The news this week seems to be discouraging. There are several stories we could focus on, but I want to look at a positive spin on one of the news events that is causing concerns for many.
The delta variant of coronavirus is pushing the number of cases, hospitalizations, and deaths back up. This is obviously a concern, but, from an economic perspective, the worst is behind us in the United States. The chart below shows when countries will economically recover from the global pandemic, based on getting back to pre-pandemic levels of GDP per capita.
Source: Visual Capitalist
According to this metric, the United States returned to pre-pandemic levels a few months ago. We know that this doesn’t mean everything is just like it was in 2019. Some things will never be the same in some sectors of the economy. But some things might actually be better than they were.
What We Know Is Different…
Shopping is one those activities that won’t be the same but may be better in some ways. Online shopping for everyday items is now more fully integrated into the routine of many households.
For example, online retailers have benefited from this shift. As The New York Times reported:
Amazon has eclipsed Walmart to become the world’s largest retail seller outside China, according to corporate and industry data, a milestone in the shift from brick-and-mortar to online shopping that has changed how people buy everything from Teddy Grahams to teddy bears.
Propelled in part by surging demand during the pandemic, people spent more than $610 billion on Amazon over the 12 months ending in June, according to Wall Street estimates compiled by the financial research firm FactSet. Walmart on Tuesday posted sales of $566 billion for the 12 months ending in July.
Walmart experienced rapid growth in the past year, with sales growing $24 billion. At the same time, the value of everything people bought on Amazon rose by nearly $200 billion. Some are concluding that this means retail is moving online, but the truth is there is room for both online and brick-and-mortar sales. In fact, there are unexploited synergies between the two.
Shopping mall owner Simon Property Group (NYSE: SPG) noted:
…by returning purchases to the store rather than by common courier or by the US mail, carbon emissions can be reduced by up to 40 percent.
Online returns are a growing problem in retail, with studies showing online returns doubled in 2020 to $102 billion with apparel returns as high as 40 percent of items ordered online. Stores are the most sustainably friendly option for processing returns and offer retailers a clear economic advantage: higher save-the-sale/cross-sell rates and lower return shipping costs.
Only seven percent of retailers proactively promote and encourage shoppers to return online purchases to stores despite these environmental and financial benefits and even though shoppers prefer the speed and convenience of making a return in person and the peace of mind of receiving an immediate refund.
How I’m Trading Right Now
Simon found that 69% of shoppers believe returning to the store is more convenient and this would also lower costs for retailers.
This demonstrates that Simon believes its properties retain relevance in the online world. The company is one of the largest landlords in the world with about 179.9 million square feet of gross leasable area (GLA) in malls and outlet stores. The company’s 113 malls usually have at least one department store anchor big box retailers with a wide variety of smaller stores connecting the anchors. Additional stores are usually located around the parking area.
Simon also operates 69 Premium Outlets that are generally located close to major metropolitan areas or tourist destinations in addition to several other retail properties like strip malls.
While many worry about the financial future of landlords, Simon reported that “as of December 31, 2020, approximately 91.3% of the owned GLA in malls and Premium Outlets was leased and approximately 95.3% of the owned GLA for [other malls] was leased.”
Simons is back on track to increase its cash flow in 2021, and technicals confirm my bullish outlook for the stock. SPG is on an Income Trader Volatility (ITV) “buy” signal.
Action To Take
SPG does look like an investment with long-term potential. But my focus is on trading this stock for a short-term income opportunity.
We can do this by selling put options. If you’re not familiar with how this works, that’s okay. For now, just know that this is a good short-term alternative to holding SPG for the long-term.
With this strategy, we can express our bullish sentiment on SPG by betting that it won’t fall below a certain level — and if it does, we’re willing to potentially buy it. In return, we get paid immediate income for our trouble. Thanks to the proven tools we use over at Income Trader, we’ve been able to make successful trades more than 90% of the time with this strategy. In fact, we didn’t have a single losing trade last year.
Want to learn more about how this works? Go here now.