What do LeBron James and tsunamis have in common?
They’re unstoppable forces.
For the better part of two decades, LeBron has dominated the NBA, winning countless championship rings and MVP trophies, and ultimately proving that – no matter the time, place, or opponent – he cannot be stopped.
And neither can a tsunami – no matter the time or place, a powerful tsunami can overtake sea walls and topple communities. Nothing can stand in its way.
If only such unstoppable forces existed in the stock market…
Forces so powerful that they would persist, no matter what, regardless of macroeconomic or geopolitical conditions, and always make you money…
Lucky for you, they do exist — and they’re called megatrends.
Megatrends are global shifts in personal or enterprise behavior that are so large, so pervasive, and so impactful that they don’t stop… for anyone or anything.
History is crystal clear on this.
Consider three of the world’s biggest megatrends over the past two decades:
- E-commerce (the global shift from consumers buying things in-store, to buying things online)
- Digital advertising (the global shift from companies advertising on billboards and in newspapers, to advertising on digital media platforms)
- Mobile phones (the global shift from people using letters and faxes to communicate, to using mobile phones to communicate)
Now let’s think about all the market circumstances that might have slowed these three megatrends down from 2000 to 2020.
Major events, both foreseen and unforeseen, have crippled markets. Think of the dot-com bubble, or the Financial Crisis, or multiple stock market flash crashes, or a global pandemic.
And yet… through it all… global e-commerce sales rose by 1,269% from 2000 to 2020…
North America digital ad sales rose by 1,954%…
And mobile phone sales rose by 406%.
Sure, external noise slowed these megatrends somewhat. But none were stopped. And that’s the point. By investing in secular megatrends, you are investing in unstoppable forces.
You are ensuring that you will make money, in a long-term window, regardless of anything else that happens.
It’s as surefire of a bet as there is in financial markets.
And what’s more… these megatrends don’t give you tiny returns.
They give you enormous returns that produce life-changing wealth.
Just look at the returns of the leaders in the e-commerce, digital advertising, and mobile phone megatrends over the past 25 years.
Apple stock is up more than 30,000% since 1995.
Amazon stock is up more than 4,000% since 2000.
Alphabet stock is up more than 1,500% since 2005.
The takeaway is obvious. If you’re a long-term investor looking to become a millionaire in the markets, the best place to start your stock picking process is by choosing emerging investment megatrends.
We are those types of investors looking for life-changing investment opportunities. Naturally, then, I start my stock picking process by identifying up-and-coming megatrends that will redefine our world over the next 10 to 20 years.
But simply finding and investing in megatrends alone is not enough.
Sure, it’s a good start. But will it guarantee that you find the next Apple, or the next Amazon, or the next Alphabet?
To do that, you must dig deeper.
And that’s where innovation comes into play.
Innovation Is the Origin of Growth
Innovation is at the center of every history-defining big idea…
Combinatorial innovation led Gutenberg to create the printing press…
Competition between world powers sparked the internet revolution…
Cell phones with bonus features were the norm until Steve Jobs put a full-fledged computer in your pocket, kickstarting the smartphone revolution…
The common thread weaved throughout these hypergrowth events is innovation.
How did Amazon grow from a tiny online bookstore into a global e-commerce empire?
Innovation. Jeff Bezos and company innovated through building a platform that could sell any product to any consumer, in the most convenient way possible.
How did Facebook grow from a college kids’ pastime to a globally ubiquitous digital townhall?
Innovation. Mark Zuckerberg and company innovated through constructing a universally appealing platform that connected the world through computers and smartphones.
How did Netflix grow from a struggling DVD rental service to a streaming TV powerhouse on the cusp of pushing cable TV into extinction?
Innovation. Reed Hastings and company innovated through creating an affordable, easy-to-use platform that allowed consumers to stream any movie or TV show they wanted, at any time they wanted.
Get the point?
Innovation is the origin of big growth.
This has been true for decades. It’s still true today.
So, after you identify unstoppable investment megatrends, what do you do?
You seek out the most innovative companies in those megatrends.
Not the companies with management teams that are happy just to be in the right place at the right time…
Rather, the companies with management teams are that innovatively doing everything they can to grow the business, beat the competition and ultimately dominate the megatrend.
These companies are where you will find the next Apple… the next Amazon… the next Netflix… and they will score you enormous, life-changing returns.
Square started out in 2009 by selling flexible and affordable payment card readers to merchants so that they could accept non-cash payments. It was a pure play on the cashless megatrend.
But Jack Dorsey and company weren’t satisfied by simply being a part of the cashless megatrend. They wanted to dominate the cashless megatrend.
So throughout the 2010s, Square innovated, and innovated, and innovated.
It built out a software services ecosystem that supplied payroll assistance and management tools to merchants and retailers…
It expanded into the e-commerce channel, and developed capabilities so that its customers could use Square to simplify digital sales…
It developed bank-like services, including Square Capital, which extended loans to customers…
It created a consumer-facing cashless app, Square Cash, which allowed consumers to digitally deposit, store and transfer money…
It built out Square Cash to allow consumers to buy-and-sell stocks and even bitcoin through the app, while also attaching usable, physical debit cards to the account…
Now, here we are in 2020, and Square is so much more than just a physical payments processor.
Square has created an end-to-end cashless ecosystem for both buyers and sellers.
And guess what?
Because the company kept innovating, it never stopped growing.
Square’s revenue growth rate back in 2014? About 70%.
Square’s revenue growth rate last quarter? About 60%.
Six years later… on a revenue base about 800% bigger… Square’s revenue growth rate is almost the same, which translates into the fact that Square’s revenues have risen 2,216% over the past seven years.
That’s the power of innovation.
Hypergrowth Lives in the Overlap of Innovation & Megatrends
You’ve probably heard the term “hypergrowth stocks” before…
But many analysts, investors, and market observers incorrectly overapply the “hypergrowth” label to any company that’s growing quickly.
That’s not how I look at hypergrowth stocks.
Instead, I see hypergrowth stocks as companies that are growing quickly because they are innovative leaders at the heart of emerging megatrends. Therefore, a business in hypergrowth mode sustains a high-growth trajectory for the next 5, 10, 15-plus years.
In this sense, our hypergrowth stocks are not flashes in the pan. They are secular, enduring growth stories… some of which may sneak by without the fanfare of a ticker tape parade… because the biggest ideas… the ones that are on the bleeding edge… are sometimes too subtle to notice their brilliance… until it’s too late.
Which is why our hypergrowth stocks can actually make you a millionaire.
Let’s take a deeper look through the lens of big ideas at seven of my favorite hypergrowth stocks to buy for 2021 and beyond:
1) Hypergrowth in Solar Energy: SunPower (SPWR)
North America’s solar energy and storage market is booming. Recently, the International Energy Agency (IEA) announced groundbreaking news: Solar energy is taking over the world.
I’m paraphrasing, but you get the point… solar energy is a big idea that stands on its own two feet. It just needs the right company with the right products and the right price.
Once economic drivers show up to a party, there’s no going back.
Computers went mainstream thanks to the innovation at IBM and Apple, making them affordable for the masses.
Smartphones became ubiquitous once Apple’s iPhone made consumers realize they wanted functional computers and not telephones that can play Snake.
Tesla went into hyperdrive when Elon Musk & Co. married beautiful aesthetics and eco-friendly engines with affordability.
And solar energy will go into hyperdrive when it becomes the cheapest electricity source in the world.
Enter SunPower (SPWR) – one of the most compelling solar stocks to play the solar megatrend.
In the next two decades, solar energy will rise from a near-7% share of North America’s electricity generation to 30%-plus. That implies growth of more than 400%.
It is SunPower’s innovative approach to solar energy that has put it on this turbocharged track. Broadly, SunPower is $3.3 billion solar energy storage and distribution leader. It sells solar panels, finances solar panels, and installs the hardware and software for solar panels. And it does this in both residential and commercial markets throughout the States and Canada.
The bull thesis on SunPower stock boils down to three things:
- Big first-mover advantage: In California, where SunPower has been active for decades, it’s garnered 9% of the market in residential solar and more than 50% in new home construction.
- Best-in-breed solar panels: SunPower’s solar panels are top notch, with the most efficient panels in market averaging 19% to 23% efficiency (above the industry’s 14% to 18% rate).
- SPWR stock is priced fairly: SunPower’s stock is heavily discounted when you compare it to peers like SolarEdge, Enphase Energy and SunRun, which all sport $10-plus billion valuations on 10X forward sales. SPWR, meanwhile, is a $3 billion company with 2X forward sales.
Did you connect the dots? SunPower is a high-growth company… in a turbocharged solar industry… with 10X potential.
2) Hypergrowth in Digital Advertising: PubMatic (PUBM)
Over two years ago, a tiny little ad tech company with a $2 billion market cap had built a valuable programmatic advertising platform. Back then, this platform wasn’t very widely used, but its ability to leverage data for better optimization of digital ad campaigns proved promising to brands.
Back then, Wall Street wasn’t talking about the company. But I believed it would become the next big thing in ad tech.
Because the future of advertising was data-driven. This company eliminated the guess work from advertising, facilitating superior outcomes for its users. This company was The Trade Desk, and it offered the market’s best demand-side ad tech platform for data-driven advertising.
Since then, that tiny, $2 billion company with a not-very-widely used platform has turned into a $40 BILLION titan of industry. And its data-driven advertising platform challenges the likes of Amazon, Facebook, and Google.
If you bought the stock back in 2018, it was likely one of the best plays you could’ve made in the stock market…
Now, I think I’ve found the next The Trade Desk.
This small company is freshly public, which means it doesn’t even have a chart for the past twelve months. And it is exactly where The Trade Desk was back in 2018 – sporting a $2 billion market cap and a valuable, yet not widely used data-driven ad tech platform.
Over the next two years, it could do exactly what The Trade Desk did over the past two years – and that is soar by nearly 20X.
When it comes to advertising, you have two sides to consider: the demand side (or buy side) and the supply side (or sell side).
The demand side represents the brands and marketing agencies that buy advertising inventory for marketing purposes. The supply side represents content publishers and app developers that sell ad inventory to monetize their platforms.
Think of TTD as the buy side’s tool of choice. And think of PubMatic (PUBM) as its sell-side equivalent.
PUBM stock just recently came public via a hugely successful IPO in December 2020. Its sell-side ad tech platform leverages data-driven algorithms and tools to help content publishers and app developers maximize the value of their ad inventory.
In essence, PubMatic combines ad bid data from demand-side platforms, with consumer demographic and interest data from content publishers, to help ad inventory owners put the right ads in front of the right consumers, so as to increase advertiser return-on-investment (ROI) and publisher revenue.
Think of it as The Trade Desk for ad sellers.
And just like with TTD, PubMatic’s business model is all about the data.
PubMatic runs on the same data-driven growth flywheel as TTD, which was able to leverage its ad data on the buy side to become a titan of industry. Similarly, PubMatic’s first-mover advantage in the sell-side programmatic ad tech business allows it to forge partnerships with some of the biggest ad sellers around. That includes News Corp, Verizon, AMC, and Electronic Arts.
This matters only because it means PubMatic has amassed the largest and most valuable dataset in the sell-side programmatic ad tech world.
Right now, it processes 1 trillion ad bids on a per-day basis! And it’s daily ad impressions are in the billions (134 billion, to be precise).
In sum, PubMatic is responsible for 1.65 petabytes of data… every day. That’s unprecedented in the ad tech space.
While its data advantage is enormous, it’s not PubMatic’s only edge…
The company’s approach to providing sell-side ad tech solutions is unique and potentially game-changing.
While sell-side platforms traditionally focused exclusively on what’s known as a “closed box loop,” PUBM has opened its process up. The result is a more transparent and coordinated advertising process, that allows it to integrate with leading buy-side players. Such as The Trade Desk.
As such, PUBM gets both the buy- and sell-side parts of the ad equation to work together, which should only bolster the effectiveness of PubMatic’s solutions.
Further, PubMatic has a reputation as an innovator in the space. Two of the five customers it lists in its S-1 filing cite PubMatic’s “innovation” as the reason for choosing the company.
This mostly stems from the company’s leadership in header bidding, which PubMatic basically pioneered.
But, more importantly, its innovation bodes well for future product developments and business expansions.
While nothing is a “sure thing,” PubMatic does have all same ingredients that The Trade Desk had two years ago… and that worked out to a 20X gain for The Trade Desk stock in just 24 months.
Could PubMatic pull off a similar meteoric rally? Absolutely… which means that PubMatic stock deserves to be your buy radar today.
3) Hypergrowth in Retail Personalization: Stitch Fix (SFIX)
In 1995, psychologist Sheena Iyengar of Columbia University attempted to answer a very simple yet profound question: is there really such a thing as too much?
Iyengar set up two displays of jams at a grocery store in California. One display had 24 assorted flavors of jams. The other had just 6 flavors.
Perhaps obviously, the large display attracted 50% more visitors than the small display.
Less obviously, the small display’s visitors were 10 times as likely to buy jam, and those who did buy, were far more satisfied with their purchase.
These surprise findings gave birth to the Paradox of Choice. That paradox states that while people are drawn to the idea of greater choice, too much choice can ultimately cause customer anxiety and paralysis. Which leads to lower sales and satisfaction.
In other words, when it comes to shopping, less is more.
Retailers don’t seem to understand this. Many fashion brands offer thousands of different styles at the same time (ASOS, for example, has about 85,000 different products on its website right now).
Shopping, then, has one HUGE problem: there’s too many options.
Fortunately, a fashion technology company is solving this problem right now – and its breakthrough solution to customer choice paralysis could unlock significant value for you in the long run.
There are thousands of apparel brands in the world. Each one of those brands has hundreds, if not thousands, of unique products. Ultimately, if you want to buy a t-shirt, you have millions of options to choose from – and that’s just too many.
Insert Stitch Fix (SFIX). Stitch Fix is a $3.9 billion fashion tech company that is trying to disrupt the $25 trillion retail market by simplifying it with an on-demand, online personalized styling service.
The process is simple.
You go to Stitch Fix’s online platform. You take the “Style Quiz”. It asks you various questions about your personal style, like what size, fit, and look you prefer. Stitch Fix takes that data, and plays “data match-maker,” matching your personal style data with brand style data, to produce a curated list of personalized apparel options made just for you.
Essentially, Stitch Fix leverages data to shrink each shopping trip from a few million random choices, to a few dozen relevant choices.
That’s a big deal. Academic study after academic study proves that consumers like simple. Stitch Fix makes shopping simple. Naturally, consumers will like Stitch Fix.
Of course, Stitch Fix isn’t the only player in this market. Urban Outfitters, for example, has launched a curated apparel rental service of its own.
But Stitch Fix is the biggest player in the online personalized styling market, and it will remain so for two big reasons.
First, independent brands like Urban Outfitters are limited to their clothes only. Stitch Fix, however, has in-house brands as well as third party brands like Madewell and Michael Kors, and therefore gives consumer broader access and better choices than independent brands.
Second, among third-party marketplaces, Stitch Fix is the biggest, and so has the most data. Longtime readers will know that we think big data equals big money. Stitch Fix is no exception to this trend. Because the platform has more data than other services in this space, Stitch Fix will deliver better results than other platforms, and win over more customers.
Big picture: Stitch Fix has come up with a breakthrough solution to make the shopping process simpler, and has rich marketplace and data advantages that should enable the company to turn this breakthrough solution into a hugely scalable business.
Despite all of that, Stitch Fix still only has a $3.9 billion market cap.
That’s why long-term investors should consider taking a position in Stitch Fix stock – the upside potential over the next several years is enormous.
4) Hypergrowth in Electric Vehicles: Workhorse (WKHS)
U.S. President Joe Biden recently pledged to replace every single federally owned vehicle with an American-made electric vehicle. And in making that pledge, Biden basically confirmed the winner of the huge and significantly delayed USPS contract.
The logic is simple. There are three finalists for the contract.
One of them, Karsan, is a Turkish-based company. It’s unlikely a federal U.S. agency taps a Turkish company to supply its vans. The other finalist, Oshkosh — who is partnering with Ford — is proposing to make a delivery van built on an internal combustion (so it’s not electric).
Thus, there is one company left that is the “best fit” for USPS. And it’s a U.S.-based company that makes electric vans.
Biden basically confirmed that this company will, indeed, win the contract.
He’s pledging to electrify federal fleets, which means electric vans. Not a new internal combustion engine (ICE) van. That all but takes Oshkosh out of the running.
Biden is also pledging American-made vans. Karsan doesn’t fit that bill. So, they’re basically out of the running, too.
Who is left?
The entire bull thesis on WKHS resets upon that contract. Thus, if Workhorse does indeed win the contract in early 2021, Workhorse stock will stage an enormous rally over the next 12 months.Why?
It’s time to buy Workhorse stock
Winning all or most of the USPS contract is a huge near-term deal for Workhorse. It will essentially guarantee the company billions of dollars of revenue over the next few years.
For a company set to do about $1 million in revenue this year, that’s a massive deal.
The long-term implications of a USPS contract win for Workhorse, however, are much bigger than the near-term revenue injection.
In winning the USPS contract, Workhorse will cement itself as a viable leader in the electric delivery van market. At the same time, thanks to the USPS partnership, Workhorse will likely be able to raise a ton of money at favorable terms to dramatically expand manufacturing capacity.
Thus, if Workhorse wins the USPS contract, this will be a company that, by 2025, will be a distinguished leader in making electric delivery vans with an unmatched ability to manufacture these vans.
Those are winning attributes which will likely attract many, many new customers to Workhorse over the next few years, as almost all logistics companies in the world follow USPS and electrify their fleets.
To that end, Workhorse winning the USPS contract optimally positions the electric delivery van maker for a decade of hypergrowth ahead.
Behind that decade of hypergrowth, WKHS stock will soar, taking out the $40 level in 2021.
About 350,000 last-mile delivery vans are sold in the U.S. every year. I think all 350,000 of those vans will be electric by 2030. Workhorse will win the USPS contract, and leverage its first-mover’s advantage to turn into one of the biggest players in the domestic market. I think market share will round out to about 20% by the end of the decade.
Assuming so, I see Workhorse’s revenues charging north of $5 billion in 2030. Gross margins of 25% seem doable. Increased scale should drive positive operating leverage and push the Opex rate down to a more normal 10% rate. Operating margins could clock in around 15%.
All in all, these inputs imply $4 in earnings per share potential by 2030. Based on a 20X forward earnings multiple, that implies a 2029 price target for WKHS stock of $80. Discounted back by 8% per year, that implies a 2021 price target of over $40.
5) Hypergrowth in Digital Payments: Shift4 Payments (FOUR)
We’re all looking for the next big thing.
The next Amazon… the next Facebook… the next Apple…
And the best place to look for up-and-coming stocks with “next big thing” potential is in the IPO market, where you – for the most part – have a bunch of vision-driven, early-stage, hypergrowth companies trying to change the way the world works.
Two weeks ago, we told you about a brand-new IPO stock named BigCommerce that we said was positioned to be the next Shopify.
Since then, BigCommerce stock has more than doubled.
In fact, that stock is well on its way to turning into a “next big thing.”
But that’s just one IPO stock… in a sea of hundreds… all of whom are gunning to change the world.
Surely, in that sea, there are more investment opportunities than just the next Shopify?
What about the next Square?
That’s right. We’ve uncovered a small-cap, freshly public payments technology company that has all the ingredients necessary to turn into the next Square – which is a pretty compelling investment thesis since Square stock is up 1,200% over the past four years alone.
For a moment, imagine a technology company… one that has created a robust, end-to-end payments ecosystem… which enables merchants and retailers to securely accept and process non-cash payments of all sorts… and which includes a suite of value-add software services like business intelligence.
Sounds exactly like Square, right?
But it’s also the business model of a much smaller payments technology company by the name of Shift4 Payments (FOUR), which just made a splashy debut on Wall Street via a hugely successful IPO in early June.
For all intents and purposes, Shift4 Payments is Square – a big growth payments tech company that’s increasingly turning into mission-critical software for merchants and retailers as cash becomes antiquated and non-cash payments become ubiquitous.
It should be no surprise, then, that Shift4 processed over 3.5 billion transactions for over 200,000 businesses in 2019.
But… there are two critical features that differentiate Shift4 from Square, which could supercharge the Shift4 growth narrative over the next 5 to 10 years.
First, Shift4 is omni-channel.
Square does have the market’s best and brightest physical payments solutions. But the company’s online presence is minimal. Shift4, meanwhile, is all about creating an omni-channel payments ecosystem that connects offline shopping with online shopping, so that merchants that do business across multiple channels can be covered with one streamlined solution.
Omni-channel is the future of shopping, so Shift4’s leadership in omni-channel payments processing is a huge competitive advantage.
Second, Shift4 has QR code payments.
It’s a novel, breakthrough technology that enables consumers to order and pay their bill at restaurants and retail shops by simply scanning a QR code with their phones. No waiters. No sales associates. Just a phone and a payment method.
Considering the current environment, contactless payment methods that simultaneously reduce labor costs are the future – and Shift4 has a leading solution for this future.
Thanks to these two critical advantages, Shift4 is optimally positioned to gain share in the secular growth non-cash payments processing market over the next several years.
As the company does, Shift4 stock will soar.
So… if you’re looking for the next Square to supercharge your portfolio, look no further. Shift4 stock is your answer.
6) Hypergrowth in the Green Economy: GrowGeneration (GRWG)
There has never been a better time to get bullish and stay bullish on pot stocks.
Why? Favorable legal developments.
The cannabis megatrend is all about legal developments. The demand is there. We know that. Just look at the black market for cannabis. That’s a $70 billion industry in the U.S. alone – and a multi-hundred-billion-dollar industry globally.
Thus, the cannabis megatrend isn’t about generating new demand for weed. It’s about transferring the already enormous demand for weed from the black market to the legal market.
That transfer was supposed to start back in October 2018 when Canada legalized recreational weed. But Canada botched the roll-out of legal weed by being too restrictive on taxes and distribution. Demand stayed in the black market. Other countries took note, and proceeded to put their own cannabis legalization efforts on hold.
The tide, however, is finally starting to the turn — and the “Great Transfer” of cannabis demand from black market to legal market is finally getting started.
In 2020, Canada has significantly eased cannabis market restrictions, and created a better legal framework which is starting to pull demand from the black market into the legal channel. For the first time ever, legal pot spending in Canada topped black market spending in the second quarter of 2020.
At the same time, U.S. legalization efforts are starting to gain serious momentum. During Election 2020, five states had cannabis legalization on the ballot. All five passed it, including some traditionally conservative states like Montana and Arizona. Meanwhile, Democrats will control the White House and both chambers of Congress for the next two years — which, of course, provides enhanced visibility towards potential federal cannabis decriminalization and legalization.
If you’re keeping score, that means Canada’s legal cannabis market is on the cusp of finally coming into its own and the U.S. legal cannabis market is ready to come to life.
It doesn’t take a rocket scientist to connect those dots.
The global stage is set for the long overdue “Pot Stock Boom” to finally arrive – and for this disappointing industry to shift into a new, never-before-seen hypergrowth gear. Right now, one of my favorite ways play this emerging growth opportunity is with GrowGeneration (GRWG).
The bull thesis on GRWG stock is very simple — it’s the emerging “Home Depot for Marijuana.”
Growing cannabis is not a straightforward, easy process. Most of the time, it requires a specialized process called hydroponics. Hydroponics is basically just a soil-free way of growing cannabis (and therefore, an easier, cheaper and more scalable way of growing pot). Demand for hydroponics supplies will soar as the U.S. cannabis market matures and scales. But the current state of the hydroponics industry is not ready for this surge.
There are about 1,000 hydroponics stores in the U.S. The market is highly fragmented. There are no big brands. There’s zero consistency across markets. And online and omni-channel capabilities are limited.
That’s where GrowGeneration steps in.
Founded in 2014 in Colorado, GrowGeneration is a specialty hydroponics retail chain that is trying to consolidate, optimize and modernize the cannabis supplies market. Ultimately, the company is trying to turn into a modern, national go-to convenience store for cannabis growers — much as Home Depot is a convenience store for home improvement experts, and Petco is a convenience store for pet owners.
GrowGeneration wants to be that for cannabis growers. And it’s executing very strongly toward that goal.
The company has leveraged a strategic acquisition strategy to expand its branded GrowGeneration hydroponics store base from about a dozen stores in 2017, to 39 stores in 2020. That number is expected to rise by another 41% over the next year to 55 stores.
These stores are geographically located where legal cannabis demand is most robust, like California and Colorado. They are also accompanied by a rapidly expanding e-commerce business. As such, each store is seeing its sales surge. Comparable store sales at GrowGeneration stores rose 58% in the fourth quarter of 2020.
This combination of rapid store base expansion and significant comparable sales growth is powering huge revenue growth. Fiscal 2020 revenues are expected to rise 140% year-over-year. This growth isn’t expected to slow anytime soon. Next year, revenues are expected to rise another 80%.
Zooming out, GrowGeneration has a goal of turning into the Home Depot for Marijuana, and it has executed almost flawlessly over the past few years on that goal.
So long as management continues to execute like this, GRWG stock will turn keep pushing higher.
7) Hypergrowth in Global E-Commerce: Wayfair (W)
All of these fears about the end of Covid-19 marking the end of the shift to buying furniture online are significantly overstated.
In fact, they are dead wrong.
Covid-19 was the impetus for a permanent acceleration in home retail sales moving online, and for this retail vertical to be largely digitized over the next decade.
Here’s the story.
Prior to Covid-19, consumers were selective about what they bought online.
In certain verticals where they felt the physical shopping experience didn’t offer them anything that they couldn’t get online — such as consumer electronics (43% digital sales penetration in 2019) and apparel (30% digital sales penetration) — consumers shopped online. In other verticals — like home goods (13% digital sales penetration) — consumers stuck to physical shopping because they felt that online compromised the shopping experience (you aren’t able to “see” and “feel” a new furniture piece on a website, for example).
Covid-19, however, shut down physical stores, and forced everyone to shop online for everything.
When that happened, consumers realized that their preconceived notions about the shortcomings of online furniture shopping have been made antiquated by significant technological advancements in the past few years.
Enter Wayfair (W).
Wayfair’s stock has been a beacon of strength in a struggling market, as the company has actually benefitted from the Covid-19 crisis since physical retail stores are closed and consumers have been forced to shop for furniture and home décor online. Heading into September, Wayfair stock was up 240% year-to-date.
Then, everything got flipped on its head.
Pfizer (PFE), Moderna (MRNA), and AstraZeneca (AZN) all announced — one after the other — that their Covid-19 vaccines were all proving to be 90% or more effective in preventing infection under certain scenarios. Together, these announcements make it crystal clear that we are indeed in the final stages of the Covid-19 crisis.
Big win for the stock market. Big win for the economy. And big win for humanity. But a big loss for Wayfair stock.
On fears that Covid-19 going away and the physical economy reopening in 2021 will reduce traffic to Wayfair.com, Wayfair stock has shed about 30% since August.
This sell off is unnecessarily short-sighted.
For example, Wayfair has developed robust AR (augmented reality) technology so that consumers can now “see” a furniture piece in their home. Wayfair has also created a large reviews system, too, which allows shoppers to gauge how other consumers “feel” about the product.
So, the whole “seeing” and “feeling” advantages of physical furniture shopping are overstated.
Meanwhile, Wayfair leverages data-driven algorithms to curate a feed of relevant products for consumers (something physical retailers cannot dynamically do). Plus, Wayfair has fleshed out its logistics so that furniture pieces ordered online can arrive to your doorstep within days (if not sooner).
And, of course, Wayfair allows you to do all of that by just sitting at home and clicking a few things on your phone or computer.
In other words, online home retail shopping today is far more convenient than physical retail shopping, while also just as robust in terms of product selection, shopping process, delivery times, etc.
All the obstacles of online home retail have been removed– and consumers are aware of that, thanks to Covid-19.
That sets the stage for the online home retail space to follow in the footsteps of the online consumer electronics and online apparel categories, and rapidly digitize over the next several years.
Wayfair stock is at the epicenter of this secular digitization
Long-term, the home décor retail market will pivot largely online, and Wayfair is the Amazon of this space. So buy the dips in Wayfair stock for huge long-term gains.
Editor, Hypergrowth Investing