3 Stocks Thriving on Competitors' Failures
We've seen it time and again: when one company hits the rocks, there's always a competitor there to take advantage of their downfall. It happened just recently when the news broke that Allergan's (NYSE:AGN) textured breast implant products were linked with a rare form of T-cell lymphoma. With this information dominating headlines, Costa Rican company Establishment Labs (NASDAQ:ESTA) is poised to take over, filing for and receiving a Notice of Allowance covering its products from the U.S. Patent and Trademark Office. Establishment Labs was already having a good run, with sales up 60% year over year in the second quarter, but now it is really in a position to take off.
Establishment Labs' success can be directly linked to the way it has leveraged Allergan's struggles; there are, after all, plenty of other companies that could have stepped in to fill that supplier gap. If you're looking for companies with serious potential, the following three stocks are also thriving off of their competitors' weaknesses.
The Stitch Fix strategy
One of the major reasons brands fail is they're doing the same thing as everyone else, but they're not investing enough or offering added value. Think, for example, about attending a trade show; the successful trade show displays are memorable and action-driven, but they also define brands against their competitors. They make it clear what they're doing differently to edge out the competition - and that's exactly the angle Stitch Fix (NASDAQ:SFIX) is working right now.
You might know Stitch Fix as the subscription clothing service largely targeting women; the brand has generally done well over the last several years. With competition from Amazon's (NASDAQ:AMZN) new Prime Wardrobe service, though, the company was reckoning with a growing challenge - until it saw a way to compete. Moving into the territory abandoned by Gymboree, the classic children's brand that recently declared bankruptcy, Stitch Fix's new children's line is poised to push the stock to new heights, with experts predicting as much as 50% this month.
A better big bank
Major banks have had their share of problems over the last decade and the drama isn't slowing down. Most recently, the scandals have included Wells Fargo's (NYSE:WFC) fake accounts crisis, which broke back in September of 2016 but is still sending shockwaves through the company. Since this revelation, Wells Fargo has been shelling out big money to buy back its shares and its stock has declined 24% in the past year.
So who stands to benefit from Wells Fargo's downfall? It's a bit complicated at the moment, as several other banks are dealing with their own fake account issues, but JPMorgan (NYSE:JPM) is signaling to shareholders that it is thriving. JPMorgan recently increased its quarterly dividend to 90 cents per share and its equity ratio is up to 16%, well above the 10% considered preferable for banks. In such a high-cost, stats-savvy sector, that subtle gesture - increasing the dividend - is the perfect way for JPMorgan to say it is thriving while its competitors struggle.
Disney bears down
The streaming sector is booming, but an industry-wide boom means intense competition for all players. Of particular concern for established streaming players, though, is the launch of Disney's (NYSE:DIS) new streaming service. A multi-sector powerhouse, Disney's streaming service hasn't even launched yet and it has already managed to trip up lead player Netflix (NASDAQ:NFLX). After acknowledging that Disney might prove to be a competitive challenge, Netflix saw a continued decline after a second-quarter shortfall.
It's too early to tell exactly how Disney's new services will impact the streaming world, but this is a good moment for major competitors like Hulu to step up to the plate. Disney owns a 67% share in Hulu, which isn't publicly traded, and if the company can attract more subscribers by leveraging its Disney partnership - specifically the bundle deals the company will offer with Disney's streaming service - Hulu could be Disney's ace in the hole in the streaming war.
Finding your edge is key for any brand that's trying to compete in a crowded sector, and knowing where other companies fall short. One company's shortcoming is another's open door and, as a buyer, these transitional moments are also an opportunity for you to act, shifting your money to greener pastures.
Disclosure: I do not own any of the stocks mentioned in this article.
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