What are Epicenter Stocks and Should They Be Central to Your Portfolio?

When the pandemic forced lock-downs across the nation, and the market crashed, not all stocks went down the same amount and then the recovery didn't lift stocks at the same rate. Some stocks, which people have taken to calling "epicenter stocks", were hit the hardest and stayed down the longest. These were the businesses that were hit the hardest by pandemic restrictions. Stocks in the Consumer Cyclical , Industrials , Energy , Financials , and Basic Material sectors were the biggest losers from the pandemic because they were at the center of the economic damage. Despite having a huge disadvantage during the pandemic due to wide-ranging restrictions, these companies are positioned well for investors looking to capitalize on the recovery. Through the help of massive amounts of pent up demand from consumers, these stocks have the biggest advantage at capturing the re-opening momentum going forward. Having the best outlook, however, does not guarantee that investments in epicenter stocks will necessarily pay off. While logically, these stocks were hurt the most, and thus have the most to gain from reopening. It also implies that these stocks have the most to lose from every hiccup along the way in the recovery. This is important to remember as surging infection rates of the delta variant of the coronavirus stands to continue to bleed epicenter stocks. Investments in these companies should not be thought to go against the natural relationship of risk and reward, meaning the high returns from a swift enough reopening, comes with the risk that delta and other potential variants will be able to drag the reopening timeline out, which would certainly change who the winners and losers of the near future will be. Given the strong position of epicenter stocks going forward, let's explore some top-ranked stocks that may be well positioned in the reopening. JetBlue Airways ( JBLU ) JetBlue Airways is a company that certainly stands to gain from a return to normal. As Covid spread, airlines were one of the first industries to take a beating. On July 27, 2019, 2.4 million passengers travelled the skies according to the TSA numbers . One-year later, just 536,756 passengers travelled. In 2021, more than half of the passengers have returned, with 1.8 million passengers passing through TSA checkpoints on July 27, 2021. One-fourth of travelers are yet to return to air travel. JBLU was trading at $21.29 per share before the pandemic brought the world to a halt, and was trading at $15.32 per share on July 28, with the company currently about one-fourth off of its pre-pandemic value. MGM Resorts International ( MGM ) Casino and resort operator MGM Resorts International is another epicenter stock that is set to grow strong as travel and tourism recover. With casinos and resorts around the world, and as the largest resort operator in Las Vegas, MGM is in need of fewer restrictions on travel to fill its casinos and hotel rooms. Unlike JetBlue, MGM wasn’t a sitting duck during the pandemic, and the company actually made a strong move into the online gambling industry with a sportsbook app to rival DraftKings ( DKNG ), which helped the company reach its highest levels since 2008. With 18 states having fully legalized online sports betting, MGM is positioned inside of two potentially fast-growing markets: the returning casino business, as well as the burgeoning online gambling market. Norwegian Cruise Lines ( NCLH ) Last is cruise company Norwegian Cruise Lines. Norwegian took a massive hit from closures as the cruise line became unable to operate at all. NCLH fell from $58.12 per share, which was near all-time highs, to just $11.86. The stock has since fought back to $25.43 per share, just less than half its pre-pandemic levels. While cruises are not yet operating again in the U.S., the Centers for Disease Control and Prevention has begun approving select cruise lines for simulated voyages and limited sailings, a sign things are moving toward a resumption of sailing.