Gregory Bergman
Editor-in-chief, CapitalWatch
You are not going anywhere.
Yes, even after that Pfizer thing. And neither are any of those cruise or airplane stocks. While the week began as the long-awaited rotation out of stay-at-home tech and into the beaten-down travel sector, the rotation already came and went. It lasted a whole day, long enough to sell those cruise stocks on the pop—I did.
Investors are now back to tech and stay-at-home stocks as reopening optimism confronts the reality of vaccine distribution hurdles amidst a rise in coronavirus cases in both America and Europe. To wit, on Tuesday, the number of people with Covid-19 at US hospitals for the first time topped 60,000. The COVID Tracking Project, a volunteer organization that compiles data on coronavirus cases, said the number as of Tuesday was 61,694. That's 2,024 more people than were hospitalized on April 15, the previous record.
Maskless in Minsk
There will be no cruise vacations this winter, at least not leaving from any U.S. ports. And there will be very little travel, particularly for the Americans lucky enough to have a job (unless you want to spend your measly two-week vacation quarantining in one of only a handful of countries that will let you in). If you have ever wanted to go to Belarus, now is the time—you don’t even need a negative Covid-19 test to enjoy all of what Minsk has to offer. Albania, Colombia, and Brazil are a few other countries Americans can visit without even showing a negative Covid-19 test, let alone quarantining on arrival. And from what the data show, you are probably less likely to contract Covid-19 on a crowded beach in Rio than you are at home with your family indoors. It’s just that whole getting on the plane bit I have a problem with.
Looks like it’s time for a staycation. You could always watch Anthony Bourdain on Netflix travel to exotic locales. And if you become envious of him, just remember that he traveled a lot—and now he’s dead. Food for thought?
So, if you need an escape from your family and your life, just barricade yourself with a wall of pillows, and dive into the world of fantasy—from films to video games. Here are some staycation stocks to consider while you sit out this winter's storm.
Escape to the Strange World of Anime Advertising
While for many of us social media offers less of an escape and more of a heightened version of the real and horrible world, Snapchat is booming in popularity, its stock price appreciating in kind. Snap, Inc. (Nasdaq: SNAP) jumped on a 52% increase in revenue, fueling $56 million in adjusted profits compared to a $42 million loss in the same period of last year. The company also added more than 11 million daily active users for the three-month period.
After the stock fell back a bit, it rose as much as 7% Thursday on reports of its “augmented reality strategy.” The augmented reality (AR) technology will enable users to superimpose computer-generated images over pictures or videos they shoot themselves. While Snap has been incorporating AR elements for some time, Deutsche Bank published a note raising its price target on SNAP from $40 to $48, fueled by optimism regarding its AR technology’s advertising usefulness and overall positive effect on the company’s e-commerce potential. Basically, think of an ad where an influencer of some kind superimposes a virtual version of a cool sneaker they may want to buy on their feet. Inane? God, yes. But the $4 billion potential market for AR lens and filter advertisements Deutsche Bank mentions is enough to make you buy the stock on the dip today—you should.
Escape to the “Movies”
While the kids are Snapchatting their teenage years away, escaping into a world of anime-laden advertising and creating strangely compelling images of themselves with dog ears, you can spend your time during the holiday lockdown looking to Netflix and Disney for an anachronistic escape into the world of cinema.
Netflix (Nasdaq: NFLX) and Disney (NYSE: DIS) are good bets for the holiday season; the 11% pullback in Netflix of late makes this streaming stock a buy at these levels. Disney’s recent reporting of strong growth in streaming subscribers in fourth quarter earnings Thursday exceeded expectations. The stock popped, and I would wait for a pullback to buy. Long-term, however, Disney is a buy even at these levels as it is emerging from Covid-19 as a Netflix-level streaming peer with all those theme parks that will, eventually, reopen.
No matter if you stream Disney or Netflix, do not expect to see too many new shows. A recent survey performed by Hub Entertainment Research showed that most new subscribers sign up not from advertising but from word-of-mouth, usually about a specific show. And the data showed that 74% of consumers who sign on to watch specific show, end up sticking with the service even after they’ve binged-watched said show. This may indicate that these streaming services do not need as much original programming as once believed to attract and retain customers.
Great. So not only no movie theaters but fewer original programs to stream. Thank God for The Crown.
Call of Boredom: Video Game Stocks
Another way to escape the drudgery of winter lockdowns is through immersing oneself in the world of the video game. As a consumer, the last video game I bought (or rather was bought for me), was Sega’s “Alex Kidd in Miracle World” because, well, I am old. While Sega is a private company, its 1980s rival Nintendo (OTCMKTS: NTDOY) has seen explosive revenue growth this year. And while the stock has moved on these figures, it never moved like some of its gaming peers. While excitement over competing consoles may overshadow Nintendo this holiday season, get into the stock before the company’s 2021 launch if its console the Switch 2.
Another underappreciated Japanese stock is Sony (NYSE: SNE). A conglomerate, Sony does so many things that in the minds of investors none of those things stands out—kind of like my career. Shares may have risen over 140% in five years, but the stock has never ballooned to where many argue it should. Even launching its much-anticipated gaming console, the PlayStation 5, the stock rose but did not catch fire. Expect the stock to take off over the holidays and, more than any other gaming-related stock, Sony’s history of safe, steady, albeit not extraordinary stock market price appreciation makes it a buy long-term irrespective of how it performs this Xmas season.
And don’t worry if you can’t seem to find the PlayStation 5 in stock (Walmart and Best Buy have already sold out) you can buy it on Ebay if you like for upwards of $32,000—the going price for the console this afternoon at some resellers on the e-commerce site, according to CBS News. Or you can be cheap and buy the equally unavailable Xbox Series X for a mere $8,000. Video game nerds may debate which provides the better gaming experience, but Xbox offers more sheer computing power. Microsoft (Nasdaq: MSFT), maker of the X box, is also a buy at these prices—the stock has historically risen in the two months before the end of the year.
If you can’t afford either gaming console even at the usual retail prices of $299 for Xbox and $499 for the PlayStation, buy a whopper or two at Burger King and hope to win the latter. Burger King’s Parent company Restaurant Brands International (NYSE: QSR)—which also owns Popeyes and Tim Hortons—is a buy even after the recent pop. The company, slow to see fast-growing consumer requirements of digital ordering and drive-thrus during the pandemic, is finally making the needed improvements. That stock will come out of Covid-19 a winner.
Take-Two Interactive for the Second Wave
Pure video game stocks have skyrocketed this year due to Covid-19. Stocks like Take-Two Interactive (Nasdaq: TTWO), Electronic Arts (Nasdaq: EA) and Activision Blizzard (Nasdaq: ATVI) have seen an insane boost in sales and in their stock prices. However, historically, unlike Microsoft, stocks in pure video game and console makers have not consistently risen on the eve of Christmas. All three companies have their respective gaming blockbuster products: Activision has Call of Duty, Electronic Arts has the sports games Fifa and Madden, while Take-Two Interactive owns the infamous Grand Theft Auto franchise. While I like Electronic Arts on the pullback from its highs, I like Take-Two Interactive in this stock grouping. The company has $2.28 billion in cash and short-term investments and no debt: That is a game worth playing both short and long term.
Finally, if you are like me and you are more interested in escaping via the actual NFL than the virtual one in Madden, bet on the games (or Fantasy Football) at Draftkings.com. Also bet on the stock. Shares of DraftKings (Nasdaq: DKNG) jumped nearly 5% Friday on better-than-expected sales in the third quarter.
As for my Super Bowl pick, I’ll take the team that whose star quarterback doesn’t wind up on a ventilator.
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Gregory Bergman
Editor-in-chief, CapitalWatch
(The opinions expressed in this article do not reflect the position of CapitalWatch or its journalists. The analyst has no business relationship with any company whose stock is mentioned in this article. Information provided is for educational purposes only and does not constitute financial, legal, or investment advice)
