If you would have said that as of today, nearly 41 million Americans would see jobless benefits in just over two months time, I would have told you that was crazy.
Yet, here we are.
The coronavirus pandemic has forced that many Americans to be laid off or furloughed as businesses around the country closed down to prevent the spread of the virus.
And there’s no telling how long this unemployment situation will last, even with businesses starting to open back up.
But that doesn’t mean there aren’t areas investors can find profit.
Banyan Hill Publishing’s Charles Mizrahi found two stocks that should do well once the economy starts to get back on its feet.
“Investing in these stocks could set you up for big returns over the long term,” said Mizrahi, the Editor of Alpha Investor Report.
How Unemployment Stocks Can Lead to Profits
Even though the stock market is up, the state of the U.S. economy is far from that.
A big driver of that is unemployment.
In April, the unemployment rate hit 14.7% — the highest it has been in more than 70 years.
That’s higher than the Great Recession in 2008 and 2009, and even higher than the recession of the early 1980s.
And Mizrahi said he believes it will only get worse.
“We’ve never even had a period like this in American history,” he said, “so we really have no idea how the economy will react when it opens up again.”
But the bottom line is that people are spending less and cutting back on discretionary spending. They aren’t buying nearly as many bright and shiny new things as they were before the economic collapse.
However, there are two unemployment stocks that are poised to grow despite millions of Americans being out of work.
This Part of the Automotive Sector Will Jump
Now I have been pretty bearish when it comes to the automotive sector.
If you remember, I recently called Ford Motor Co. (NYSE: F) a “bull trap” that will only go lower because some of its big customers are scaling back on buying new cars.
That trend is carrying over to individual consumers.
But that leads to another sector of the automotive industry that will soar, thanks to a slowdown in the U.S. economy.
O’Reilly Automotive (NYSE: ORLY) is an unemployment stock to really look at. It’s one of the largest aftermarket suppliers in automotive parts.
After hitting a low of $260 per share in March 2020, the company has rebounded to the tune of a 56% jump in share price. In fact, it is closing in on a new 52-week high.
Now, where this comes into play is because people still need cars to drive from place to place. To find work, to go shopping, to go just about anywhere.
Those vehicles are going to add wear and tear. But, with unemployment and the economy the way it is right now, people are less likely to spend thousands on a new car. Rather, they are going to want to keep their current vehicles operational as long as possible.
And that’s where O’Reilly Automotive comes into the picture.
Selling discounted aftermarket parts for vehicles will be the answer to people looking to keep their vehicles operating normally.
“Auto retailers this year are down on the year, and that’s where I see the opportunity, the ability to get into a good company at a semi-decent price,” Mizrahi said. “O’Reilly should have a nice trend up for the next several years as people fix up their old cars while the economy gets back on its feet.”
Cheaper Clothes Means Bigger Gains
No matter what the economy is doing, we all still need clothes, right?
With the uncertainty, however, we are less likely to want to shop for clothes at department-store prices.
That opens a huge door for Burlington Stores Inc. (NYSE: BURL). Burlington offers new clothes at deeply discounted prices.
“The company has high inventory turnover and really strong relationships with its vendors — vendors that are dying to get rid of goods,” Mizrahi said.
Before the stock market drop in February 2020, Burlington was trending upward. It dropped — along with everything else — but has regained more than 73% of its losses in short order.
Even when the economy starts to shift back upward, people are still going to get in line to save as much as 40% off name-brand clothes, and Burlington’s sales are going to skyrocket.
“With Burlington, the thing I like about it is that its customer base is everywhere, from people with incomes from $25,000 to $100,000,” Mizrahi said. “There’s something for everyone. I do like Burlington for the long haul as well.”
The bottom line is that no matter what this economy does — and there is no way to really predict that — people still need sufficient transportation and clothes to wear.
But if you have to choose between putting food on your table and buying a new car or an expensive pair of pants, I can guess which direction you’re likely to go.
With millions being out of work and the unknown of when that situation will change, these unemployment stocks will provide investors with profit now, and in the future.
