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It’s not easy to be bullish these days.

The S&P 500 is down 9.8 per cent year to date. The Nasdaq has tumbled 14 per cent. Planned interest rate hikes continue to weigh on stocks. Russia’s invasion of Ukraine isn’t making investor sentiment any brighter.

But none of that means you have to stand on the sidelines. As Warren Buffett says, “Be fearful when others are greedy, and greedy when others are fearful.”

If you’re looking for a sector that could make a strong comeback, a clue lies in the latest report from the U.S. Commerce Department.

Online retail is booming

The Commerce Department reported on Feb. 16 that U.S. retail sales rose 3.8 per cent in January 2021, much better than the 2.1 per cent increase expected by economists.

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Considering that consumer spending accounts for around two-thirds of U.S. GDP, strong retail sales can be a sign of economic growth.

Of course, with the pandemic yet to end, not all retailers are doing well. In the report, one group of retailers stands out the most: non-store retail, which largely refers to online vendors.

In January, non-store retail in the U.S. enjoyed a 14.5 per cent increase in sales — faster than any other group. Furniture stores reported the second-highest sales growth at 7.2 per cent for the month, followed by car dealers’ 5.7 per cent sales increase.

It’s no secret that e-commerce is firing on all cylinders. But you wouldn’t know that just by looking at the group’s share price performance.

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Over the past 12 months, the Amplify Online Retail ETF (IBUY) plunged 49.4 per cent. The fund tracks the EQM Online Retail Index, which consists of a diverse basket of companies that earn at least 70 per cent of their revenue from online sales.

To put things in perspective, the S&P 500 returned a positive 11.9 per cent during the same period.

While some investors are taking a step away from high-growth stocks, now could be an opportune time for contrarian investors to take a second look at this particular sector.

Even if you aren’t willing to put your bottom dollar on a bet like that, it might be worth it to invest your spare change through a no-fee trading platform.

The momentum continues

E-commerce was already a fast-growing industry, and the COVID-19 pandemic only added fuel to the fire. Some stores had to shut their doors for months at the onset of the pandemic, meaning customers had no choice but to go to online vendors.

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While the economy has largely reopened, strong momentum is continuing in online shopping, as the latest retail report has shown.

You can also see the strength of the industry by looking at its leader, Amazon (AMZN).

In 2021, the e-commerce gorilla generated US$469.8 million in net sales, representing a 22 per cent increase from 2020. Considering that 2020 was the year when more people were stuck at home, the fact that Amazon delivered substantial growth in the following year is a big sign of strength.

Of course, as mentioned earlier, the sector is not an investor favourite at the moment, and even a behemoth like Amazon is not immune to the change in sentiment. Over the past six months, its shares have slipped 11.1 per cent.

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Wall Street, though, sees major upside in the company. On Feb. 4, JPMorgan analyst Doug Anmuth raised his price target on Amazon to US$4,500 while reiterating an overweight rating.

Considering that Amazon shares trade at US$3,082 apiece at the moment, the price target implies a potential upside of 46 per cent. And if that share price has you intimidated, consider fractional trading through a new platform that lets you buy shares of blue-chip stocks at almost any price point.

More beaten-down names

While Amazon is the most dominant player, it’s far from your only option in the space.

For instance, Etsy (ETSY) built its name by focusing on handmade items and craft supplies. Today, it’s a full-blown e-commerce platform with more than 90 million active buyers.

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In Q4 of 2021, Etsy’s revenue surged 16.2 per cent year-over-year to a record US$717.1 million. Net income rose 8.8 per cent from a year ago to US$161.6 million.

The stock enjoyed a nice pop after the latest earnings report but is still down nearly 28 per cent over the past six months.

A rebound could be on the horizon. Scott Devitt, analyst at investment bank Stifel Nicolaus, has a buy rating on Etsy shares. His price target of US$200 is 28 per cent above where the stock sits today.

Lastly, if you are really looking for contrarian ideas, check out Shopify (SHOP). The e-commerce company posted 41 per cent revenue growth in the most recent quarter. Yet its shares have tumbled 55 per cent in the last six months.

After Shopify’s latest earnings report, analyst Mark Mahaney of advisory firm Evercore ISI lowered his price target on the company from US$1,770 to US$1,000 — but that’s still 46 per cent above the current levels. Mahaney kept an outperform rating on the shares.

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A more diversified approach

Picking winners and losers can be tricky, and even the best analysts don’t always get it right.

For a more diversified approach, ETFs — like IBUY — provide a convenient way for investors to get exposure to the sector.

IBUY holds dozens of e-commerce stocks, including Amazon, Etsy and Shopify. However, the fund also has travel-related stocks like Expedia (EXPE), Booking Holdings (BKNG) and Airbnb (ABNB) as some of its biggest holdings.

Given the global pandemic, the travel industry is fighting an uphill battle, so owning these names could bring a different set of risks — and potential reward once things go back to normal.

And if you’re looking to diversify from stocks altogether in these turbulent times, consider fine art, which is known to have very little correlation with stock markets. Thanks to a new trading platform, artworks that were once available only to the wealthy are now available to retail investors.

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