Although many companies in consumer-oriented industries continue to struggle, others have benefitted from society’s need to socially distance. Here are five stocks that have successfully accelerated digital adoption through the pandemic along with three in hard-hit categories poised to thrive once coronavirus inoculations become widespread.
In general, we like companies that have strong, entrepreneurially minded management teams with clearly defined avenues to gain market share. While many people think only of high tech and e-commerce companies when it comes to disruption, we believe innovation can – and should – happen in any industry.
Although some companies have struggled with lower sales since March, others have found that the pandemic turned headwinds into tailwinds. In light of the new reality, we looked for companies that could use the downturn to their advantage. Ultimately, it was about finding the right management teams using the right business models and carrying the right balance sheets.
Carvana [NYSE: CVNA] (Carvana Co. 2.20% of portfolio), an online retailer of used cars, is one of many companies benefitting from increased e-commerce. We like it because it uses an innovative approach in a very fragmented market of about $1 trillion. Carvana’s direct-to-consumer model features no-haggle prices, making it a much better experience than going to a typical used car lot. It has grown from annual revenues of $853 million three years ago to about $5 billion this year. As the runaway industry leader, we believe Carvana can continue to grow its market share at a high level for many years even if significant competitors appear.
Another company that’s benefitting from the accelerated move to virtual interactions is (DocuSign [NASDAQ: DOCU] (DocuSign Inc. 3.22% of portfolio), in which we are long-term investors. DocuSign is now widely used in a variety of interactions – everything from signing for a package to buying a house. The company is building other services around the entire contract life cycle to make it even easier to conduct business digitally. Its ability to capture data and extract insightful analytics can also be monetized.