressively increased its dividend, with the payout growing an average of 20% per year over the past decade.
The Hoya Capital Housing ETF (HOMZ)
the Hoya Capital Housing ETF (HOMZ) is a newer fund that offers exposure to investments across the housing industry.
The fund’s portfolio covers the four housing sectors:
Home ownership and rental transactions (30% of the portfolio)
Building and construction of houses (30%)
DIY and furnishing (20%)
Residential financing, technology and services (20%).
The fund also pays dividends monthly.
Trend 2: The desire to go out
Brunswick Society (Before Christ)
Brunswick Corp. (BC) manufactures boats and marine engines.
The company has more than a dozen brands of boats under its umbrella.
For the second quarter of 2020, the company reported non-GAAP earnings of $ 0.99 per share, exploding the Wall Street consensus of $ 0.44 per share.
Polaris, Inc. (PII)
Polaris, Inc. (PII) manufactures motorcycles, snowmobiles and the very popular Ranger and RZR all-terrain adventure vehicles.
For the second quarter, Polaris reported non-GAAP earnings of $ 1.30 per share. The profits were double the Wall Street estimate.
Polaris is also a dividend champion, increasing payouts to investors for 23 consecutive years.
Trend 3: The desire to stay safe
During the pandemic lockdown, fear drove many Americans to buy guns in defense of their homes. Unrest in many American cities continues to propel gun sales. Arms dealers see weapons and ammunition disappear from the shelves as soon as they are replenished.
Smith & Wesson brands (SWBI)
Shares of Smith & Wesson Brands (SWBI) are up 165% year-to-date. The company’s last profits in June were for the fiscal fourth quarter ended April 30.
At that time, EPS of $ 0.57 per share exceeded the Wall Street consensus by $ 0.15.
The next earnings report will be released in late August, and a quarter of a blowout could continue to push the stock price higher.
Sturm, Ruger & Company, Inc. (RGR)
Sturm, Ruger & Company, Inc. (RGR) is up 71% year-to-date, although the company’s second-quarter GAAP EPS of $ 1.05 per share missed the estimate of 1 , $ 23 from Wall Street.
Ruger declared a quarterly dividend of $ 0.42 per share based on second quarter results and a special dividend of $ 5.00 per share.
Both dividends are intended for shareholders of record on August 14, 2020 and are payable on August 28, 2020.
Want more great investment ideas?
HD shares were trading at $ 266.15 per share on Tuesday afternoon, down $ 0.03 (-0.01%). Year-to-date, HD has gained 23.42%, compared to 3.27% for the benchmark S&P 500 over the same period.
About the Author: Tim Plaehn
Tim is the Senior Analyst, Income and Dividend Investments at Investors Alley. He is the editor of The dividend hunter, a popular investment research advice focused on high yielding dividend stocks for investors who want stable and growing income. Prior to joining Investors, Alley Tim was a stockbroker, financial planner, F-16 fighter pilot and instructor in the US Air Force. Following…