These stocks just hit record highs, despite the bear market

April 20, 2020, 10:48 AM UTC

The Street isn’t surprised certain “stay at home” stocks are posting all-time highs amid the coronavirus-raged market, and you likely aren’t either.

Online behemoth Amazon and streaming giant Netflix both soared to record highs last week as the stocks got bullish shout-outs from top banks. Both stocks hit their highs on April 16, as Amazon topped $2,408 per share and Netflix hit $439 per share. The overall market, meanwhile, is still down about 14% for the year.

But to those like Wells Fargo Investment Institute’s senior global market strategist Sameer Samana, it should come as no surprise that these “stay at home” stocks are outperforming the pack.

“In a market where there’s quite a bit of uncertainty, investors almost always, and even more so now, are on the hunt for growth and certainty—that’s the magic combination,” he tells Fortune. And stocks like Amazon and Netflix, who both incidentally offer services that have become essential in quarantine, fit the bill.

Yet Samana points out the popularity of these companies’ services isn’t anything new. “Investors have looked for…[what were] some of the secular trends that were already going on prior to the coronavirus, and which one of those trends has the virus accelerated,” he says. “It was happening before the virus, and the virus has only turbocharged it to a certain extent.”

Samana points out that while Gen Zers and millennials have already adopted these services, some members of the older generations who perhaps wouldn’t have turned to streaming or grocery delivery “have been forced by the virus to reevaluate their lifestyles, and have [become] customers that maybe would not have been tapped” otherwise.

However, at all-time highs, shares in Netflix and Amazon are anything but cheap right now—Amazon is currently trading around 99 times trailing earnings, while Netflix comes at a pricey 100 times trailing earnings. Still, analysts at companies including JPMorgan are advising clients to stick “with those winners.” Part of the reason is that the firm believes “they will see accelerated shifts in behavior after the crisis has passed,” analyst Doug Anmuth wrote in a client note.

In fact, Samana speculates that even once shelter-in-place orders are lifted, consumers may be hesitant to dash outside and resume normal activities right away. He looks to how China has been recovering, and notes, “Some of those structural shifts tell you that, at least right now…people are staying at home, and if they’re staying at home, they’re going to keep shopping at home, and…eating out at home through food delivery.”

Looking ahead, some portfolio managers like Saira Malik, head of global equities at Nuveen, think Amazon is a “big winner” in the transition of computing and IT infrastructure from on-premises to cloud, as tons of people are working from home, she recently told Fortune. Plus, Malik notes how positive Amazon’s food and household essentials delivery service has been: She echoes Samana and believes there will be a “structural shift in the way people shop and think about shelter, even once the restrictions are lifted.”

Plus, for Netflix, whose stock rose over 10% in the past week to its high on Thursday, the quarantine environment is clearly bolstering the streaming space.

For Netflix in particular (versus competitors), “Content additions to the platform, combined with the value of Netflix’s library to those staying home during the COVID-19 crisis, drove this [expected] outperformance [in subscriber additions], more than offsetting the lingering impact of last year’s price increase and growing competition,” Goldman Sachs’ Heath Terry wrote in a research note.

Yet as investors load up on the stocks (and no doubt seasons of The Office), Wells Fargo’s Samana advises that since those “stay at home” stocks are outperforming on a relative basis, now might be the right time to reorient your portfolio and “keep bringing them back to what your initial intention allocation was.”

More must-read finance coverage from Fortune:

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—Couldn’t track your stimulus check? Errors and long waits plague IRS portal rollout
—What the government bailout means for airline investors (and CEOs)
—How every sector of the S&P 500 has been impacted by the coronavirus selloff
—How Fortune 500 companies are utilizing their resources and expertise during the pandemic
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—VIDEO: 401(k) withdrawal penalties waived for anyone hurt by COVID-19

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