Friday, Jun 19th 2020

Primed to endure


There seems to be growing conviction that many of the effects of COVID-19 will prove to be temporary.

That there will be full flights again. That corporate elevators will be densely packed. That restaurants will return to peak utilization. And ultimately, that the economy will return to its pre-pandemic state in no time.

Perhaps there is some truth to this. We sure hope so. But not everything will be the same - and some things for the better.

This is where the key to capitalizing on today's market lies: disentangling the passing trends from the enduring structural changes that COVID-19 will have.

To frame it simply: which aspects of quarantine are here to stay?

Amazon, in this regard, is a “prime” company to examine (Titan Co. since '18). In Q1, Amazon’s sales rose by +26% after the e-commerce giant benefited from a surge in purchasing during the initial lockdown (e.g., consumers bulk ordering essential goods).

As shops begin to reopen, many investors are unsure to what extent this upswing will last. Was the stocking-up simply a "pull-forward" of demand, setting AMZN up for an eventual drop in the stock?

Sure, Amazon’s activity may peak in the short term. But longer term? We believe COVID-19 has structurally altered the retail landscape in Amazon’s favor.

For example, older generations — who traditionally preferred to shop at physical stores— have now set up online Amazon accounts, adopting the digital world years sooner than many predicted. Meanwhile, COVID-19 has catalyzed the bankruptcies of brick and mortar competitors. The accelerated shift to e-commerce is a structural change Amazon is primed to endure.

You can spot other enduring changes firsthand. What else do you think is here to stay? Will you continue to pay for Zoom? Do you think your company will let you work from home more frequently? How does that change how you'll live your life? 

Behind these changes may be some lucrative investment opportunities.

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