Remember when we divided companies into those that could thrive in a COVID environment and those that would falter? It turned out to be surefire way to make money with companies like Zoom (ZM) and Clorox (CLX) seeing extraordinary growth and concomitant stock price accumulation.
Those days are long gone. We now have a new standard: is the company now doing better than it did not in 2020 - almost all are because of the shutdowns - but in 2019, a year that was of the halcyon variety when everything was going right not wrong with the world.
It turns out to be a pretty exacting standard. Consider Zoom, the company that changed so many of our lives and brought about the notion of rigor for working at home. It's growth is still good, but not great and we really can say that this was a pandemic stock. Are Zoom's growth days done? No, not at all. But it's a darned expensive stock even after its 17% decline last week when the company talked about slowing growth. Clorox? A stock that declines from $240 to $168 tells the tale of growth stalled and a meager 2.75% yield protecting those who own it. Both companies have seen valuations ratcheted down because reigniting their growth could require acquisitions, nothing organic.
Now, though we are beginning to see the birth of companies that have caught fire during the pandemic and the conflagration has raged even stronger, much stronger than even 2019. We saw such comparisons in Signet Jewelers (SIG) , which has seen both sales and margins expand versus those days. Chipotle (CMG) is having little problem crushing 2019 and doing so in many cases because of digitizing their throughput and delivery. I've been impressed with the numbers DoorDash (DASH) has put up post the raging days of the epidemic as ordering in has become a staple, even as people are excited to go to restaurants again.
RH (RH) , formerly Restoration Hardware, is crushing 2019 numbers with its luxury prices for luxury goods. It's become not just a store, not just a gallery but a destination, especially when it opens its 70 acre British estate filled with RH ideas and concepts. AMC (AMC) just experienced a weekend that exceeded its compare from 2019. Am I necessarily recommending a company with a high debt load and a business that's challenged on many fronts? No, but who would have thought that AMC could best 2019 even at a time when the Delta variant rages. Contrast that with the airlines, another leisure business, are cratering numbers. Neither the business nor the pleasure traveler has returned in abundance, the former truly perhaps a thing of the past.
DocuSign (DOCU) has changed peoples' minds about how to do deals. Time spent on something like a house closing has been cut to almost zero. We aren't going back to the old way.
As amazing as all of these are I think we have found the winner and new champion when it comes to crushing 2019 numbers: Lululemon (LULU) . Last night the company reported a quarter that was 64% better than 2019 with expanding gross margins and impressive invention and share take. LULU management is saying they are in the "early innings" of growth and even though the company is no longer a wunderkind, call me a believer. Call others believers too as the stock has rallied 42 points to an all-time high.
There are not one but two things at work with this company and this stock. First, it's total addressable market expanded as we began to work at home and then, in some cases, returned to the office. It's clothes, comfortable and fashion-forward, can be worn in both environments. Second, short sellers thought that growth would be curtailed when people returned to the office. They are trickling back to the office but they are still in their LULU clothes. That's led to a short squeeze of tremendous proportions and I don't think it is over.
So when we look at companies, particularly growth companies in tech and retail, remember to ask yourself not how they did versus 2020, but how they compare to 2019. The numbers are eye-opening and the subsequent performances bountiful.
