Three Big Investment Opportunities in the Retail Carnage

I concluded yesterday’s piece with the thought that 2020 could be a great year for commodity prices…

And in turn, Australian resource companies.

Just yesterday, iron ore miner Fortescue Metals Group Ltd [ASX:FMG] added weight to that argument by hitting all-time highs.

The company finally surpassed the previous price high of $11.71. A price last hit all the way back in June 2008.

In the last 16 months, Fortescue’s share price has tripled.

To me, this only confirms it:

If there’s one place Aussie share investors can make a buck, it’s in the resources sector.

That’s not to say there aren’t big risks there too, of course. If you don’t do your research or get sucked in at the wrong time, you can lose a bundle.

But the fact is Australia is blessed with all manner of minerals, and for the savvy, speculative investor, I see big opportunities here in the year ahead.

In infrastructure metals, in battery materials, and in mining technology.

An area I’m far less excited about is Aussie retail…

Download this free report now and discover Ryan Dinse’s three small-cap tech stock picks that could be set to boom in 2020.

You’d better like spots and stripes

This won’t be news to you.

Much ink has been spilled on the death of retail over the years.

Already, only three weeks into 2020, 161 shops have announced they’ll close in Australia this year.

Fashion retailers Harris Scarfe and Bardot were two big-name brands announcing new closures.

Indeed, I was only recently driving down the iconic shopping strips of Bridge Road and Chapel Street in Melbourne for the first time in a long while, and was shocked to see just how many ‘for lease’ signs were up.

There’s a flow-on effect to all this. And not just for retail investors and workers.

My sister who works in fashion design told me over Sunday brunch that textile designers — the people who create the patterns on your clothes — are losing business fast.

Big fashion brands that typically used to outsource textile designers are now prioritising saving costs, and using images from their existing stock of patterns instead.

Apparently, the word is out to stick to simple, classic designs like spots and stripes.

Safe and easy, these are considered more likely to stay in fashion for far longer than a more imaginative design might.

But there could be an opportunity for you in all this carnage too.

If you know where to look…

Three ideas in future retail

Facebook’s founder Mark Zuckerberg once said that in a world of rapid change the biggest risk is to take no risks.

That advice can apply to both businesses and investors alike.

It doesn’t take an Einstein to see the world of retail is changing fast.

Ever since the advent of the internet, change in how we shop has been coming.

Especially in recent years, the process of change seems to be growing exponentially. As a result, it’s having a much more dramatic effect on industry than in the past.

But that’s simply the natural course of exponential disruptions. They start off small and are often ignored.

Then they hit a tipping point and become unstoppable.

The mistake many people make is that they think of the process of change as a death. They forget that it’s also the birth of something new…

The fact is: People will always buy stuff. And retailers will always exist to sell it.

The story you know is the death of old retail. What I want to talk about now is the birth of new retail.

Because that’s where the investment opportunities lie.

Here are three areas set to thrive in the new retail reality of spots and stripes.

Idea one…

A senior executive at Coles told Inside Retail this week:

I have no doubt in the next 10 years, customers will be able to take the product off the shelf, put it in their basket, walk out and have it all paid for.

In fact, the technology already exists.

Amazon.com, Inc [NASDAQ:AMZN] has been trialling ‘no checkout’ tech in 20 stores in the US. You walk in to the store, swipe in with the app on your smartphone, then walk out with your shopping.

The tech relies on a combination of sensors and AI tech to predict what you’re likely to buy, and early testers say it works very well.

There are investment opportunities here for you in sensor tech, AI stocks, and innovative retailers like Amazon.

Idea two…

Automated logistics.

As the move from shopfronts to online retail environments gathers steam, a beneficiary so far have been the parcel delivery companies.

After all, they’re needed to deliver the packages to the customer.

But the corresponding rise in complexity has also thrown up a need for companies that can make the logistics process simpler and cheaper.

The opportunities here are diverse.

From companies like TuSimple that are testing automated trucks in the US, to AI-blockchain logistics software vendors like the ASX-listed Yojee Ltd [ASX:YOJ]…

Big things are set to happen in logistics.

Idea three…

Good old-fashioned property.

Well, the right property that is…

You can buy property funds (REITS) that invest in a certain section of the commercial property sector.

And while shopping centre-focused REITS have struggled (remember all those ‘for lease’ signs!), the values of warehouse-based REITS have surged.

That makes sense when you think about it.

All that internet shopping means a lot more stock going through warehouses on the way to the customer’s house.

Goodman Group [ASX:GMG], for example, returned more than 25% in 2019, way more than competitors like Dexus, GPT, and Scentre Group, which have more shopping centre exposure.

Goodman’s sole focus is on warehouse and logistics centres across 17 countries worldwide.

A new chapter in retail

As I said, retail is changing rapidly.

It’ll be bad for some and good for others.

But it’s not the death of retail as so many are saying.

It’s simply a new chapter.

And like any disruptive trend, the investment opportunities open to you are biggest if you can work out the winners and losers before the herd.

Good investing,

Ryan Dinse,
Editor, Money Morning

PS: We believe these rapid fire market opportunities are a fantastic way to grow your wealth. Which is why you’ll find us talking about the big trends that can uncover them. If that is something up your investment alley, then click here to learn more.


Ryan Dinse is an Editor at Money Morning. He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle. Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.  


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