Market Health

Back-to-School Stocks: What Investors Need to Know

We’re entering my favorite time of year.

It’s not my favorite because I love fall or the cornucopia of pumpkin-spice-flavored goodies. Or because I’m a fan of winter. (In fact, I hate all those things.)

I love this time of year because it’s the busiest season for trend traders like me.

And despite the pandemic’s best efforts, the world hasn’t ground to a halt. Life adapts and pushes forward. We’ve witnessed this time and time again this year.

That’s why I believe that as we dive headlong into the final two quarters of 2020 (thankfully!), we’re going to experience record spending poised to reward investors.

Not That One… the Other BTS

K-pop – or Korean pop music – has exploded in popularity in recent years.

PSY’s “Gangnam Style” was only the tip of the iceberg.

In fact, a couple of weeks ago, the superstar K-pop group BTS shattered YouTube’s viewing record with the premiere of its music video “Dynamite.” The video garnered more than 101 million views in its first 24 hours.

Though BTS is a global phenomenon, today I want to talk about the other BTS… back to school.

The new school year is underway, but it’s obviously going to be very different from any year before it.

New clothes might not be a top priority with so much education shifted online. But investors shouldn’t fret. Those dollars – and more – are being spent elsewhere.

In fact, when the numbers are finally tallied, the National Retail Federation forecasts BTS (not the K-pop band) spending will top out at a record $34 billion this year.

That far and away destroys the previous high-water mark of $30.3 billion set all the way back in 2012!

And on top of this, back-to-college spending will also set a record of its own with a projected $67.7 billion.

These two combined will spill over $100 billion for the first time ever.

COVID-19 gutted sit-in dining out, movie theaters and other densely packed establishments. But it’s fueling a record rise elsewhere, especially when it comes to BTS. And there are going to be some clear winners in this trend.

BTS and Beyond

The true driver of the record BTS spending is the enormous demand for electronics – laptops, PCs, mobile devices, webcams, mics, etc. – as schools shift online.

Amazon (Nasdaq: AMZN) has undoubtedly been the biggest winner in the global pandemic.

And other e-commerce standouts such as At Home (NYSE: HOME), Etsy (Nasdaq: ETSY), Wayfair (NYSE: W) and more are riding the online shopping surge.

But we’ll see a BTS updraft, as well as the upcoming holiday spending splurge, benefit plenty of others.

Best Buy (NYSE: BBY) delivered exciting second quarter earnings as revenue grew 5.8% to $9.9 billion.

The company reopened its stores in mid-June and saw sales surge 16% year over year. And online sales more than tripled to account for 53% of U.S. sales.

That’s by far the best quarter for online shopping in Best Buy’s history.

But there’s another side of this equation we have to pay attention to.

In the years following the financial crisis, mainstream retailers found themselves in a fight for survival against Goodwill and other secondhand stores.

And we’re already seeing non-focused merchandisers, like At Home and Five Below (Nasdaq: FIVE), really start to pick up speed.

The quarantine and stay-at-home orders cut off Five Below’s sales. But now 90% of its stores are open.

And then we have Pan Pacific International‘s (OTC: DQJCY) discount store Don Quijote skyrocketing in popularity.

Last Thursday, as the broader markets tanked, it’s worth noting that shares of Five Below, as well as those of Kohl’s (NYSE: KSS), Macy’s (NYSE: M) and other retailers I tend to target around this time, bucked the trend.

Consumer spending touches more than 70% of U.S. gross domestic product. But it isn’t evenly spread throughout the year. Much of it is weighted in the final quarters of the year with BTS and seasonal holidays.

So get your shoes on, get up in the morning, drink a glass of milk and rock ‘n’ roll, because BTS – as well as the deluge of consumer spending holidays on the horizon – is here. And that’s going to send shares of certain retailers into the stars.

Here’s to high returns,

Matthew