The “Instagram Generation” Makes This $30 Stock an Instant “Buy”
Editor’s Note: Cannabis legalization is quickly expanding – and the industry is exploding along with it.
In 2020 alone, the cannabis sector brought in 77,000 new jobs. And national sales hit $18.3 billion.
It’s clear that this is one of the biggest wealth-building opportunities of the century… but only if you know where to look.
Thankfully, Bruce Linton has you covered. The “godfather of cannabis” is a well-known figure in the industry and has his hand in virtually every corner of the market.
So it’s no wonder our friend Matthew Carr, Chief Trends Strategist over at The Oxford Club, wanted to team up with him.
And he recently revealed exactly where he sees the cannabis market heading… and where investors could see the most profits.
– Ryan Fitzwater, Associate Publisher
As a loyal Trade of the Day member, you know that throughout these past 12 to 18 months, we’ve done an exceptional job of staying ahead of major trends.
We were the first to get protected against the COVID-19-based sell-off.
Next, we were prepared for the stay-at-home trades, followed by the economic recovery trades, the election-based trades and so on.
So now, as more than 130 million Americans get vaccinated and the country reopens, what’s the next big trend?
In my view, it’ll be a trend of vanity.
You see, for the last 18 months, we’ve all been looking at our faces on Zoom and noticing every imperfection.
Maybe your eyelids droop, maybe you have dark circles under your eyes, maybe you’re losing your hair or going gray, or maybe that double chin is just getting to be too unpleasant to look at.
Whatever the reason, I believe we’ll see a comeback in cosmetic plays.
From an investment angle, this sector is undervalued and quite overlooked. For us, it could set up a great opportunity.
Here’s a complete rundown…
When I say the cosmetics industry, I’m referring to any company that makes consumer beauty products, such as makeup, lotion, shampoo, perfume, hair dye and accessories. Cosmetics stocks – as represented by the Consumer Staples Select Sector SPDR ETF (NYSE: XLP) – have dramatically underperformed the broader market. The Consumer Staples Select Sector SPDR ETF has gained 13.4% over the past 12 months, which is far below the Russell 1000’s return of 46.9%.
Here are the names that I’m focusing on to outperform in this next COVID-19 consumer cycle.
E.l.f. Beauty (NYSE: ELF): This company provides mainly low-priced cosmetic products for the eyes, lips and face. In its fiscal third quarter of 2021 (which ended December 31, 2020), net income fell 46.3%, despite net sales rising 9.7%. Going forward, I believe it’ll clean this up and sales will continue rising.
Estée Lauder (NYSE: EL): This is the elephant in the room – as Estée Lauder markets a wide range of skin care, makeup, fragrance and hair care products. The second quarter of its 2021 fiscal year saw quarterly net earnings rise 56.3% and net sales grow 5%, but the stock dropped today due to earnings.
Ulta Beauty (Nasdaq: ULTA): As I’m sure you know, Ulta Beauty operates a chain of beauty stores throughout the U.S. It sells cosmetics, skin and hair care products, and fragrances, and it offers salon services. For a $300 stock, I think the options premiums represent a value, so I’ll be tracking them.
Revlon (NYSE: REV): As the most aggressive advertiser of this group, Revlon sells makeup, lotions, shampoos, perfumes, hair dyes and accessories.
In addition to these retail players, there’s also a handful of cosmetic surgery plays that could represent the most undervalued and unknown beneficiaries of this trend.
Here are the ones I like best…
InMode (Nasdaq: INMD): It designs, develops, manufactures and markets minimally invasive aesthetic medical products, which include procedures such as permanent hair reduction, facial skin rejuvenation, wrinkle reduction, cellulite treatment, skin appearance and texture changes, and superficial benign vascular and pigmented lesions treatments.
InMode’s technology is based on radio frequency applied directly to the skin, which eviscerates fat tissue below the skin without scarring. Its technology can be used to liquefy unwanted fat below the neck, arms and belly. It can also be used to remove acne and wrinkles, which offers results similar to those from plastic surgery without having to go under anesthesia, having a long recovery time and having to deal with scarring. The company is headquartered in Yokneam, Israel, which is why it’s not a household name. But the chart has been strong, which is why I like it.
Cutera (Nasdaq: CUTR): This name raised an eyebrow when I saw a bullish engulfing pattern occur last Friday, which indicates that the bulls might be ready to make their next upside push. It’s the maker of laser skin treatments, and it’s expected to earn $0.01 per share for the fiscal year ending December 2021, which represents a year-over-year change of 102.9%. Analysts have been steadily raising their estimates for Cutera, including a recent upgrade by Zacks.
Aesthetic Medical International Holdings Group (Nasdaq: AIH): Another strong bullish engulfing pattern last week occurred on this $6 stock. It does not trade options, but I wanted to bring it to your attention anyway. It offers cosmetic dentistry and general healthcare services, including eye surgery, rhinoplasty, breast augmentation, liposuction, and laser, ultrasound and ultraviolet light treatments. The company is headquartered in Shenzhen, China, which is once again why it’s not well known, and it could be an opportunity for us.
Action Plan: Of all these candidates, the play I like the best is Cutera. Here in America, sales from the “aesthetics market” were around $8.5 billion in 2017. Globally, sales in 2017 were more than $10 billion, and sales are now growing at a 10% annualized rate. By 2024, global sales are estimated to be almost $19 billion. Gradual aging and graying of the global population, combined with pressure from social media and “the Instagram generation,” will drive this trend. That’s why I believe aesthetic procedures will soon see demand like never before. Plus, Wall Street loves that procedures like this are paid for in cash. So you completely eliminate the reimbursement risk. This is a trend that Cutera could capitalize on, especially as we emerge from our COVID-19 hibernation and get out into the world again. That’s why I’m forecasting a retest of the February highs at $37 and above.
P.S. Not named on this list is Karim’s top “vanity” play, which is an active recommendation in Trade of the Day Plus. This pick is already moving up, but it’s not too late to get in. To jump on board ahead of this powerful trend, we invite you to upgrade to Trade of the Day Plus today!