During the immediate aftermath of the novel coronavirus pandemic, millions of Americans feared for the worst. Honestly, they had every right to. Based on the disjointed governmental response and the rapidly rising number of infections and deaths over an unknown virus, it was hard not to panic. At the same time, contrarians realized that this was a once-in-a-lifetime opportunity to capitalize on so-called monster growth stocks that were only down to an “artificial” event.
So far, those contrarians have been proven correct. Still, it’s fair to wonder if the narrative for these much-celebrated growth stocks is still viable for investors today. For one thing, new daily coronavirus cases have been on the rise since Sept. 8, according to data from the Centers from Disease Control and Prevention. Also, the federal agency reported that cases exceeded 70,000 on Oct. 16, which is darn close to this year’s daily peak.
No, this isn’t fear mongering. Rather, I’m just pointing out the facts. However, I would argue that it’s reasonable to have some concern over these rising figures. After all, the weather is getting closer, inviting the regular flu season. Plus, the contentious political climate means more people are out and about, providing fertile ground for the coronavirus. On the surface, this doesn’t help the case for growth stocks to buy.
On the economic front, the national unemployment rate has been declining, which is great news. However, the number of weekly jobless claims have been persistently high. So far, the lowest number of initial claims for unemployment benefits during this crisis has greatly exceeded peak claims during the Great Recession. Recently, Reuters reported that claims increased to a two-month high, stoking fears of Covid-19’s long-lasting damage to the economy.
Despite the ugliness, it’s also possible that these are growth pains as we dive into the new normal. Part of this fresh reality, such as the rise of the gig economy, was likely going to happen, coronavirus or not. Therefore, the case for some monster growth stocks, even though they’ve soared this year, remains viable.
- Upwork (NASDAQ:UPWK)
- Fastly (NYSE:FSLY)
- American Well (NYSE:AMWL)
- Sportman’s Warehouse (NASDAQ:SPWH)
- Vista Outdoor (NYSE:VSTO)
- Peloton (NASDAQ:PTON)
- CleanSpark (NASDAQ:CLSK)
As well, because the coronavirus continues to play a big role in our society and because of the rising cases, the Covid plays are still on. Therefore, don’t be too quick to give up on these monster growth stocks to buy.
On surface level, the coronavirus has been absolutely devastating to the labor force. In less than a year, we went from having record low unemployment levels to devastatingly high unemployment. While white-collar employees have benefitted from the transition to remote work, it’s not entirely clear how long this circumstance will last.
After all, the loss of jobs in multiple sectors imply revenue declines for other industries. Further, the job losses that we’re encountering now imply that they’re permanent. Yes, the unemployment rate decline to 7.9% in September from 8.4% in August. However, permanent job losers increase by 10% over the same period. Naturally, this doesn’t bode well for growth stocks. However, contrarians may still want to consider the case of Upwork.
Upwork connects talented professionals with client companies that are looking to plug demand, typically on short-term contracts. The benefit to the independent contractors is that they receive payment for their services, while those providing the contracts receive the work they need but without the overhead associated with full-time employees. Before the pandemic, this was the viable bullish case for UPWK stock.
In my view, it’s now even more relevant and powerful. Unfortunately, discrimination in the workplace still exists. It’s obvious when you note that people who have desirable physical attributes, such as being tall, are often compensated more.
But in the new normal, it’s all about pure meritocracy. Personally, I think this is a blessing because the true producers will win out, not those who have been skating on their good looks. That’s a huge plus for UPWK stock.
Back in early October, I mentioned that edge computing services provider Fastly presented a directionally ambiguous case. On one hand, FSLY stock is levered to the content delivery network (CDN) industry, which has been crucial during the new normal. One of the key attributes of a CDN is that it brings data closer to the source of demand. This improves overall stability and usability, which is paramount when millions are working from home.
But on the other side of the coin, FSLY stock has been charting a technical pattern with bearish implications. As well, if coronavirus cases declined because people were taking the matter seriously, it wouldn’t fundamentally be positive for Fastly. And there was a reason to take Covid-19 seriously: President Trump’s own battle with the diseases, which on a personal note I’m glad he has recovered from 100%.
All that said, Fastly shares tumbled badly in mid-October. Unfortunately, the underlying company anticipates a revenue hit due to lower demand from TikTok. Obviously, this situation makes Fastly less reliable as one of the growth stocks to buy.
However, what I did say came out to be true: extreme volatility struck FSLY. Because of the discount, shares look much more directionally interesting. Although the TikTok headwind is a bummer, rising coronavirus cases support increased demand for CDNs. This is a bit risky but it could easily offer double-digit upside.
American Well (AMWL)
Speaking of rising Covid-19 cases, our seeming lack of control over this pandemic bolsters the telehealth industry. Earlier this year, Teladoc Health (NYSE:TDOC) absolutely skyrocketed from the contactless medical consultation platform. Although only making its public market debut just recently, American Well should likewise see benefits from a possible second wave.
Again, I don’t want to sound like an alarmist. However, many European nations are witnessing a resurgence in Covid-19 cases. Further, Euronews.com reports that France and Germany are suffering from record daily coronavirus cases. Given that much of western Europe is a hotbed for tourism and international business – similar to the U.S. – it’s reasonable to assume that we will suffer a second wave as well.
I understand that this isn’t the news that people want to hear. All I can say is don’t kill the messenger. I’m reporting data from government and mainstream media sources. Make of them what you will. However, if we assume that these are legitimate coronavirus cases and not fake news, the case for AMWL stock makes sense.
Further, I believe American Well may experience a psychological tailwind. Many new investors, say from Robinhood, already understand the rise in TDOC. However, shares are priced at over $220. By comparison, AMWL stock looks like a bargain at around $35.
Look, I’m not saying this is how you should buy growth stocks as a rule. But because we’re in the new normal, unorthodox methodologies like this can pay off.
Sportsman’s Warehouse (SPWH)
Currently, Sportsman’s Warehouse doesn’t look too appealing as its shares are only trading near their all-time highs. Admittedly, there is a possibility that SPWH stock could tumble, which has kept many bulls from engaging this name. Further, two factors may play into its present pensiveness.
First, as you know, record-breaking gun sales surprised some but definitely not all Americans. While what my friend refers to as the “normals” – that is, the people who work in office jobs and live in homes surrounded by white picket fences – bought endless rolls of toilet paper, arguably the smart folks bought firearms and ammunition.
Frankly, they were right to do so. With the uncertainty of the pandemic, combined with major clashes over racial and social issues, regular folks who didn’t want any part of the vitriol found themselves in the crossfire. However, the record demand led to inventory problems, which leads to my second point.
If you followed the news on gun sales like I have, you’ll note that overall sales were dominated by first-time buyers. And these people just wanted to get whatever they could get their hands on. Well, nowadays, the inventory crunch means there’s not enough supply to feed demand.
I believe that firearms manufacturers see this as a rare opportunity for a bonanza. Further, a Joe Biden administration will send a chill down supporters of the Second Amendment. In other words, gun manufacturing will jump, helping to restore some inventory. And that will be great news for SPWH stock.
Vista Outdoor (VSTO)
One of the growth stocks levered to the firearms industry that doesn’t get as much attention is Vista Outdoor. Certainly, Vista didn’t do itself any favors in this regard by selling its firearms brands Savage Brands and Stevens. However, having these gun companies under Vista’s umbrella didn’t do much for VSTO stock.
There are a couple of reasons for this but two really come to mind. First, Vista is one of the growth stocks that succumbed to unfortunate timing. When then-real estate mogul Donald Trump unexpectedly won the presidency in 2016, it was a huge relief for firearms advocates. However, it was not a great time for the firearms industry. Without the fear of Democrats taking away your guns, the narrative for VSTO stock just didn’t stick.
Second, Vista doesn’t sell what you would call ‘fun guns.’ Now, I’m going to get a lot of flak from hunters that may read my InvestorPlace articles, so let me explain. Likely, Savage is one of the top brands among those who actually use their firearms for a living. However, many of Savage’s guns just don’t appeal to urban gun enthusiasts.
And by that, I mean shooting an AR-15 with a muzzle break is already annoying inside an indoor range. Imagine someone letting loose with a Savage rifle chambered in .338 Lapua Magnum. Again, it’s just not practical for urbanites.
However, the current political climate is perfect for Vista’s ammunition business, which it has kept. Additionally, Bizjournals.com reports that Vista bought out Remington’s ammo and accessories business for $81.4 million. I think this is a very smart move, considering the likelihood that Biden will win in November.
Back during the holiday season of last year, Peloton gained notoriety for a silly little ad that it posted. In it, an attractive, fit housewife is given a Peloton Bike as a gift from her husband. As people know, it’s always a bad move for husbands to gift their wives any kind of exercise equipment. Naturally, people went on social media to blast the company and PTON stock incurred some volatility.
Man, I’m sure we could all go back to a time when complaining about a stupid commercial was the most important thing on our mind. Instead, we have a pandemic that has killed over 200,000 Americans. And believe me, I don’t care that most of these deaths involved underlying conditions. So what? People with underlying conditions are human beings too.
However, the pandemic has also provided an upside catalyst for PTON, making it one of the top monster growth stocks of 2020. Naturally, with gyms being fertile ground for infectious diseases, people sensibly decided to work out elsewhere. Of course, this supports the bullish thesis for PTON stock.
Just recently, though, the New York Times published an article stating that “Peloton recalled clip-in pedals on about 27,000 of its bikes after it received reports of broken pedals causing injuries, including five that needed stitches or other medical care.”
On the announcement, PTON closed down nearly 4%. Still, if you’re a contrarian, this might be the time to buy due to sharply rising U.S. coronavirus cases.
Although arguably the riskiest among the growth stocks on this list, CleanSpark offers one of the most relevant exposures to new energy solutions. Specifically, the company specializes in micro-grid software, which provides management/operation efficiencies toward localized energy generation, storage and distribution services.
To really understand micro-grids, it’s helpful to compare them to macro grids or traditional energy services. Featuring large but antiquated infrastructures in far flung places, macro-grids suffered a PR crisis during the rolling blackouts in California. Though relatively short-lived, the event reminded us about how much our traditional energy distribution channels are vulnerable to disruption.
Essentially, with CLSK stock, investors are exposing themselves to a new way of thinking, bringing energy solutions closer to the sources of demand. In some ways, you can think of CleanSpark as the CDN of energy infrastructure.
As well, CLSK stock received a big boost when media reports indicated that CleanSpark was providing software solutions for a new battery storage project in Central America. This project involved utilizing the Powerpack 2 batteries made by Tesla (NASDAQ:TSLA). Thus, it’s possible that investors were buoyed at the prospect of CleanSpark engaging in future partnerships with Tesla.
Even if that doesn’t materialize, CleanSpark provides a rethink to our energy crisis. Therefore, it’s definitely worth a look with speculative money.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.