At the start of the novel coronavirus pandemic, many folks — including this author — felt that the impeding crisis was the beginning of the end. Back in January and February of last year, we were all treated to worrisome footage of people dropping on the street dead. That the same fate would soon overcome Main Street USA terrorized millions. Honestly, who could think about stocks to buy?
Well, an intrepid few — and I guess Congressional insiders — made some of the boldest trades in recent memory. Recognizing that nothing — no pandemic, no natural disaster, no act of war or terror — could shake the American spirit, the contrarians saw opportunity when most everyone else saw risk. Sure enough, both the market and the economy recovered, delivering massive gains for previously undesirable stocks to buy.
But the ensuing rally was no ordinary one. As BBC.com reported, more than “five million people became millionaires across the world in 2020 despite economic damage from the Covid-19 pandemic.” True, the news agency did acknowledge that many poor people became poorer as you would intuitively expect. After all, the crisis disproportionately affected those with less financial resources and underprivileged communities. These folks were more in survival mode, not necessarily thinking about stocks to buy.
Further, governmental responses to the economic fallout, particularly lower interest rates, definitely bolstered the affluent. For instance, a Washington Post article from July 2020 reported that the affluent were advantaging multi-year lows in borrowing costs to expand their real estate portfolio. Naturally, stocks to buy in the housing market boomed, as did many other sectors. When you have resources, you are better able to milk opportunities.
Of course, that puts a bitter taste in many folks’ mouths because the rich keep getting richer while the middle class keeps getting gutted. While there are no easy solutions, one approach is if you can’t beat ‘em, join ‘em. In other words, here are the stocks to buy that can benefit from the rise of newly minted millionaires.
- Ferrari (NYSE:RACE)
- Volkswagen (OTCMKTS:VWAGY)
- Estee Lauder (NYSE:EL)
- AbbVie (NYSE:ABBV)
- Vail Resorts (NYSE:MTN)
- Swatch (OTCMKTS:SWGAY)
- Joby Aviation (NYSE:JOBY)
Before we dive in, I should note that the following ideas are very speculative. No demographic is a monolith and predicting human behavior is always a challenge. However, if the wealth gap continues to widen, these companies are at least well positioned to take advantage.
Stocks to Buy: Ferrari (RACE)
While the world may have christened a new set of millionaires, nothing says that you’ve truly made it until you buy a Ferrari. Sure, other exotic car manufacturers exist that deliver more outrageous designs and performance. Nevertheless, the Ferrari brand is unparalleled in terms of prestige and exclusivity.
For instance, mere money isn’t enough to get you into the door of its choicest vehicles. In short, states automotive journal Drive, “you have to be a member of la famiglia.” Indeed, “Ferrari is accustomed to saying no to would-be customers.” And that’s really where the distinction lies. Typically in automotive transactions, it’s the other way around.
Still, the company’s lucky clientele put up with the snobbery because why wouldn’t they? Ferrari plays hard to get precisely because it can do so. Better yet, this strategy has produced enviable results. In 2020, despite the ravages of the pandemic, the Prancing Horse posted revenue of $4.2 billion, up a little over half-a-percent from 2019’s tally.
Barring an all-out collapse, this year will be even bigger. Already at the halfway point, Ferrari has rung up $2.45 billion in top-line sales, making it one of the top stocks to buy if you’re following the rich.
No, I’m not trying to pull a quick one on you: I fully realize that Volkswagen is not in and of itself a premium brand. As some of you may know from your high school German class, volk translates to people so Volkswagen is quite literally the “people’s car.”
Who says learning German was useless? Well, maybe it’s not the most helpful language stateside but that’s neither here nor there.
Anyways, while you’re not going to find too many people flexing on social media with a Volkswagen Jetta, you will find them flaunting their millions through the company’s myriad brands. As a prime example, Volkswagen owns Lamborghini, the ultimate Ferrari rival. Additionally, its vast corporate umbrella covers iconic brands like Bentley, Bugatti and Porsche.
Even better, Volkswagen’s ownership of desirable badges — both attainable and not so attainable — have translated into strong financial performances. Admittedly, 2020 was a rough year, with revenue down 3.4% from 2019’s result. However, over the trailing-12-month (TTM) period, Volkswagen has posted $307 billion in sales, up over 9% from 2019’s tally.
Stocks to Buy: Estee Lauder (EL)
While I’m not exactly an expert on makeup and cosmetics, I know exactly where to go to find definitive information. According to Vogue Paris — the French edition of Vogue magazine — Estee Lauder ranks as one of the top 10 most influential luxury cosmetic brands. Therefore, wealthy households will more than likely stock up on the company’s various products.
Remarkably, Estee Lauder put up a relatively strong performance in the fiscal year ended June 30, 2020. Despite the coronavirus initially shutting down all non-essential businesses, the cosmetics giant managed to post $14.3 billion in sales, down just under 4% from 2019’s haul. Again, that’s not bad considering the utter devastation the discretionary retail segment suffered.
Moving forward, though, the Covid-19 crisis may have catalyzed a longer-term bullish narrative for EL stock. In large part, retail revenge, or the concept that people who missed out on important events last year are ready to spend and make up for lost time this year, plays an important role.
Indeed, a Reuters article mentioned that outsized demand is pushing sales above expectations. That makes for a strong case for stocks to buy.
While retail revenge is a powerful motivator for the cosmetics industry, it’s not the only factor driving sentiment for the broader health and beauty segment. Generally, as multiple jurisdictions began reducing their Covid-19 restrictions, demand for beauty care products organically increased. However, for the wealthy, mere topical solutions may not be enough.
Of course, I’m talking about Botox, what a New York Times article described as a wrinkle-melting injection that has been an artificial fountain of youth for celebrities and the affluent. It’s one of the reasons why I’ve talked positively about AbbVie during this crisis. As the owner of the Botox brand, ABBV offers potential as one of the stocks to buy on the pivot out of the lockdowns.
But there’s another reason to consider the pharmaceutical firm that I never realized before until now. Increasingly, millennials and Generation Z are starting preventative Botox treatments to mitigate early aging.
Personally, I think it’s nuts and an awfully cynical reason to acquire ABBV stock. Nevertheless, the so-called “normie” class are jumping on Botox, making it an enticing idea to at least ponder.
Stocks to Buy: Vail Resorts (MTN)
When it comes to deciphering stocks to buy based on the purchasing behavior of the affluent, you shouldn’t just focus on tangible goods. While the millionaires and billionaires may be in an entirely different strata compared to the average Joe or Jane, they’re still human beings. They want experiences just like anyone else.
The difference is that the rich have different tastes for such experiences, which brings me to Vail Resorts. An op-ed from Crosscut perfectly describes why skiing is a sport largely for those with robust financial means:
“We have helmets, goggles, heavy-duty gloves, high-end jacket, pants, all manner of layered, warm clothing, high-performance boots, packs and other goodies like avalanche transceivers. The cost to outfit us each of us: At least $2,000.
Expensive, right? But wait — there’s also the cost of our skis and snowboards — upwards of $1,000 for each of us.
Add to that a daily ticket or a season pass, lunch in the lodge, an après drink or two, and each full gondola cabin represents $25,000 in spending just to enjoy a day on the slopes.”
As society normalizes, you can reasonably expect the well-to-dos to go out and hit the slopes, which should bode well for MTN stock.
Essentially the Volkswagen of horology, Swatch by itself isn’t exactly a brand that rich folks gravitate to. Instead, you’ll often find Swatch dazzling younger audiences with colorful and eccentric product lines. But before you cross this company off your list of stocks to buy, you should note the powerhouse brands that it acquired.
We’re talking about famous labels like Omega, Longines and Blancpain, to name but a few. A good rule of thumb is if you can’t pronounce it, it must be a great product.
Seriously, though, the combination of premiere products and a return to normal may help SWGAY out of its current funk. Since hitting a post-pandemic high of $18.57 on June 8, 2021, Swatch shares have dropped over 28% of market value. Unlike other luxury-related stocks to buy, Swatch has struggled to regain its former footing.
Still, as people get acclimated to the post-Covid environment, discretionary retail sales in the premium products subsegment should pick up. When it does, SWGAY will be in a prime position to benefit.
Stocks to Buy: Joby Aviation (JOBY)
Out of all modern transportation methods, aerial urban mobility arguably best epitomizes those who have truly made it. After all, when Donald Trump was a reality TV star, he made his biggest statements with his personal helicopter and private jet. Aside from the optics, going airborne is the easiest way to cut through the grind of automotive traffic that regular folks must endure.
However, with the advent of fresh innovations in personal mobility, companies like Joby Aviation seek to make air transportation a bit more accessible. Specializing in electric vertical take-off and landing (eVTOL) aircraft, Joby offers several narratives but one in my opinion stands out the most: Joby saves time.
According to experts in the field, gridlock could end up costing the U.S. economy $2.8 trillion in a 17-year period up to 2030. Therefore, paying for air mobility services could be well worth it if it could save hours, particularly for high-productivity individuals.
Nevertheless, it’s an open question whether eVTOL specialists like Joby can meet their goal of providing reasonable cost services. My gut feeling tells me that eVTOL solutions will initially be geared toward the rich, making JOBY one of the speculative stocks to buy if you want to gamble on affluent behaviors.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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.