Tuesday, February 16, 2021
Thanks to the pandemic, the world is buying more and more goods online.
I know what you’re probably thinking right now: “Thanks, Captain Obvious!”
But hear me out, would ya? Because most investors are responding to this trend in the wrong way.
By that I mean that they’re blindly snapping up shares of “Captain Obvious” e-commerce investments — most notably, e-comm pioneer and poster child, Amazon.com (AMZN).
Yet, I’ve been encouraging you for months to focus on names that are under-the-radar and less obvious — because they have significantly more upside potential.
Like the ProShares Long Online/Short Stores ETF (CLIX), which, since early December, is trouncing the returns of Amazon, rising over 15%.
But today, it’s time for me to reveal another opportunity in e-commerce…
This opportunity is far less obvious — and in all likelihood, it’s far more profitable.
So let’s get to it…
All E-Commerce is Not Created Equal
When it comes to e-commerce, plenty of obvious investments other than Amazon come to mind — from Shopify (SHOP) and Alibaba Group (BABA), to Walmart (WMT) and eBay (EBAY).
The only problem? Like I said, they’re obvious, and therefore, they’re overcrowded trades.
As you might expect, these companies are boring mega-caps, with market caps ranging from $43 billion to more than $1.6 trillion. So they’ve already enjoyed their massive run-ups.
Sorry. But we’re not looking to be late to the profit party here.
Heck no! Remember, being a profitable trend trader means getting in early, ahead of the majority of Wall Street.
The good news is, in the e-commerce sector, that’s still entirely possible…
We just need to adopt a "BASF approach."
Let me explain…
Behind the E-Commerce Scenes
As some of you may recall, BASF, the German chemical giant, used to have a marketing campaign with a fascinating slogan:
“At BASF, we don’t make a lot of the products you buy. We make a lot of the products you buy better.”
Well, if we’re looking to mint a fortune today in e-commerce stocks, we should focus on the companies that could use a similar slogan — something like this:
“At XYZ Corp, we don’t operate the e-commerce site you buy from. We make the e-commerce site you buy from better.”
Put another way, to profit in the e-comm sector, we need to move away from investing in the obvious e-commerce players, and start investing in companies that enable these companies.
These first derivative (and therefore, non-obvious) opportunities offer us the chance to position our portfolios on the leading-edge of the trend, rather than the lagging-edge.
And I’m convinced there’s no better such opportunities than e-commerce logistics companies.
Think about it...
Every online purchase needs to be delivered. Delivery is the essential component to completing the online transaction satisfactorily. Especially since the biggest factor motivating online buying isn’t cost, but how long it takes a customer to receive his or her package.
In other words, consumers have no problem whatsoever paying up for speed and convenience.
As a result, if anything goes wrong with transport or delivery, consumers are liable to resort to in-store shopping again. Or at least consider taking matters into their own hands.
And to really drive home the point, let’s get down to some hard data…
A recent presentation from prominent venture capitalist Benedict Evans shows that nearly $500 billion in e-commerce revenue is tied to parcel delivery.
What’s more, that number would need to grow by 5x before this growth is exhausted.
To put this in even plainer perspective, think about the logistics required to run the U.S. Postal Service (USPS).
It’s a massive operation, right? And because the government runs it, it’s a massive money loser ($9.2 billion in the last fiscal year). But I digress.
Now consider that Amazon is delivering more and more of its own packages. That’s a massive logistics and profit opportunity.
In fact, based on the revenue the USPS generated from its business with the e-commerce giant in 2019, it’s an opportunity that offers upwards of $3.9 billion in potential.
So again, we shouldn’t be looking to blindly buy Amazon…
Instead, we should buy the logistics companies that help Amazon deliver those packages better.
I already told you about one possibility last week (see here)…
And in the coming weeks, I plan to share even more of these opportunities.
Ahead of the tape,