Despite all the red ink, certain stocks fueled by the novel coronavirus have done remarkably well. One of these names is grocery giant Kroger (NYSE:KR). A rather mundane equity in any other circumstance, KR stock suddenly became a hot commodity during the pandemic. With desperate people wanting to hoard whatever essentials they could, grocery runs became this decade’s gold rush.
But many analysts have also wondered about the longer-term viability of so-called coronavirus stocks. It’s a fair question to ask, especially with companies like Kroger and to a lesser extent, Costco (NASDAQ:COST), Walmart (NYSE:WMT) and Target (NYSE:TGT).
Although demand from stocking up on essentials has catalyzed the overall grocery business, one household can only buy so much.
The latter three companies at least sell discretionary items that can help diversify their post-coronavirus revenue stream. But KR stock? It’s exclusively tied to food and essentials. Therefore, many fear that once the virus fades, Kroger will give up its earlier gains.
That might be the playbook to revert to in a “commonplace” crisis. But the pandemic has imposed a once-in-a-blue-moon paradigm shift. As such, we could see KR stock having far longer legs than skeptics anticipate.
For one thing, most shoppers are still scared to go grocery shopping. The concept of being inside a building full of strangers isn’t exactly confidence inspiring. Yet when you look at the rise of KR stock, it’s clear that consumers are getting over their fears.
But for discretionary purchases? I believe most people will stay at home. This should translate to greater funds for essential needs, thereby bolstering the case for Kroger stock.
Lingering Behavioral Changes Are a Positive for KR Stock
At the moment, most states have either partially reopened or are planning to do so soon. Even technically restricted states like California have made major concessions, with plans on reopening high-risk businesses — like hair salons and movie theaters — gaining momentum.
It’s great news for healthy individuals who have been quarantined in their homes for months on end. A growing chorus of voices believe that we can’t allow a virus to dictate our lives indefinitely.
But even as we venture outside, the new shifts in behavior are conspicuous and may stay with us for years. As you know, many jurisdictions and individual businesses require face masks. Understandably, some consumers have voiced displeasure at these requirements. However, that’s just part of our new normal.
Behavioral changes, though, aren’t just limited to personal protective equipment. More likely than not, this pandemic will impose permanent, generational changes.
According to a Washington Post article published in October 2019, the oil crisis of the late 1970s permanently altered the driving behaviors of Americans who were teenagers at that time and were just learning to drive. Back then, the new normal was long lines at the gasoline station as drivers waited to get their share of the precious commodity.
It’s not unlike what we’re seeing now with food and essentials.
Granted, this study has a very narrow base. Still, I think the concept is very relevant for KR stock. All of us have been faced with an unprecedented crisis. And we’re still not out of it. At the very least, we should expect stocking up on necessary goods as a semi-permanent consumer behavior shift.
Moreover, unlike other disasters, Covid-19 has dramatically impacted every American. Therefore, the case for KR stock is really a universal one.
Uncertainty Over a Second Wave
Finally, another reason to stay bullish on KR stock is the dark cloud that is the second wave. Although the infection curve has finally started to decline, thereby justifying the reopening of states, fears remain that as more people venture out, the greater the probability is of a resurgence of the virus.
America’s leading voice of the pandemic, Dr. Anthony Fauci, stated alarmingly that “there is virtually no chance” that the coronavirus will be eradicated this year. Fauci explained that the virus is so transmissible and widespread that even our best containment efforts will fall short due to global travel.
Obviously, no one wants a second wave to occur. But thinking as an investor, if it does, you want to be exposed to Kroger stock. It’s the one name that has a strong probability of upside in such a calamity.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.