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Behind Cargojet’s (TSX:CJT) Stock Price Surge

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E-commerce has certainly soared during the COVID-19 pandemic. Along with it, many shipping providers have gained substantial business. Cargojet (TSX:CJT) stock in Canada is no exception.

In contrast, the S&P/TSX Composite Index suffered significant losses this year. The index is down 13.45% year-to-date as of Monday.

Cargojet initially followed the index during the market crash in March. However, during April, Cargojet began surging and remains up 29.63% for the year.

CJT Chart

COVID-19 can’t harm Cargojet’s stock market value

Amazon is one of Cargojet’s biggest clients. In August 2019, Amazon entered into an agreement with Cargojet for $600 million of business from Amazon over 7.5 years. In exchange, Amazon received stock purchase warrants for up to 14.9% of Cargojet’s variable voting shares at an exercise price of $91.78 per share.

The Motley Fool Canada’s David Jagielski wrote about this in September 2019, telling investors to wait for a small dip in the share price before buying at a price-to-earnings ratio of 90. This recommended time to buy would have been at a price of $75.51 in March 2020.

Don’t worry if you didn’t buy it in March. You can still buy into Cargojet near the current price of $133.95. The stock is getting a huge boost from the COVID-19 lockdown. Moreover, the trend toward e-commerce is likely to be a permanent fixture of our economy.

Cargojet soars as e-commerce shipments get a lift from COVID-19 lockdowns

Cargojet’s shares $CJT.TO have rebounded beyond their prepandemic peak and closed Thursday at a record CAD $129.74 apiece, giving the company a stock market value of about $2B

— Infinitus Capital (@InfinitusCap) April 24, 2020

Adopt a long-term mindset after the COVID-19 crisis

Stock market investing requires a long-term mindset. Bear markets tend to be much shorter than the bull markets. Thus, there is very little reason to sell stocks in your retirement portfolio, even in a recession.

You should always keep six to 12 months of expenses in your savings account in the event that you lose your income. If you are retired, you definitely want at least 12 months of expenses in a safe asset like a high-yield Guaranteed Investment Certificate (GIC). That way, even if the market goes down for a year, you can still pay your bills until the market rebounds.

If you have adequate savings in cash, you will be better prepared mentally and emotionally to weather temporary stock market downturns like the one we experienced in March. Psychological preparedness in stock market investing is key. If your risk is too high, you are more likely to make common mistakes like giving into market fear.

Should you buy Cargojet stock?

I would trust Cargojet stock more than I would Shopify. Your retirement portfolio can benefit from the e-commerce trend while carrying much less risk with Cargojet stock versus Shopify. The beta (5Y monthly) on Cargojet stock is .75 while Shopify’s beta is 1.14.

Beta is a common measure of risk in the stock market. Stocks with higher betas experience larger swings in stock price, meaning you might need to suffer through periods of stress-inducing losses. If you don’t think you can stomach temporary, unrealized losses, then buy Cargojet instead of Shopify to profit from e-commerce trends.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Debra Ray has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CARGOJET INC.

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