The Capitalist Investor - Episode 36

The staycation trend is here to stay. Everyone has been forced to live in their homes 24/7 for months on end. Thousands of vacations have been canceled. And people are realizing that they can invest money into their homes to make them a place they actually want to be. People are investing in remodels, building patios, installing pools, and even putting in home gyms. How do you take advantage of these trends in the market? Listen to this episode of The Capitalist Investor to hear our discussion around the staycation trend—and how to trade it.

Outline of This Episode

  • [0:25] The staycation trend—and how to trade it
  • [6:13] No need for season tickets for the Cavaliers
  • [7:34] Recognizing the value of the outdoors
  • [9:35] Are staycations here to stay?
  • [13:48] Play this trade through the homebuilders
  • [16:33] DIY on the rise: Home Depot and Lowes
  • [18:40] Cornering the home gym market
  • [22:18] One store is making a comeback

The staycation trend is here to stay

2.5 million travelers a day were coming through US airports pre-COVID. At their lowest point during the crisis, TSA saw a record low of 100,000 passengers trickling through. Now, they’ve leveled out around 500,000 a day—which is $2 million short of normal. No one is traveling right now because of the level of restrictions and concerns for their safety.

A lot of people didn’t realize they didn’t love their homes until they were locked inside of it 24/7 for 90 straight days. There’s no place to take your kids during a lockdown, so you NEED some form of entertainment at home. So what are people doing?

People are turning their homes into their own private resorts. Families are taking the money they would’ve spent on vacation(s) and dropping it on building patios, redoing their kitchens, building fire pits, etc. They’re eliminating their guest bedrooms and turning them into home offices or home gyms.

Once people begin to really love their homes, they’ll stay there more. If you can put the value into your home and actually use it, it’s a great benefit for a lot of people. If it’s not a permanent change, it will at least be a continuing trend.

Invest in the homebuilders

So where could you invest your money? Homebuilders. Lower-priced new homes are in-demand right now—but few and far between. My hairstylist recently made an offer on a house and was in competition with FIVE other bidders. Derek and I have watched the Cleveland market our whole lives and it’s NEVER been like this.

The inventory of existing homes has been declining for the last decade. Because of the low home inventory, making a play on home builders could be a good move. The business model for a home builder is to scale quickly, not have a lot of variation, and crank things out. You can build 10 houses at the same timeframe a custom home is built.

So investing in stock such as D.R. Horton, Pulte, or Ryan could take advantage of the upward trend of home building that we think will continue.

For the DIY’ers: Home Depot and Lowes

Many retail stores have been absolutely crushed—but not Home Depot and Lowes. It’s tough to find a contractor right now. I can’t get a contractor to my house to install an outlet for 60+ days! So a lot of people are doing their own DIY projects, which is boosting the necessity for Home Depot and Lowes.

Plus—depending on how worried you are about COVID—Home Depot has an answer for you. You can come into the store, order online and get it delivered, or order online and pick it up curbside. If there was a publicly-traded company that made pools—I would invest in them in a heartbeat. But places like Lowes and Home Depot are your best bet for taking advantage of that market.

Cornering the home gym market

Having a gym in your own home is one of the greatest things about owning your own home. It’s convenient—and you’ll be more likely to work out. The best play to take advantage of this growing trend? Peloton. The stock is in triple-digits this year, so most of the gains are behind you.

However, they’re changing people’s perspectives on gyms and they have the market cornered. They’ve also extended their market share by adding a treadmill and launching an app. Even if you don’t have the bike, the app is a game-changer. It’s $13 a month of high-margin recurring revenue. It’s a way to play the personal wellness category overall.

What else could you consider investing in that we would’ve never guessed 5 years ago? Listen to find out!

Resources & People Mentioned

Connect with Derek Gabrielsen

Connect With Mark Tepper

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Keep Listening to The Capitalist Investor:
Episode 41:
The Rise of Sports Betting and the Ways to Play It, Ep #41
Episode 2:
Is the Stock Market Overvalued?
Episode 3:
Impact of a Bernie Sanders Presidency
Episode 4:
Coronavirus, Pandemics, and Your Money
Episode 5:
What We Consider A Smart Investment Strategy, Ep #5
Episode 6:
Why Investing In IPOs Is Not A Good Idea, Ep #6
Episode 7:
How a Joe Biden Presidency Will Impact Your Portfolio, Ep #7
Episode 8:
Special – Coronavirus and the Economic Shutdown, Ep #8