Ok so here's one for the new guys/econ students out there:
There's been a lot of talk about how airlines, cruise ships and so on have a tremendous amount of pent up demand and are going to see a huge rebound post-pandemic. This is true.
What there isn't a lot of talk about is the inverse - what products/services are going to fall off a cliff?
One of them is peloton, the exercise bike manufacturer. It just missed estimates hugely and plummeted over 35% in a single day:
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Think about this logically - a lot of these things were only bought because people couldn't go to the gym or for a real road cycle or what have you. We know this because sales pre-pandemic were nothing like once the pandemic started. People have only bought these things to ride indoors because they've had no other choice. Lift the lockdowns, and they can actually engage in their preference again.
In short, the pandemic has had a huge spike in
substitute goods.
Ergo, whilst things like airlines or cruise ships shoot up once lockdowns are lifted, all the substitute goods like peloton fall off a cliff. We can see this in the sales numbers that have sent the stock plummeting.
I've mentioned quite a bit about how things like furniture will see a big drop on account of a couch being a very infrequent purchase, but couches aren't really a substitute good. Peloton IS.
So the challenge now is to try & think "What other substitute goods have shot up in sales through the pandemic but are going to plummet now on account of them being substitutes?".
For bonus points, try to think of something tangible (i.e a physical good) like peloton bikes that people simply will not use again once lockdowns are over. Why? Because if people are never going to use them again, they will
sell them, so we are very likely to see a HUGE flood of second hand peloton bikes hit the market now, only exacerbating peloton's problem further - you'll have both a huge drop in demand for new ones on account of second hand models being so cheap (so we're talking a substitute of a substitute now) and whatever hugely reduced number of new models sold will have to be sold at a huge discount (so lower margin) in order to convince prospective buyers to actually buy a new one vs getting a second hand model dirt cheap.
This has already happened over here in australia with gym products (squat racks, barbells, weights and so on) where the massive amounts of gear bought to set up home/garage gyms flooded the market the second lockdowns were lifted, but there are undoubtedly going to be other examples.
If you can think of another one, then it's probably an excellent stock to bet against, especially considering the fact that
nobody is talking about this