In any other circumstance, the case for Chinese secondhand automotive dealership Kaixin Auto (NASDAQ:KXIN) would be compelling. Primarily, China is the world’s largest auto market. Plus, with a burgeoning Chinese middle class, the increase in spending power should benefit KXIN stock. But the novel coronavirus, combined with international anger against the world’s second-biggest economy, has made this narrative tricky.
That’s not to say that KXIN stock doesn’t have upside potential in the new normal, because it clearly does. For one thing, used car volume has been accelerating significantly in China over the past several years. In 2019, trade volume of secondhand vehicles hit 14.92 million units, up nearly 8% from 2018 levels. While it’s not quite the double-digit gains we’ve seen in other years, this is still tremendous momentum.
Furthermore, Chinese consumer demand has recovered very well from the Covid-19 outbreak. While the first quarter of this year took a beating in terms of monthly automobile sales, results from April onward were very encouraging. Interestingly, in August 2020, sales of both passenger cars and commercial vehicles exceeded their respective year-ago results.
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Perhaps the biggest selling point for KXIN stock at this juncture is China’s handling of the coronavirus. In Europe, many countries have suffered a resurgence of cases, with some going back to lockdowns and strict mitigation protocols.
Back home, the Centers for Disease Control and Prevention reported that on Oct. 30, new daily infections hit nearly 100,000. To put that into context, Japan had just over 100,000 cases in its entire country, as of Halloween.
Of course, you must be careful with country-to-country comparisons. However, it’s clear that we’re just not managing this crisis as well as we would like. Further, with an ugly election likely to spark social unrest no matter who wins, infections will probably surge. In contrast, China’s government policies appear to have flattened the infection curve to the point where it could avoid a second wave.
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Not All Great News for KXIN Stock
On paper, China’s handling of the novel coronavirus is fortuitous for KXIN stock. To be blunt, China got the world sick, leaving behind a wake of death and destruction. But it was the first country to recover from the pandemic and appears in many respects to have gotten back on the bull while other economies are getting mauled by bears.
Gallery: 7 Sizzling Hot Stocks to Buy Now Amid Even Hotter Politics (InvestorPlace)
Though the temperature has been rising in the political space, other segments are feeling the heat. As the days wind down to Nov. 3, several market sectors have been dominating the business print. And the disaster that was the first presidential debate certainly provided oxygen for several hot stocks to consider. Interestingly, the much-anticipated showdown between President Donald Trump and former Vice President Joe Biden began with a snooze fest. I was surprised at how sleepy both of them appeared. It seemed to me that Biden was the first to interrupt the president and the first to therefore get under his skin. That of course was when the fireworks started. If you wanted pure entertainment at the loss of civility and dignity in our public discourse, you got what you came for. If people across the world think we’re a bunch of fools, perhaps their perception isn’t too far from the truth. Nevertheless, this cacophony provides a new framework for hot stocks to buy. That’s because Biden is starting to look really good. No, he didn’t win the debate. But Trump got in his own way, incessantly attacking Biden when he had him on the ropes. If the president would have calmed down a bit, he would have handily emerged victorious. Instead, the American people were treated to more than an hour’s worth of high-level psychological fracturing. And that only plays into the devastation that they are feeling, not only from the health impact of the novel coronavirus but also due to its severe economic ramifications. It’s under this large-scale context that these hot stocks are performing so well. Johnson & Johnson (NYSE:JNJ) Alibaba (NYSE:BABA) Target (NYSE:TGT) Nike (NYSE:NKE) Spark Networks (NYSEMKT:LOV) Heat Biologics (NASDAQ:HTBX) GameStop (NYSE:GME) Of course, with any momentum play, you want to be careful. At any point, the narrative can suddenly shift. However, we’re starting to get a clearer picture of the upcoming election, which may provide some reliability to these hot stocks to buy now.
Hot Stocks: Johnson & Johnson (JNJ)
For decades, Johnson & Johnson has been a borrowing platform for investors, one which management was presumably proud about. After all, when one of your best-known products is talcum powder, you’re not going to be generating headlines. Sadly, that narrative changed for the worse, with JNJ stock beleaguered with product liability issues, to put it mildly. However, Johnson & Johnson has now become one of the hot stocks to buy for its surprising momentum. Recently, the company got back in the American public’s good graces — or at least made a solid start — with news that its Covid-19 vaccine candidate received approval for a Phase 3 trial. True, many vaccine players are in advanced-stage trials. But the key difference for JNJ stock is that its underlying candidate is a one-dose proposition. From a cost, logistical and convenience perspective, a one-and-done regimen is far more appealing than a two-dose alternative. However, most vaccines are indeed two-dose proposals, which immediately sets apart the pharmaceutical giant. As well, Johnson & Johnson’s vaccine does not need to be frozen, which allows for easier distribution in regions where healthcare infrastructure is not up to high standards. Plus, JNJ has the manufacturing capacity to be one of the most credible solutions for the coronavirus. Overall, this is a surprising-but-viable idea among the current hot stocks to consider.
Alibaba (BABA)
It will be strange for any analyst not to point out the pink gorilla in the room: China. If you really could gauge Americans’ opinions about the world’s second-biggest economy — you know, without the threat of cancel culture — I’d wager that most would have nothing good to say. Fortunately, I don’t need to speculate. The Pew Research Center has already confirmed what is obvious to everyone else. Logically, this dark cloud hangs over Chinese companies and especially their flagship, Alibaba. That said, I find it very interesting that BABA stock skyrocketed following the first presidential debate. Sure, Alibaba is enjoying upside momentum because its cloud business may turn profitable in the current fiscal year. But who are we kidding? At least some of that bullishness had to come from Trump putting on a clinic on self-destruction. As I said above, I don’t think Biden won the debate. But Trump was so antagonistic in his insults and interruptions that he interrupted his best one-liners against Biden. Without letting the sting sink in, Trump went in for another attack, which diminished the initial impact. Clearly, that’s great for BABA stock. As you know, U.S.-China relations are not developing well. Likely, they will worsen under a second Trump term. On the other hand, a Biden administration may offer a reset, for better or for worse. But in my opinion, this makes Alibaba one of the hottest stocks to consider.
Hot Stocks: Target (TGT)
For companies that have significant exposure to brick-and-mortar retail stores, the name Amazon (NASDAQ:AMZN) either sparks shivers or derision. From its days as a book seller, Amazon has been disrupting every subsegment of the broader retail market. Yet that doesn’t seem to bother big-box giant Target anymore. In fact, if recent developments are anything to go by, the company famous for its bullseye logo is ready to take the fight to the e-commerce behemoth. In a bold move, Target is going head-to-head with Amazon’s Prime Day sales jubilee. As fans of the event know, Prime Day is usually held in July. However, the coronavirus just couldn’t resist changing things up. Look, if you’re going to force the Indianapolis 500 to race in August, you might as well give Amazon a taste of its own medicine. To be fair, Target has been very coy about its Deal Days event taking place on Oct. 13 and Oct. 14, right when Prime Day 2020 rolls out. But I must say that this isn’t a death sentence for TGT stock as some might think. If you’ve been to a Target store lately, you’ll know they are packed. That tells me Americans have largely adapted to the new normal. Assuming this is the case, that adds a wrinkle to the holiday season. Perhaps people will show up in force during crowded shopping events like Black Friday. We’ll have to wait and see. But definitely don’t ignore TGT stock in your list of hot stocks to consider.
Nike (NKE)
On the surface, Nike doesn’t seem an intuitive play among hot stocks during the coronavirus. As you can imagine, the personal saving rate has skyrocketed since the pandemic struck. Granted, as of July 2020, the saving rate has nearly halved from its peak. Nevertheless, the fact that people are saving money in an unprecedented manner suggests that millions are reeling from this economic crisis. Fundamentally, then, you wouldn’t expect NKE stock to do so well. At time of writing, shares are up nearly 25%, but that doesn’t tell the whole story. Rather, since March 23, NKE has nearly doubled. If you want reliable hot stocks, this is it. Yet why is a consumer discretionary firm — as great as it is –doing so well during this pandemic? Like others, I believe that Nike has an overwhelmingly powerful brand. Also, wealthy and successful people tend to exercise more, which benefits NKE stock. But there could be something else at play: the incentive lost to dress for success. Thanks to Covid-19, many of us don’t have to physically go to work anymore. While that’s great for fulfilling our gig economy fantasies, this hurts businesses that specialize in office attire. Cynically, with people wearing whatever they want, they’re increasingly choosing casual wear like Nike. And that makes it one of the hot stocks to buy during this crisis.
Hot Stocks: Spark Networks (LOV)
In terms of love relationships, I’ve been out of the market for a while. That’s why I haven’t paid much attention relative to other subjects regarding the dating impact of Covid-19. Listen, it’s tough being single in the best of times. But when you’ve got a raging pandemic added to the mix, the loneliness can feel much more bitter. However, the silver lining is online dating companies like Spark Networks. As you know, online dating has become a huge hit. In its early days, the segment was known to attract the “unloveable,” so to speak. But that terrible reputation has mostly faded. Now, online dating is the way to go because it allows you to get to know someone before meeting them in person. That’s a major component of the narrative for LOV stock and rivals, such as Match Group (NASDAQ:MTCH). But where LOV can separate itself from other steamy hot stocks to buy is its faith-based focus. Spark got into the love and relationships game with Jdate, a Jewish dating site. It has since expanded to brands like Christian Mingle and LDS Singles. Why is this important? Well, the novel coronavirus has disproportionately affected people of faith. So, while rolling a joint is considered an essential activity, worshiping your deity is not. But with Spark Networks, at least this segment has one reason to be hopeful, thereby benefitting LOV stock.
Heat Biologics (HTBX)
Easily among the riskiest of hot stocks to consider, Heat Biologics brings an interesting perspective to the Covid-19 vaccine race. Many, if not most vaccine candidates, focus on the production of antibodies, or Y-shaped proteins that attach to antigens (foreign substances), preventing them from infecting healthy cells. But another component in the battle against the coronavirus — or any virus for that matter — is the T cell. A vital component of our immune system, T cells also latch onto antigens. However, a key difference is that they release perforin and cytotoxins, which contribute to destroying antigens. As the New York Times wrote, a holistic vaccine regimen may involve both antibodies and T cells. And that’s the narrative backing Heat Biologics and HTBX stock. Instead of outright competing with pharmaceutical firms, Heat Biologics bills itself as a platform that features the potential to combine with other Covid-19 vaccines. That could explain why shares are riding a rising level of support while other hopefuls have crumbled. In addition, it should be noted that Heat Biologics is also aiming for a one-shot approach. Of course, something like HTBX stock is incredibly risky. If this storyline doesn’t pan out, Heat Biologics may face a cold spell.
Hot Stocks: GameStop (GME)
Well before the pandemic disrupted our way of life, GameStop was living its own new normal. But rather than a virus, the video games and accessories retailer was a victim of a technological phenomenon: digital downloads and streaming. Now, gamers didn’t have to go to a physical retailer to get their fix. Instead, they can download compelling titles into their internet-connected consoles. As well, this innovation lends itself to new industries, such as software as a service. For instance, users can pay a monthly subscription fee to access several titles, like Netflix (NASDAQ:NFLX) for video games. Naturally, modern gamers gravitated toward this avenue, dramatically hurting the case for GME stock. Then, the pandemic came and poured salt on open wounds. It seemed like the end was near for GameStop. Yet GME is suddenly one of the hot stocks to buy this year. What the heck happened? According to the print, activist investor and Chewy (NYSE:CHWY) founder Ryan Cohen wants to convert GameStop into an e-commerce powerhouse that ships a wide assortment of merchandise at lightning-fast speeds. However, I like GME stock for the underlying relevance against a possible recession. Unlike other retailers, GameStop focuses on buying and selling games. Though an old-school business model, it could be very meaningful if funds become tight, but people still want an escape from the drudgery. On the date of publication, Josh Enomoto held a long position in GME.A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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8/8 SLIDES
Whatever karma is, this is the exact opposite. But it may not be true. No matter how great the China narrative appears, we must remember that it’s a communist country. China has been a consistent violator of human rights and the country works nonstop to further its aims.
I can’t say for sure that China is being deceptive with its coronavirus situation. But I wouldn’t be surprised in the least that its miraculous recovery was a façade.
But let’s assume for a moment that China really does have Covid-19 under control. Even so, we must remember that much of China’s wealth is generated through its export machinery.
According to TradingEconomics.com, exports of goods and services represented 18.4% of China’s GDP in 2019. Although the country has come a long way in reducing its exposure to exports over the years, the current figure is still quite high. For instance, in 2018, good and services exports represented only 12.2% of U.S. GDP.
Theoretically, then, if the U.S. and China maintained their current bellicose relationship, the former would wear out the latter. As well, China doesn’t have an incentive to create friction with the international community. That’s because exports to global partners translate into good jobs, the kind that allow Chinese consumers to buy the European luxury cars for which Kaixin is famous.
Thus, you shouldn’t be in a hurry to buy KXIN stock without serious thought toward geopolitical implications.
Even Our Own Politics Are Iffy
Based on the latest polls, the common assumption is that former Vice President Joe Biden will easily win the election. Despite the shocking lessons from 2016, many are predicting that Biden carries at least a 70% chance of victory. Given this likelihood, it appears that KXIN stock would benefit from a possible re-warming of ties between the U.S. and China.
Still, I wouldn’t count out President Donald Trump. Frankly, the enthusiasm for the incumbent is off the charts. Even with the popular former President Barack Obama campaigning with Biden, the support that Trump receives is unparalleled. And it’s almost for certain that his backers will come out in full force on Election Day.
At this point, it’s really anyone’s guess the trajectory of this nation. Therefore, I would stay away from KXIN stock for now. Besides, shares are awfully volatile, which provides a disincentive for everyone but gamblers.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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