2020 has been a volatile year in many ways, and most people are happy to leave it behind. For the stock market, however, all was not bad. the S&P 500 The index gained 16% despite three-year lows in March.
There are many lessons that investors can learn from investing in the past year. One of them is that safe stocks – or companies that resist during times of economic upheaval – are an important part of any stock portfolio. But security doesn’t necessarily mean slow growth. Target, Etsy (NASDAQ: ETSY), and PayPal funds (NASDAQ: PYPL) are all sure-fire bets for continued growth in 2021 and for the long haul.
Americans’ favorite place to shop
Target was the biggest sales winner during the pandemic compared to suppliers of similar essential products. Here is a breakdown of comparable sales, by calendar quarter. (While not exactly an apples-to-apples comparison due to the different quarter-end dates, it should provide us with some useful insight into how each retailer performed during the different periods of the year. year.)
|Company||Quarter ending Oct./Nov. 2020||End of the July / August quarter. 2020||Quarter ending April / May 2020|
|Target (NYSE: TGT)||20.7% (ended October 31)||24.3% (ended August 1)||12.5% (ended May 2)|
|Walmart * (NYSE: WMT)||6.4% (ended October 31)||9.3% (ended July 31)||10.0% (ended April 30)|
Costco * (NASDAQ: COST)
|17.1% (ended November 22)||14.1% (ended August 30) **||7.8% (ended May 10)|
Target attributes a solid portion of its comparable sales growth to its digital sales channels. As a perspective, while digital origin sales only contributed 15.7% of total sales volume for the quarter ended October 31, this translated to 10.9 percentage points, or more than half of the retailer’s total comparable sales growth of 20.7%. In absolute terms, digital sales grew 155% in the third quarter, powered by same day options, which jumped 217%. Target has invested in its multi-year omnichannel program and was prepared for this time. It acquired same-day service company Shipt in 2017 and offers nearly every iterations of buying options a customer could ask for. The company plans to expand the Shipt product line in 2021 and introduce updated features across all services on the same day, to deepen its vision of the store model as a hub for Target. This model, which uses local stores instead of distribution centers to handle more than half of orders, results in improved customer satisfaction through faster delivery as well as lower costs for the business.
Target also owns 45 popular brands that offer contemporary fashion at affordable prices, like All in Motion, which launched in 2019 to participate in the athleisure trend, and the retailer is strengthening its beauty category – one of its most dynamic – by announcing a partnership with Ulta Beauty to offer 100 Ulta shop-in-shops in 2021, with the possibility of adding 100 more.
The retailer has also successfully played with store-size concepts, opening smaller stores in denser areas with an organized product line-up so customers can have a Target experience in areas where large-size stores don’t. not work. Target opened 29 small-format stores in 2020 and aims to grow to 40 per year.
The target is right where the retail business is heading, and the company is expected to record consistent gains over the next several years.
An e-commerce disruptor with a twist
Etsy offers a unique line of products that has reached the general public and is growing in popularity. The company sells handmade or one-of-a-kind items in its marketplace which is made up of thousands of sellers.
The company has dramatically improved its usability over the past few years and has established itself as a true shopping alternative. It was positioned to perform well during the pandemic and succeeded, with sales skyrocketing 128% in the third quarter ended September 30. Gross merchandise volume increased 120% and net profit increased 520%.
There are 3.5 million active sellers on the platform and 69 million active buyers. Active sellers increased 42% in the third quarter and active buyers increased 55% from the previous year. It is an important trend that I suggest investors keep an eye on, because previously the growth of sellers exceeded that of buyers.
Now the question is, how far can Etsy go and is its stock overvalued? Over the past three years, its shares have gained over 770%. However, growth must be viewed from the perspective of total market opportunity. Etsy took in less than $ 500 million in the third quarter, a tiny fraction of the total addressable market of $ 100 billion. Its higher growth during the pandemic could slow as the economy recovers, but the digital switchover is here to stay and the company has gained new customers in the past nine months. Considering how much more Etsy can increase sales, I wouldn’t worry about the valuation.
Fueling purchases during the pandemic and beyond
Many companies have had to backtrack to growth as the pandemic wreaked havoc around the world and collapsed in markets in March. But a privileged few flexed their muscles at that point as they racked up sales despite a failing economy. PayPal is the leader in digital payments, and its high-tech shopping options allowed businesses around the world to jump into the show when governments shut down physical stores.
the financial technology The company processed a record 36% increase in total payment volume, and revenue grew 25% in the third quarter ended September 30, and it expects similar numbers in the fourth quarter. And it continues to launch new options and products, like buy now, pay later installments, and a Venmo credit card that combines physical and digital wallets.
PayPal is accepted as a simple payment method in millions of online stores, but there is still room to grow. Digital purchases are still only a fraction of the total, but that is changing and PayPal is getting a bit of the millions of dollars spent. It has also acquired several companies, such as Venmo and Honey, which are expanding its reach. Investors should expect to see more of the good stuff from PayPal in 2021 and beyond.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.