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By Mallika Mitra
April 8, 2021
A trader works ahead of the closing bell on the floor of the New York Stock Exchange
Getty Images

It’s no surprise that hotel and airline companies are likely to get a big boost as Americans grab their suitcases. Nearly 20% of the country is fully vaccinated and, according to the Centers for Disease Control and Prevention, that means they can safely travel within the U.S.

But from eating in restaurants to shopping for office attire again, reopening the economy means a lot more than just jumping on an airplane. Here are some of the not-so-obvious winners of us (eventually) saying goodbye to COVID-19 for good.

Cosmetics

Soon, many will ditch their work-from-home pajamas and replenish their make-up stash. In a recent consumer survey, Wells Fargo analysts found that respondents choose make-up and beauty as the category they were most likely to return to first post-pandemic, even beating going-out apparel.

There’s also the “lipstick effect,” which refers to how consumers tend to spend money on small indulgences rather than expensive luxury items, like a purse, when money is tight. Cosmetics are cheaper but they also make people feel good, says Camilla Yanushevsky, a senior equity research analyst at CFRA: “They’re making a purchase that enhances their self image.”

(And money is tight: millions of American are still unemployed, and more than a third of respondents to a survey from Money and Morning Consult said their situation earlier this year was somewhat or much worse now than it was in February 2020.)

Ulta Beauty is one cosmetics company that could get a boost, Yanushevsky says.

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Off-price retailers

As people look for outfits they can wear to bars and restaurants, off-price retailers could snag some extra business as well.

“When there’s a widening wealth gap, when there’s challenging labor market prospects, people are more inclined to shop for bargains,” Yanushevsky says.

These retailers may also capture market share from 2020 department store bankruptcies and benefit from the anxiety of shopping in public places dissipating.

Burlington, Ross Stores and TJX Companies (which operates TJ Maxx, Marshalls and others) are among these potential winners, according to a recent note by Wells Fargo analysts.

Banks

Combine the economy reopening, with stimulus money from the government and cash Americans have stashed away for months and what do you get? Strong economic growth in the second half of 2021 and good news for banks, says Jack Ablin, chief investment officer at Cresset Capital Management.

There’s a stronger likelihood that borrowers will be able to pay back loans, increasing credit quality. Banks also have more ability to make money by borrowing overnight rates, which are close to zero, and lending out intermediate term interest rates like 10-year rates, which have jumped. Some of the largest banks are J.P. Morgan, Bank of America and Citigroup.

Meanwhile, consumer finance companies, largely made up of credit card companies like American Express and Capital One, have started to move with the more “obvious” pandemic recovery groups, like airlines and hotels, adds Kristen Perleberg, a senior analyst at The Leuthold Group.

Meta software

Last March, IT departments scrambled as companies were suddenly forced to get employees up and running from their homes. For some employers, like Twitter and Shopify, the trend has turned into a permanent model, while others will have workers in an office for only part of the week. They’ll need help supporting their IT changes. Enter so-called meta-software companies, software that software developers themselves use, says John Freeman, vice president of equity research at CFRA.

Businesses can be unwilling to adopt new technologies unless they’re forced to (if it ain’t broke, don’t fix it, as they say) but financial crises tend to accelerate digital transformation. “Companies learned their lesson,” Freeman says.

Now, they’ll rely on meta-software companies to help with the necessary digital shift. His top picks are ServiceNow, New Relic and Atlassian.

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Space

When you think of space stocks, you may picture rockets or astronauts walking on the moon. But the work of space companies actually hits pretty close to home, whether it be when your Uber driver or Amazon delivery uses GPS tracking, or when your family gets on a Zoom call from different corners of the world.

“Satellite communications are working behind the scenes to make sure people can stay connected,” says Andrew Chanin, Co-Founder & CEO of ProcureAM, the firm behind The Procure Space ETF.

The pandemic pushed many of these technologies to the forefront as companies have rushed to increase their remote working communication and connectivity capabilities, he adds.

ProcureAM’s space ETF includes the satellite television company Dish Network and broadcasting company SiriusXM.

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