How strong is the work-from-home, stay-at-home thesis? Is it, months into the pandemic, still working?
We've been getting some real tests of it, and so far all I can say is thing's a monster. Do not get in its way.
Let me give you a few examples, and you will know how ingrained it's become.
This morning an outfit called Icon Health & Fitness sued Peloton (PTON) , one of the hottest of the hot companies in this entire market. You may not know Icon, but I am sure you know NordicTrack and until Peloton came along, it was pretty much the state-of-the-art for the home gym. The patent they are suing on is a little abstruse, but you had to figure that Icon would be able to dent Peloton's stock. After all, Icon's huge; the NordicTrack bike's got a real look and feel of a Peloton -- at least from the ads -- and it's been around for years.
Nope, didn't matter. This morning, Bank of America (BAC) predicted a big holiday season for the replacement for many a spin class and that it has new products, like a lower-price treadmill that the analyst, Justin Post, says could be a big hit. The backlogs keep extending. So he upped his price target from $116 to $150.
Nordic Track lawsuit? Or Justin Post? The answer: Peloton's stock leaps 4% to a new high of $136.
When I go out with wise guys, people who think they know everything about the market, they often try to tell me that my love for Zoom (ZM) is ridiculous. The company's growing too fast, they say. Or it's a commodity soon to be caught by Ring Central (RNG) or Cisco's (CSCO) Webex. Or they make the point that it is just a matter of time before Microsoft (MSFT) moves in and crushes them.
Look, I don't know how to value the thing any more than you do. But I have to admit that its new products, whether it be the deal with Docusign (DOCU) that makes it feel like you are face-to-face when you do a deal or the Zoom product that lets you feel you are a concert or a Zoom phone that gives you the ability to make a private call while on Zoom, it all keeps the company one step ahead of all of those short sellers. So what if it sells at 50-times earnings? It's suis generis -- it's all by itself.
When I was at my old hedge fund, I would describe stocks like Zoom as entities that are trying to grow into their market caps. If we are going back to another lockdown, then it won't just be the people who work at home who have it. The universality will include everyone. That's why the stock hit its all-time high today.
Or how about the soon-to-be public Doordash's new initiative "Doordash for Work," which allows businesses to offer their employees meal benefits and food perks. Why not? Door Dash had a thriving business delivering food to the office. Now it's been reverse-engineered to follow employees wherever they are. I think this makes a ton of sense, because when you think about it, you don't want your employees taking long martini lunches, while they are working at home. Providing them food via Door Dash is a great way to seal that work-at-home deal.
You know what stocks have been total dogs for ages? The box makers. Companies like International Paper (IP) and Westrock (WRK) . They added too much capacity to meet the demand for delivery. It got so bad that they had to close mills and shut down the production. But not now. The stay-at-home economy has ignited even that bedraggled group. The price increases for linerboard are now starting to come, and I can tell you, as the son of a linerboard salesman, once they start going, the trajectory is straight up, given the lack of new capacity coming on. That means both International Paper and Westrock are just at the beginning of their runs, and even as the stocks have moved, I think with this stay-at-home strength you ain't seen nothing yet.
I can't believe that the homebuilders are back in focus, but when the illness flairs up, the low rates and the new homes coalesce to get people out of the cities once and for all. We have gotten to the point where it's acceptable for the CEO to show up only two or three days a week. Why should any peons venture in for all five days? Plus, there used to be a period where home sales were strong, because parents wanted to be sure to get their kids planted for the start of the school year. If all school is virtual, who cares?
Finally, with what looks likely to be the collapse of the stimulus bill, you can bet that even the inventive restaurants, the ones with the beautiful outdoor set-ups, are about to close up. Unless you are on base camp, one on the way to Everest, you don't want to sit outside in your parkas. That's how Darden's (DRI) stock now crossed $100, because it can afford to close its restaurants, refurbish them with nice Plexiglas, or at least nicer than I can afford, and take out all sorts of tables and stay in business anyway. Remember, these restaurants aren't always going to be like this. They are just waiting for the vaccine. So is Chipotle (CMG) . So is McDonald's (MCD) . Wendy's (WEN) . Yum (YUM) . The difference between them and the neighborhood bistro? The big guys don't care how long it takes to get that vaccine. In fact, if you didn't know any better, they had set up a joint coalition to wipe out the mom-and-pop restaurants staffed by members of the Republican and Democratic parties. The longer the better. The ideal thing for these big dogs? We get a vaccine right after the last of the independents folds.
Now, there are some outliers. The video game maker stocks have stalled. I don't get that at all. I told members of the Action Alerts PLUS club that they should be buying the stalled stock of Take Two Interactive (TTWO) as it should be a huge holiday season. I think that the internet FAANG stocks should have gone up, but they were held back by some European shakedown.
But in the end, this theme simply won't quit. Every time we have a new wave of illness, something that's easy to have -- given our aversion to masks, social distancing, and contact tracing, and our still too difficult to come by testing -- these stocks roar and I expect they will keep roaring until we have the long awaited vaccine.