“It’s ‘nervous time’ at the Fabulous Forum,” the legendary Los Angeles Lakers announcer Chick Hearn would often remark whenever the home team was trailing late in the fourth quarter.
A similar sort of “nervous time” is hanging over the stock market now that the major indices have rocketed 37%–45% from their March lows … even though the novel coronavirus pandemic is catching a second wind.
Investors are becoming increasingly concerned that the “easy” gains they reaped from the March lows might disappear just as quickly as they arrived. Already, many of the stocks that are most vulnerable to the coronavirus shock are rolling over and sliding back toward their recent lows.
A Second Wave of Setbacks
A name like Howard Hughes (NYSE:HHC) comes to mind. The Covid-19 pandemic dealt a severe blow to this multifaceted real estate and hospitality company. As a result, the stock tumbled in step with most other real estate and hospitality stocks.
However, like most of its peers, the stock bounced a spritely 75% off the March lows. But the stock is sliding again — this time because of a particularly pernicious setback from Covid-19. The second wave of the pandemic, because it is flaring up in the Houston area, is making a direct hit on the heart of Howard Hughes’ operations.
The Houston area is home to the company’s largest residential and commercial projects. The Las Vegas area represents another big chunk of the company’s operations. So the scary regional and national headlines that are starting to pop up about rising Covid-19 infections are no help to these operations either.
Probably, these headlines are creating a good buying opportunity for the stock. Short term, the headlines could continue hammering away at the company’s share price. But longer term, Howard Hughes could actually benefit from the Covid-19 crisis.
That’s because the company’s larger residential and commercial projects are near Houston, but not in it. Likewise, its Las Vegas projects are in Summerlin, which is near Las Vegas, not in it.
According to the company, the Covid-19 crisis might trigger a flight from centralized urban-center housing and offices out to the leafier and more spacious suburban properties Howard Hughes operates.
But the road from short-term challenges to long-term prosperity could be a rocky one.
Meanwhile, a handful of stocks and sectors are breezing through the fears of a second Covid-19 wave … at least so far.
Let’s check out a few.
I first told you about Activision on April 25. It’s up 14% since then.
The specific play in this sector that I recommended three months back to Fry’s Investment Report subscribers has chalked up 35.7% gains — and hit a new all-time high. (To find out how to join us at the Investment Report, click here.)
Nearby on the winners list, we find leading companies from the world of mobile apps and mobile gaming, like Tencent Holdings (OTCMKTS:TCEHY). That Chinese internet company is trading at a new all-time high, as is a similar stock in the sector that I recommended to my subscribers.
Online retailers also rank among the list of standout performers. The shares of Amazon (NASDAQ:AMZN), the titan of online retailing, continue to power higher and higher, no matter what news crosses the wires. As a result, Amazon’s stock is trading near an all-time high.
But many “lesser lights” in the online retailing sector are also enjoying boomtime conditions, which is causing their stocks to soar to all-time highs. That list includes names like Pinduoduo (NASDAQ:PDD), Ocado Group PLC (OTCMKTS:OCDGF), MercadoLibre (NASDAQ:MELI), Shopify (NYSE:SHOP) and JD.com (NASDAQ:JD).
Every single one of these stocks just hit a new all-time high. And thanks to those gains, another of my portfolio recommendations is also hitting record levels: Amplify International Online Retail ETF (NYSEARCA:XBUY).
This sampling of stock market winners underscores just how essential “Technochasm” investing has become…
The Opportunities I Love in the Technochasm
The Technochasm is the phenomenon in which companies that innovate technologically outperform.
Those that don’t innovate simply fade away.
As you can see in the chart below, over the past decade or so, the tech-heavy Nasdaq 100 delivered double the performance of the S&P 500 … triple the performance of the transports … and 12 times the performance of oil.
That said, technology is not simply a destroyer. It is a creator of new ways of doing business. So companies that learn to mimic the best tech companies’ world-beating practices will thrive.
Of course, not every technology company is a great investment — and not every non-technology company is a bad investment.
You still have to investigate every potential investment thoroughly… and make smart decisions.
Howard Hughes is an excellent company, with some of the premiere real estate assets in the world. Furthermore, its stock is depressed. So investors with a two- to three-year view might do well by investing in it.
In fact, I like that kind of opportunity.
But I love the opportunities that are clearly on the winning side of the Technochasm. The companies that are developing and applying next-generation technologies to establish or reinforce a competitive advantage — the companies that are the forefront of technological disruption.
Even with the Nasdaq Composite trading near an all-time high, I’m finding many compelling investment opportunities, especially in the 5G arena.
These are exciting times.
P.S. For two decades, CEOs and Wall Street billionaires paid me millions for trade research and ideas. Over 20 years, the peak highs from my top recommendations averaged out to 93% a year. But I’ve left all of that behind — and invited a small group to follow my work. For that small group, in just 10 months, I uncovered total gains of 987% (including the losers!). Today, I’m inviting a few more people join me. Go here to find out more.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. And when it comes to bear markets, you’ll want to have his “blueprint” in hand before stocks go south. Eric does not own the aforementioned securities.