The Motley Fool

Stock market crash: 1 secret ecommerce stock I’d buy for the new bull market

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

A bull outlined against a field
Image source: Getty Images.

With consumers relying more on online marketplaces such as Amazon to purchase products, businesses have begun to rely less on brick-and-mortar stores in favour of selling online. Subsequently, ecommerce stocks have seen some incredible growth.

The lockdowns imposed by Covid-19 have only further accelerated this trend, due to both the reduced traffic of customers and higher fixed costs (rent, security, and sanitation).

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

While selling products online can drastically reduce expenses for businesses, it does introduce a few new problems that this secret ecommerce stock helps to solve.

Products for online retail have two primary requirements. They need storage space, and access to a logistics network for fast and efficient delivery to the customer, both of which are provided by Warehouse REIT (LSE:WHR).

This ecommerce stock owns and manages 95 industrial warehouses across the UK close to infrastructure hubs.

Image source: Warehouse REIT 2020 Annual Report

As it stands, the demand far exceeds the supply of storage space in prime locations, which has led to an exponential growth in rental incomes for warehouse operators.

Furthermore, real-estate firm Savills has estimated that every additional €1bn of online sales will require an additional 775,000sqft of warehouse space

Warehouse REIT primarily operates Tier-3 warehouses strategically placed in economically buoyant areas, close to transport links and large conurbations.

These warehouses are typically small in scale – less than 100,000sqft – but still addresses a wide diversity of smaller and larger businesses, including the likes of John Lewis and Amazon. By focusing on smaller-scale storage facilities the firm has been able to dodge its larger competitors that focus on large-scale warehousing.

The ecommerce stock has a fairly simple business model. It acquires existing warehouses in prime locations that have depreciated in value due to poor maintenance. After injecting additional capital to refurbish the properties, Warehouse REIT leases them out to businesses.

Since its IPO in 2017, the business has been performing exceptionally well. Revenue has increased by nearly four times from £6.57m to £30m, and due to the low costs involved with managing the warehouses after refurbishment, around 70% of that is pure profit.

As the firm’s revenue is entirely dependent on the businesses using their facilities, it’s important to take a look at the occupancy rates and lease durations.

As of March 2020, the occupancy rate stood at an extraordinarily high 93.4% up from 92% a year prior!

The average lease duration is a more muted but still a respectable 5.2 years up from 4.6 in 2019. While I would ideally like to see this figure closer to 8+ years, the rising trend does provide confidence that management are heading in that direction.

With warehousing facilities unable to keep up with demand, I believe the market conditions are extremely favourable to this ecommerce stock, allowing for a rare combination of potentially explosive returns paired with a 5.7% dividend yield.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Zaven Boyrazian does not own shares in any of the companies mentioned. The Motley Fool UK has recommended Warehouse REIT. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.