What Is The Re-Opening Trade?

Currently, we are at the cusp of huge global economic revitalization. More people get vaccinated every day and governments all over the world are already easing covid restrictions. It is hard to deny that we will be living with the virus for a while, even beyond herd immunity, but we can do so fully without major restrictions as many states like Florida have proven, the state is expected to reach herd immunity by Summer. The whole US is expected to reach herd immunity by the end of the year.

Summer and travel season is coming and there is a lot of pent-up demand out there. Most of us spent last summer locked in our houses or taking walks around the block. There was not even a thought about taking a vacation. 2021 will surely be different for many. I predict that the summer will see a higher than expected traffic of travel and activity. We might still be a little skittish about spending time in crowds or eating in restaurants but this will soon change.

So what exactly is the re-opening trade? The term is used for the current transition from pandemic darlings like Amazon, Clorox, and Costco to companies that will do better in a world where covid restrictions are eased or lifted. This is not a judgment on the companies that did well during the pandemic. The thought here is that the nature of demand will change as people continue to return to normal. It is likely that we will see pandemic stocks fall, but they will remain very valuable in the long term as consumers will continue to use the products they have grown accustomed to. Here are 3 points why I believe consumers will come out and play this summer.

Extra Cash$$$

People will be receiving a $1400 stimulus check per person, and dependent. Together with the stimulus or unemployment that most people have already received, we are looking at some serious liquidity. I am not saying that everyone had the means to save all that money, but some did. Even if the money wasn't saved, people likely paid off some bills, or maybe even credit cards. If you weren't a small business owner, chances are you made more money than you would have made if 2020 was a regular year. Even if that money is not here anymore there might still be the lingering effect of feeling a little more "spendy" than usual.

Companies want you to come out!

There will be a marketing onslaught of deals, rebates, and travel coupons to encourage people to travel and stay in hotels, casinos via planes, trains, and automobiles! Don't think companies have sat around all year waiting for the virus to pass, many companies have been successfully experimenting with reopening for a while now. Disney World Florida reopened in July 2020 and no transmission of cases has been reported.

Many people will be vaccinated

Thus, they will not be too concerned with catching a virus and more able to live their regular life. Remember, what a buffet was like? Places, where strangers gather like dancefloors and cinemas, will soon just be normally awkward again.

My point is that we will soon see a form of normalcy return to the world. Even the UK is reopening schools in March, even though they opted to keep bars closed for now. Companies that lost much of their business last year will not want to repeat it this year and will do anything to make sure the customer is safe and that the experience is comfortable. For this reason, I have been recommending Carrier (CARR) for months now due to their global HVAC business that is a frontline weapon against Covid-19 because the HVAC systems can easily be equipped with a UV light to kill viruses. Many commercial properties should opt for this upgrade to ensure their customer's safety, especially restaurants and movie theaters.

Something else to note is that many companies that have been highflyers during the pandemic will begin to report "disappointing" earnings because the hyper-demand of the pandemic is dwindling. We don' need to get our toilet paper from Amazon anymore, Zoom will be continued to be used but some offices will reopen. We will still need masks but I would not be surprised if the demand falls sharply soon, the same is true for Lysol. So we should not be surprised if some companies that worked overtime during the pandemic see a transition to normal.

Thanks,

The Punkrock Capitalist