Some of the world’s top money managers are betting on a post-pandemic spending boom that will boost real-world companies as economies reopen and people go back to their normal lives.
Investors from Aberdeen Standard Investments Inc. and GAM Investments to UBS Asset Management are increasingly pouring money into companies where face-to-face interaction is the norm — things like travel companies, restaurants, off-line shopping and “consumer experiences.”
“A lot of people are estimating this is really going to lead to a new ‘roaring 20s’ theme,” said Swetha Ramachandran, the manager of GAM’s Luxury Brands Equity fund, referring to growing views that post-pandemic spending will hark back to the excesses of the 1920s. That’s when euphoric consumers piled into a wave of spending after the first World War and the 1918 flu pandemic. “There will be a lot of peacocking” as people start socializing, she said.
Investors began piling into cyclical stocks that benefit from an economic rebound late last year following good news on the vaccine front, while pulling back from high-valued technology stocks. The rotation accelerated as Treasury yields rose in mid-February. Now with stimulus checks wending their way across the U.S. — the beneficiary of half the $2.9 trillion in savings amassed globally during the pandemic — consumer stocks are in for an even bigger pick-up.
To be sure, no one’s saying that the pandemic is near-over. Europe is facing a slow vaccine rollout, with renewed restrictions on day-to-day life in some countries, while the seven-day average of new U.S. Covid-19 cases has soared, showing that cases stateside are rising again and threatening a return to normal life. Digitization is here to stay — no retailer is going to go back to a pure bricks-and-mortar world.
But a short-lived shift into consumer discretionary stocks in November, when the “reopening” trade became fashionable, has room to catch up. A sub-gauge of global energy shares is the best performer by sector since the end of October, up 53%, while the index for consumer discretionary is only 17% higher.
In fact, the gauge for global consumer discretionary shares is expected to return 17% over the next 12 months, according to Bloomberg-compiled data, while the S&P 500 index is estimated to rise 12%.
“People want to travel. They want to see family that they haven’t seen in a long time. They want to go out with friends,” said Donny Kranson, European equities portfolio manager at Vontobel Asset Management.
Theme parks, airlines, and even beer is back.
On the travel side, funds are betting on staycation-friendly hotels like Marriott International Inc. and home-sharing firm Airbnb Inc., theme parks like Six Flags Entertainment Corp., and even U.S.-listed Chinese online travel agency Trip.com Group Ltd., based on interviews with Miller Tabak + Co., Scottish Investment Trust and AGF Investments Inc.
Marriott has gained 11% this year so far, while Airbnb, Six Flags and Trip.com have advanced 19%, 41% and 11%, respectively. They have all outperformed the S&P 500 in 2021.
Restaurant chains like Cheesecake Factory Inc., and alcohol brands popular at largely shut nightlife venues, bars and restaurants such as Heineken NV, Anheuser-Busch InBev NV and Pernod Ricard SA, which distills Absolut vodka, are also in play.
Large, suburban shopping centers that have adapted and allow for socially-distanced shopping should also do well, said Calum Bruce, fund manager at Ediston Property Investment Company.
Perhaps the biggest change money managers see in consumer appetites as life goes offline is the “premiumization” of tastes in food, autos, cosmetics and apparel. Jimmy Choo-owner Capri Holdings Ltd. in the U.S. and more affordable luxury brands like France’s SMCP, which owns labels Maje and Sandro, are seen as benefiting if the reopening theme plays out.
Even higher-end brands like Gucci owner Kering SA and China’s biggest stock, Kweichow Moutai Co., are must-haves as people trade up, say some fund managers.
“In markets like China, strong premiumization trends are visible across segments such as beer, dairy, spirits, cosmetics, condiments, branded foods and four-wheelers,” said Shou-Pin Choo, portfolio manager for Asian equities at UBS Asset.