Managing Editor’s Note: If this article seems familiar, it’s because we posted it back in June. However, it’s just as relevant now as it was then. With retail companies reporting their sales later this week, numbers could be all over the place. But you shouldn’t read too much into them. Because retail is still a strong trend … and experts are still missing the mark on where it’s headed.
— Annie Stevenson, Managing Editor, Winning Investor Daily
The “experts” were wrong again.
A few months ago, they were calling for an all-out crash. They even said certain industries may never recover.
It turns out they were dead wrong.
But this shouldn’t be a surprise to you. I’ve told you for months that these sectors will recover from this recession quickly. And the latest government numbers still prove us right.
So today, I’m showing you how we’ve been making money off the experts’ terrible call … and how we’ll continue to profit.
Retail Is the Backbone of the Economy
The experts said the fat lady was singing the death of retail, especially at malls. They believed consumers weren’t going to change their online shopping habits even after the economy opened up post-pandemic.
And auto dealers? Fuhgeddaboudit! Experts said that consumers would be too worried about putting food on the table. There’s no way that anyone would be buying autos.
Well, that’s not what happened.
Retail sales for both June and July caught the experts off guard. In fact, The Economist projected retail sales would increase by only around 8%. Instead, it came in at a whopping 17.7% for June and 7.5% for July.
Now, it’s amazing that these people get paid for giving advice and making predictions that turn out wrong like that.
Clearly, shoppers opened up their pocketbooks at malls and auto dealers. They blew the covers off the door exactly in the places experts said were going to be dinosaurs!
But the point I want to make today is: Retail sales are the backbone of the economy.
Why? The answer is simple. It’s a ripple effect.
Think about it. Stores buy from wholesalers, which buy from manufacturers, which buy raw materials, which need truckers, etc.
So, retail sales drive a large part of the economy. And when retail sales are higher, it’s a good sign. When retail goes up, other sectors follow, like manufacturing and financial. That’s what we love to see.
It means the recent numbers bode well for U.S. recovery from the coronavirus shutdown. It also means there are plenty of opportunities to profit, too.
And if you’ve been following along with my Alpha Investor updates and monthly issues, this should come as no surprise.
The Strongest Companies Will Weather the Storm
In April, I told you we were adapting for both our physical well-being … and our financial survival. I made sure I was only adding pandemic-proof stocks to our Alpha Investor portfolio. These are great businesses trading at bargain prices that should do really well even during a recession.
At the time, things weren’t all clear. The markets made a bottom just a few weeks before, and it didn’t look that good. But I still recommended a financial solutions provider I believed would weather the storm. It’s an industry-leading business with a great reputation.
We’re up over 30% on Broadridge Financial Solutions Inc. (NYSE: BR) in just four months. It’s not my only pandemic pick that’s doing well, either. We’re also up nearly 34% on HCA Healthcare Inc. (NYSE: HCA) in less than two months, too.
And what about the used car retailer in our portfolio, CarMax Inc. (NYSE: KMX)?
Based on what the experts said, the company shouldn’t be doing well.
But like I said before, humans will still need to drive to get around in the post-COVID-19 world. That’s not going to change much, especially if you don’t live near mass transit in a city. So, people still need cars to get around.
And the thing about cars is you still need to upkeep them. They need maintenance, especially old cars. The average age of vehicles on the road today is 11 years old. With 16 million people unemployed, they’re probably more concerned with fixing up their cars than buying new ones, too.
I don’t see people going out and getting new cars instead of fixing up their old ones or buying used cars — which are doing fantastic. And that’s where CarMax comes in. So, it’s still doing great, and we’re up over 33%.
The bottom line is that we’re just in the early stages of what I think will be a great recovery.
The Recovery Will Continue
Where the economy is going right now, I really don’t have much of an idea. I can’t tell you we’re going to be at X percent by Y time. I just don’t know. Nobody has a crystal ball.
But I can tell you that human behavior won’t change much for everyday things. People will still need cars to drive and will still keep them for longer. They’re still going to dress and need clothes. People are always going to look for deals — even more so during times of economic uncertainty.
So, to sum it up: Surprise, surprise, the experts were wrong. The key to making money is not by making predictions.
If you want to make money, and I mean the kind that could make a difference in your life … there is only one way: Buy great businesses when they are selling at bargain prices. It’s nothing more complicated than that.
All you have to do is take advantage of uncertainty and find great businesses that are financially sound and trading at attractive prices. That’s really it.
As the economy starts picking back up again, off-brand retailers will take off. People are still going to be driving and fixing up their cars. That’s just the start. Many states are just opening up. And I’ll continue finding and adding the best companies to our Alpha Investor portfolio that’ll soar during this recovery.
Remember, this isn’t a trend that’s going to be measured in months. It’s a trend that’s going to be measured in years. Keep in mind that past stocks I’ve talked about went up 500% to 600% from the lows of ‘09. That didn’t happen in a month. So, sit back and let the profits take care of themselves.
Editor, Alpha Investor Report