By: Tom Gentile
on February 1st, 2021
January 4, 2020 was a whirlwind day. First, the S&P climbed to an all-time high of 3769.99, then tanked to a daily low of 3662.61. Was this a sign of impending doom? Had the Covid crash of March 23, 2020 reared its ugly head, again? Or would the promise of COVID vaccines bolsters the trading market?
One thing we know for sure is that COVID-19 has changed our world. Social distancing and mask wearing requirements (in one form or another) are here for the foreseeable future. As are remote work plans, food delivery, online shopping and marathon streaming sessions.
Eventually, our world will recalibrate, but aspects of the new normal are here to stay. With these changes come opportunities. It may be the right time to embrace and capitalize on these changes.
Unique Market Opportunities Created During the Pandemic
If you are like many of us, 2020 kicked your shopping from home habit into high gear. Retailers adapted to this new purchasing model and placed their products online. Malls became quieter, and the internet became busier.
Simon Property Group (NYSE: SPG) is a shopping retail investment trust (REIT) that closed many stores during this past year. The growth of the online shopping sector will likely cause this REIT’s stock price to continue falling.
- Office Space
While some of 2020’s stay-at home-orders have expired, many businesses and employees have decided to stick with their at-home workplan. The biggest casualty of this trend is commercial real estate.
The Real Estate Select Sector SPDR Fund (NYSE: XLRE) is the home of many REITs. This sector has not recovered. The worst performer in this sector is Boston Properties (NYSE: BXP). Boston Properties manages office space. In October 2020, its stock hit a record low and there are no immediate signs of recovery.
Energy consumption has fallen during the pandemic. People are not driving as often, nor are they boarding planes as frequently. Although the airline industry does seem to be recovering to a certain extent, it’s nothing like it was pre-pandemic.
HollyFrontier Corporation (NYSE: HFC) produces jet fuel and has been hit hard by the reduction in air travel. This company is in a precarious position. Individuals interested in trading the entire energy sector can look into Select Sector SPDR Energy Trust ETF (NYSE: XLE)
Just as shopping has changed, so has TV viewing. While people are staring at their screens more, the way they access content has changed. Providers like Netflix, Amazon Prime, Hulu and YouTube TV don’t need the help of ratings companies to track viewing trends. They can do it themselves.
Nielsen Holdings (NYSE: NLSN) stock price tanked in April 2020 and will likely continue this downward slide.
The “How To” of Trading a Bearish Stock
There are two ways to capitalize on these bearish stocks. First, you can short sell. When you short a stock, you sell the stock and then buy it back at a lower price for a profit. My preferred method for trading bearish stocks is to buy a 30-90 at-the-money PUT OPTION. As the stock price falls, the put option climbs. The put option method can dramatically improve your ROI.