Wayfair, Etsy and Amazon are among the e-retailers outperforming in 2020. Overstock, the best of the names with a more than 900% rally so far this year, even got an upgrade from Needham analysts on Monday based upon higher online spending.
Nancy Tengler, chief investment officer at Laffer Tengler Investments, sees stocks at the intersection of home goods and improvement and e-commerce as the best bets to ride the digital spending wave.
"We have expressed our views in this space through some of the housing-related stocks like the Overstock upgrade, Home Depot, Lowe's. These are companies that have been investing in e-commerce and then also Walmart and Target. Each one of those companies increased quarter-over-quarter e-commerce sales by just about over 100%," Tengler told CNBC's "Trading Nation" on Monday.
Target, for example, increased digital sales by 195% in its second quarter. Overall sales rose by 25%.
"We see fundamental reasons for owning the stocks like dividend increases which all of the companies have increased their dividends this year, except for Walmart and they're expected to do so this next quarter," Tengler said.
Katie Stockton, founder of Fairlead Strategies, warns that the year's rally in stocks such as Overstock, Etsy and Wayfair could be running into trouble.
"Looking at Overstock, there is some appeal in that chart because it's really a high flyer or was so before it's corrective phase. It had very, very strong momentum, very, very strong relative strength versus the major indices. However, we see now how quickly that can come apart," Stockton said during the same "Trading Nation" segment.
Overstock has fallen 45% from an Aug. 19 peak. It is still up 2,769% from a March low.
"That kind of decline does serve as a harsh sort of reminder of the risk in adding exposure into parabolic uptrends," said Stockton.
She anticipates that Overstock could remain in a corrective phase for a few weeks, if not longer, before an oversold buy signal indicates the downtrend has been exhausted. Its relative strength index, a measure of overbought and oversold conditions, has fallen to 43 after reaching close to 91 at the beginning of August. Any reading below 30 typically suggests a stock has become oversold.
Disclosure: Laffer Tengler Investments holds TGT, HD, LOW, WMT.