Our theme of E-Commerce Stocks which is comprised of U.S.-based e-commerce companies as well as logistics, and payment players, has underperformed year to date in 2022, declining by about 25%, compared to the S&P 500 which remains down by about 7%. There are a couple of factors weighing the theme down. Firstly, the big e-commerce surge that was seen through the lockdown phase of the Covid-19 pandemic is now cooling off and this is reflecting on revenue growth rates and stock prices in the theme. For example, e-commerce bellwether Amazon saw its U.S. sales grow by just about 9% in Q4 2021, compared to a 40% growth rate in the year-ago quarter, while its international e-commerce business actually contracted. E-commerce stock prices are likely correcting a bit to adjust for slower growth going forward. Moreover, the ongoing supply chain issues, labor shortages, and rising inflation are also impacting logistics companies and e-commerce players. For perspective, Amazon’s e-commerce division posted an operating loss over Q4, partly due to labor supply shortages and inflationary pressures.
So what’s the outlook like for e-commerce stocks? We think near-term returns could remain limited, given the concerns about the broader economic recovery, amid Russia’s invasion of Ukraine and rising commodity prices. The Federal Reserve has also started to raise interest rates and it could make high-growth, high-multiple stocks slightly less attractive to investors. That being said, the long-term outlook remains bright, as the Covid-19 pandemic has accelerated the trend of online shopping and the changes in consumer behavior should benefit e-commerce focused companies. Within our theme, Carvana stock (NASDAQ:CVNA) has been the weakest performer, declining by about 41% year-to-date. On the other side, UPS stock (NYSE:UPS) has been the strongest performer, rising by about 4% year-to-date.
While e-commerce players are gaining at the expense of brick and mortar retailers, check out our theme of Fintech Stocks for a list of companies that could potentially disrupt the $1.5 trillion-plus U.S. insurance and financial services industry.
What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since the end of 2016.