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Investors should follow the online spending trend

Peter Switzer
5 April 2022

On my long walk last night I stopped twice to buy something online! And following a story that my colleague Ben Fordham on 2GB asked me to cover, I started thinking of a company that might be a big beneficiary of how we’ve changed since the pandemic struck, locking many of us up for months.

We’ve learnt that the pandemic has changed people. Employees want to work from home like never before and we’re all buying ‘stuff’ online like never before.

To make money out of stocks, you need to pick up on a trend before others see it. Because they believed in the future of electric vehicles and therefore batteries that use lithium, the early buyers of lithium stocks have made good money.

My wife Maureen religiously reads our subscriber newsletter The Switzer Report and one of our expert analysts saw the trend and came up with Novonix, which has gone from 36 cents in January 2020, before the Coronavirus crash of the market, to $6.92 today! Fortunately, she followed the trend.

Novonix (NVX)

Seeing is believing and getting in early on a major life-changing trend is a great way to make money out of stocks, but you can get the timing wrong.

On my long-distance buying last night (don’t think I’ve become a shopaholic who needs products any time of the day), I needed to check flight availability online and get a seat with legroom. And I’ve been wanting to go to a certain Melbourne restaurant for some time and tried to ring, but the answering machine directed me to go online.

The internet has taken over and will get bigger and bigger — that’s my tip, despite the fact that real-life shopping will survive, the whole idea of experiences while browsing will become bigger and bigger.

In today’s Daily Tele, Nicole Madigan tells us that “Australia Post’s latest eCommerce report reveals shoppers spent more than $62 billion online last year, increasing their collective number of purchases by a staggering 73.1 per cent in just two years.”

But this is the crunch point for investors: “The report found online shopping accounted for almost 20 per cent of total retail sales in 2021, and the type of products shoppers we're buying was also changing.”

Now you might think that ‘online only’ businesses have been the big beneficiaries - and they have been - but the big boys of retail have got in on the act. “Online purchases from variety stores like Kmart, Target and BIG W experienced a whopping 100 per cent growth in two years, with the most popular items being athleisure, baby products, footwear, pet products, tools and garden, sporting and outdoor goods, and women’s fashion,” Madigan tells us.

To me, my investing and even my media business are all about the numbers, and the one I seized on was this: “The report found online shopping accounted for almost 20 per cent of total retail sales in 2021”.

This means it’s still early days in the growth of online shopping so it’s not too late to get on the investing bandwagon into online businesses and retailers who’ll get more profitable because of their greater forays into the world of selling on the information superhighway called the Internet.

To see if expert stock watchers agree, I went to FNArena, which surveys the company specialists who analyse listed companies on the stock market. I selected a company like Kogan.com, but they didn’t see much upside for the company’s share price. It was a $22 stock during the 2020 lockdowns but has fallen from grace and is now $5.57.

On the other hand, the furniture online business Temple & Webster is another story.

While it was a $13 stock in 2020 with lockdowns making so many Aussies online dependent, its share price is now $6.65 but the analysts really like the company.

The consensus view is that the share price could be 84.4% higher, but that’s the average view of four experts. Macquarie’s company assessor is the least excited, seeing a potential rise in price of 45.86%, while Morgan Stanley guesses a 110.5% share price rise is possible.

Now, these are only ‘best’ guesses, and you can’t simply put your money on them and assume these analysts are going to be right.

However, these people do their homework on a company and must see a bright future for online shopping and a business like this to put such a big number on the potential price rise ahead.

It pays to pick up on a trend that looks like it’s here to stay, as the share prices of Microsoft, Amazon, Apple and Tesla have shown.

Microsoft (MSFT)

Now that’s the kind of chart you want to see for all your investments. Temple & Webster isn’t a company like Microsoft, which people use every day and have become addicted to their services, but given the potential of online shopping, it could be a good performer in coming years.

I guess if you want to play the online trend the safe way, just buy the big retailers, JB Hi-Fi, Harvey Norman, Woolworths, Coles and Wesfarmers, while Temple & Webster might be more for the thrill-seeker.

By the way, if you want to see what two fund managers think about the future price rises for tech stocks, check out last night’s TV show:

We also test out the proposition that a recession is coming.

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