One of the lingering impacts of the Covid-19 pandemic is the supply chain disruptions that continue to bedevil many sectors. By now, every investor is aware of the global chip shortage that is disrupting many sectors that were projected to have strong growth in 2021.
But there are many more sectors that are being affected by supply chain disruptions. And this affects everything from big-ticket items like cars to everyday items like pet food and even bacon.
The focus of this special presentation is seven companies that stand to benefit from the current disruption in the supply chain. All of these companies delivered strong gains in 2020. Some of them have weakened in 2021, but that was before the full extent of the supply chain weakness was discovered.
As the economy reopens, the shortage of items is likely to continue and become much more notable. When they do, many of these stocks may get overpriced. That’s why now is the time to get in on these stocks that can help you work the supply chain in your favor.
Quick Links
- Lumber Liquidators
- Chewy
- Tyson Foods
- Zillow Group
- Crown Holdings
- Vista Outdoors
- Carvana
#1 - Lumber Liquidators (NYSE:LL)
Homebuilders are becoming increasingly exasperated at the lumber shortage. Many builders are now attaching escalation clauses to their contracts with consumers to account for the rapid, and hard to predict, increases in lumber prices. In fact, the lumber shortage is adding an extra $36,000 to the cost of a new home.
Lumber Liquidators (NYSE:LL) stands to be a big winner as many consumers are turning to high-margin vinyl flooring as an alternative. That is playing out in the company’s recent earnings report in which the company beat on earnings. Revenue was more of a mixed bag. The company fell short of analysts’ expectations, but the number was still higher on a year-over-year basis.
But investors are a fickle bunch and they were expecting more. Or maybe they are becoming weary of companies being unable to provide guidance due to supply chain disruptions. LL stock is down 26% in 2021 and nearly 10% since April 21.
About LL Flooring
LL Flooring Holdings, Inc, together with its subsidiaries, operates as a multi-channel specialty retailer of hard and soft surface flooring, and hard and soft surface flooring enhancements and accessories. The company offers hard and soft surface flooring including, waterproof hybrid resilient, waterproof vinyl plank, solid and engineered hardwood, laminate, bamboo, tile, and cork products; and flooring enhancements and accessories, including moldings, underlayment, adhesives, and tools, as well as Duravana, a hybrid resilient flooring under the Bellawood, Coreluxe, ReNature by Coreluxe, and Duravana brand names.
Read More - Current Price
- $0.00
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $1.00
#2 - Chewy (NYSE:CHWY)
Chewy (NYSE:CHWY) allows investors to take advantage of several emerging trends. The first is the continuing growth of the pet sector. Pet adoptions spiked during the pandemic as many Americans decided spending more time at home was a good reason to add a furry family member.
The second trend is that the surge in pet adoptions has led to a shortage in pet food that Supermarket News says may last into 2022. And that is likely to be a catalyst for Chewy which is becoming a significant player in the e-commerce sector, the third trend that makes CHWY stock a buy. Chewy has managed to do something that’s not easy – carve out a niche against Amazon (NASDAQ:AMZN).
Chewy stock is down almost 30% in 2021 and much of that is based on the expectation that the company will not be able to maintain its year-over-year growth. But the stock is looking oversold which sets nimble investors up for a nice reversal.
About Chewy
Chewy, Inc, together with its subsidiaries, engages in the pure play e-commerce business in the United States. It provides pet food and treats, pet supplies and pet medications, and other pet-health products, as well as pet services for dogs, cats, fish, birds, small pets, horses, and reptiles through its retail websites and mobile applications.
Read More - Current Price
- $33.72
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 14 Buy Ratings, 9 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.60 (2.6% Upside)
#3 - Tyson Foods (NYSE:TSN)
Where’s the beef? Sorry, couldn’t resist. But meat prices continue to be on the rise as grocery chains are continuing to find it hard to keep up with demand. Tyson Foods (NYSE:TSN) makes this list because they produce two items: hot dogs and bacon that are projected to be in short supply as the economy reopens.
The reason is simple. President Biden was right when he was saying Americans could gather for cookouts. In fact, they’re already doing so and that trend will be likely to continue as the northern states enter the warmer summer months. Tyson has been raising wages to help incentivize workers to keep up with demand. However, the company should be able to pass along those costs to consumers at least for the remainder of the grilling season.
TSN stock is up 25% this year but the pace of growth has slowed in the last month. Opportunistic investors can use this consolidation as an opportunity to grab more shares for the next leg up.
About Tyson Foods
Tyson Foods, Inc, together with its subsidiaries, operates as a food company worldwide. It operates through four segments: Beef, Pork, Chicken, and Prepared Foods. The company processes live fed cattle and hogs; fabricates dressed beef and pork carcasses into primal and sub-primal meat cuts, as well as case ready beef and pork, and fully cooked meats; raises and processes chickens into fresh, frozen, and value-added chicken products, including breaded chicken strips, nuggets, patties, and other ready-to-fix or fully cooked chicken parts; and supplies poultry breeding stock.
Read More - Current Price
- $58.02
- Consensus Rating
- Reduce
- Ratings Breakdown
- 1 Buy Ratings, 6 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $60.67 (4.6% Upside)
#4 - Zillow Group (NASDAQ:ZG)
Prior to the pandemic, America was dealing with a housing market with low supply that was offset by weak demand. That supply-demand equation changed dramatically in 2020 and now it’s a seller’s market. Some landlords are moving to get rental homes on the market to take advantage of the premium price that any home can command.
Zillow Group (NASDAQ:ZG) benefited from this trend in 2020. The stock is up over 100% in the trailing twelve months ending May 21. But like several stocks on this list, ZG stock is down for the year as many investors believe that growth will slow dramatically as more Americans go back to old habits of looking at homes in person.
That may be true. But as we’ve seen throughout the pandemic the economy has allowed companies like Zillow to show consumers that the paradigm shift is possible, even with something as hands-on as buying a home. The company fits well with the millennial and Gen-Z consumers that will make up a lot of the market.
About Zillow Group
Zillow Group, Inc operates real estate brands in mobile applications and Websites in the United States. The company offers premier agent and rentals marketplaces, new construction marketplaces, advertising, display advertising, and business technology solutions, as well as dotloop and floor plans. It also provides mortgage originations and the sale of mortgages, and advertising to mortgage lenders and other mortgage professionals; and title and escrow services.
Read More - Current Price
- $73.77
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 5 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $72.71 (1.4% Downside)
#5 - Crown Holdings (NYSE:CCK)
Aluminum is suddenly a commodity that is now in short supply. This is happening at the worst possible time as beverage manufacturers are looking to capitalize on live events sparking demand. Crown Holdings (NYSE:CCK) is a leading supplier of aluminum cans.
In the last 12 months, CCK stock is up 77% and is up over 10% in 2021. Currently the consensus opinion of analysts is that Crown Holdings will see slower growth. In fact, the 12-month price target only shows about 10% of additional growth. However, technical analysis of the stock chart shows the price moving higher with increased volume which is traditionally a bullish indicator. And the company pays a dividend which allows it to score well for value-minded investors.
And with sustainability and climate change becoming hot button issues in 2021, investors should note that Crown Holdings was recently recognized as being in the Top 10 of Climate Change Performers on the 3BL Media’s 100 Best Corporate Citizens List of 2021.
About Crown
Crown Holdings, Inc, together with its subsidiaries, engages in the packaging business in the United States and internationally. It operates through Americas Beverage, European Beverage, Asia Pacific, and Transit Packaging segments. The company manufactures and sells recyclable aluminum beverage cans and ends, glass bottles, steel crowns, aluminum caps, non-beverage cans, and aerosol cans and closures.
Read More - Current Price
- $83.05
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 10 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $106.62 (28.4% Upside)
#6 - Vista Outdoors (NYSE:VSTO)
Manufacturers of exercise bikes benefited from consumers sheltering in place in 2020. But sales of leisure bikes also rose by as much as 120% during the pandemic. As a result, new bikes are in short supply. The shortage in bikes and bicycle parts is likely to continue into 2022.
Vista Outdoors (NYSE:VSTO) is not a pure-play in this sector by any means. However, with VSTO stock investors are getting exposure to the broader category of outdoor activities that has propelled the company’s stock to grow by over 375% in the last 12 months.
Growth like that always raises the question of whether there’s anything left in the tank. At this time, VSTO stock is showing consolidation near its 52-week high at the same time the S&P 500 is also near record highs. This is a bullish setup pattern that is likely to push the stock higher in the short term.
About Vista Outdoor
Vista Outdoor Inc designs, manufactures, and markets outdoor recreation and shooting sports products. in the United States and internationally. The Kinetic Group segment designs, develops, distributes, and manufactures ammunition, primers, and components for hunters, recreational shooters, federal and local law enforcement agencies, and the military.
Read More - Current Price
- $44.63
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 6 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $41.20 (7.7% Downside)
#7 - Carvana (NYSE:CVNA)
The last stock on this list is Carvana (NYSE:CVNA) which addresses the shortage in new cars. As consumers look to unleash their pent-up demand many are turning their eyes to a brand new car. The problem is that the global shortage of semiconductor chips is disrupting the supply chain.
That means that more consumers are turning to buy used cars. As has been written at length, the pandemic is changing entrenched habits. Increasingly consumers are becoming comfortable buying big-ticket items such as homes and cars online.
CVNA stock is up 159% in the last 12 months. However, the stock is up just about 4% in 2021. That has some investors wondering if they missed the run. The question is why. And the answer seems to be interest rates. If that’s the case, it’s not hard to see the stock moving up higher.
Carvana is not a stock for the faint of heart. It’s still not a profitable company. However, with earnings beginning to improve, it may be worth a place in your portfolio.
About Carvana
Carvana Co, together with its subsidiaries, operates an e-commerce platform for buying and selling used cars in the United States. Its platform allows customers to research and identify a vehicle; inspect it using company's 360-degree vehicle imaging technology; obtain financing and warranty coverage; purchase the vehicle; and schedule delivery or pick-up from their desktop or mobile devices.
Read More - Current Price
- $224.46
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $222.71 (0.8% Downside)
The reopening of the economy is happening quickly. The rise in vaccinations is helping to prevent the community spread of the novel coronavirus. More importantly, both hospitalizations and fatalities from Covid-19 are dropping. With that good news, Americans are doing what they do. Whether that’s shopping or attending live events, the net result will be good for the economy.
As you can see in this presentation, there are many sectors that are affected by supply chain disruptions. And if you’ve been to the grocery store, I’m sure you can add others to the list. One of my amusing ones is replacement charcoal filters for my coffee maker. Really? Yep, there’s not one to be found at my local grocery store.
But when you’re aware of these shortages, you easily understand the opportunity that’s right in front of your eyes. And nimble investors will use that realization to invest in the companies that stand to benefit from strong demand.
More Investing Slideshows:
