Pent-up demand. Get used to that term because it is going to define the next part of this bull market.
Investors have been treated to endless new reasons to buy stocks during the pandemic. We had a gigantic stimulus that sent thousand dollar checks to people – whether you needed them or not – along with bountiful unemployment benefits.
Then there was the bifurcation of companies that actually performed well in a pandemic, like the tech companies that thrived on the cloud not the on premise central office. The pandemic pulled through digitization and the adoption of the internet that we didn’t expect to see for several years.
After that we had the work from home tsunami that triggered hundreds of billions of dollars in home buying and house renovation to turn bedrooms into school rooms, gyms and offices. You couldn’t have just one PC anymore. You needed one per person and they had to be powerful enough for gaming and entertainment or a new TV was installed. You needed Sonos, had to have a Peloton, and bought everything from Grand Theft Auto number whatever to a Fire Stick or Roku (ROKU) enabled TV replete of course with Netflix (NFLX) and technology that allowed you to see all sorts of clothing and furniture before you bought it.
Next? The used car bull market. We saw dramatic increases in everything from Lithia Motors LAD and AutoNation (AN) to AutoZone (AZO) and Carvana (CVNA) . The booming used car market then bled down to the real auto makers and we are seeing the first turn in ages at Ford (F) and General Motors (GM) . Their stocks are electric and, speaking of electric, the EV bull market’s been white hot. You couldn’t use Uber (UBER) if you moved out of the city to the suburbs when you wanted to get around. But don’t worry about Uber or its competitor, the soon to come public DoorDash, as they have become the lifeline to restaurants trying to get you your delivered dinner.
Then there was the Chinese comeback which brought orders for agriculture, elevators, sneakers, cellphones and lattes for consumers as well as capital goods like engines from Cummins (CMI) , trucks from Caterpillar (CAT) , copper from everywhere and, most important oil. They’ve all been on a run.
After that we got the hope from pharma, hope for an end to the pandemic, for treatment for the disease from Operation Warp Speed tossing out tens of billions of dollars to anyone who had a hope a wing and a prayer of defeating the scourge. It’s not just the Modernas (MRNA) and the Pfizers (PFE) , it’s the Illuminas (ILMN) and the Thermo Fishers (TMO) , the PCR equipment makers. Swab companies, testing companies. You name it.
Now with the advent of the distribution of the vaccine, first in the United Kingdom and soon here? We’ve got the new “Pent up Demand” bull market and it is just starting.
Let me list some so you know where to go. Exhibit A? Boeing (BA) . The Max is back, although I think they should just call it the 737 as branding can be everything. I believe there is so much pent up demand for travel when we beat this thing that airlines will be clamoring for the most tested, arguably the safest plane ever, the Boeing flagship that’s going to make the companies fortunes.
Can you imagine, you have a whole cooped up world, led by the United States, and suddenly you are going to be able to go somewhere? What do you think that will do to the stocks of United Airlines (UAL) or American (AAL) , which recently did a secondary that everyone cleaned up on? How high will it propel Wynn (WYNN) or Las Vegas Sands (LVS) , especially when Macau hits its stride.
Where’s the most obvious place you go when you are vaccinated and can show some your inoculation ticket? How about Disneyworld (DIS) ? With this news about the UK, I wonder if Americans are, today, not taking any chances, and taking down rooms in Disneyworld or perhaps even the closed Disneyland.
The cruise lines? I don’t think that the buyers can wait for those stocks, which have had endless tiny rallies on any good news. Now there’s even rallies on bad news. You want pent-up demand? Norwegian Cruise Line (NCLH) extended its suspension of cruises for two months and the stock went up anyway.
The travel agent stocks are going higher and you are beginning at last to see the break out of Alphabet (GOOGL) , as Google is by far the winner when it comes to ordering tickets. It’s been doing well on the cheating of American students who are studying from home but now it has a real tailwind.
Pent up demand’s behind the next leg of the oil stocks – remember I like Chevron (CVX) and Pioneer (PXD) , they go higher. They will run ahead of the commodity because they have stopped aggressive spending. Now that Exxon (XOM) has preserved its dividend you can sense a temporary bottom unless Biden takes aim at them from the get-go.
Even the pathetic banks are doing better. They all trade together so pick one and don’t’ sweat the program. If you are bereft of ideas buy the stock of American Express (AXP) as it is the official pent-up demand stock of the group.
I know, I know, I am not forgetting what’s really going on, the millions and millions of people who work for companies that aren’t going to get to the promised land because they have rent, heat bills, insurance and electric bills to pay but are closed by the pandemic. About 14 million people are in that jam and Senator Mitch McConnell, who, perhaps unwittingly, has become the best friend of Costco (COST) , Walmart (WMT) , Home Depot (HD) and even Amazon (AMZN) , seems determined to doom small business on the altar of helping out states that didn’t vote for President Trump. McConnell couldn’t’ stop the movement up in Kohl’s (KSS) or Macy’s (M) or Five Below (FIVE) and the off price retailers. He’s gaze seems to be more fixed on wiping out the private, hand-to-mouth restaurant and retailers.
The failing businesses, though, are going to create another big round of buying in the stocks of Darden (DRI) and Brinker (EAT) , Chipotle (CMG) and the other restaurants that have scale, and Marriott (MAR) which is going to survive the onslaught of few customers and an aggressive Airbnb.
The great news about the pent-up demand rally? While these stocks have been creeping up they are now going to explode higher as one after another of the cruise lines, the apparel companies, the airlines, and the myriad companies that make parts for Boeing are going to force Wall Street to raise numbers and price targets.
We’ve been going up for ages. We are due for some bad news, maybe lots of stock that needs to be sold to welcome Tesla (TSLA) into the S&P 500 or some talk by Joe Biden that capital gains rates are going to ordinary income rates if the Dems win in Georgia. But otherwise, these pent-up demand groups can run for ages, especially because, alas, there’s almost no near term demand whatsoever so it can only go up from here.
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