3 Sectors Aided by Holiday Cheer

by Louis Navellier | December 28, 2011 3:19 pm

Presents Holiday Retail[1]The holidays are one of my favorite times of the year. First, they give me an opportunity to spend quality time with my family and friends.Second, the holidays typically bring a rejuvenating excitement to the stock market.

Investors typically perk up during this time for a number of reasons. The most basic is the fact that holiday cheer is contagious. From Thanksgiving on, the warmth of the season spreads and increases. Whether you celebrate Christmas, Hanukkah, Kwanzaa or any other holiday taking place this time of year, it’s difficult not to be in good spirits.

The holidays also mark a spike in consumer spending[2], and retailers pull out all the stops with promotions, specials and sales to make sure they pull in as much money as consumers are willing to spend — and then some. So, it’s not a surprise that sectors like the retail industry receive a nice boost during the holidays.

Also, working in the markets’ favor this time of the year is investors’ desire to end the year with a bang. Now is the time when many are rearranging their portfolio and hatching plans that will allow investors to finish off the year with big returns. Smart investors are stocking up on stocks at bargain prices. Others are planning trades that will help with tax breaks.

The bottom line is that the holiday season is a significant part of the year-end surge. Investor activity continues to expand daily and will continue to do so through the end of the year.

Even with the poor mix of global news and economic concerns weighing down the markets, the markets have made big moves since Black Friday[3] — the official start of the holiday shopping season. On that day, the Dow closed at 11,231.78. Even after today’s sharp drop, it’s managing to hover around 12,160 mark, which is about 928 points better in a little less than month. Considering that the many negative headlines combating the holiday spike, I consider this a solid jump for the holiday season. And I expect the positive trend to become more consistent as year-end excitement grows.

Many sectors across the market improve during the holiday season. Some more than others. Here’s a look at three sectors really impacted and the latest details about a couple of big-name stocks in each.

retail stocks[4]Retail

Without question, when you think about holiday investments, retailers are probably on the top of your list. Retailers plan and prepare for this season all year long — with gifts to be bought, homes needing decorating and other preparations to make retailers take center stage during this time of year. Many retail companies pull in the most revenue in the fourth quarter, largely due to holiday sales.

This fact doesn’t escape investors, who often flock to retail stocks in anticipation of big holiday profits. I’m sure you’re already well aware of the big-name retailers out there like Wal-Mart (NYSE:WMT[5]), Best Buy (NYSE:BBY[6]) and Amazon (NASDAQ:AMZN[7]) that pull in big holiday crowds.

Why don’t we take a look at a couple of other specialty retailers? They may not have received quite the attention as the big-box stores, but they have plenty of customers during the holidays.

If you’re a woman, or you have a woman in your life who enjoys handbags, then you have likely heard of Coach (NYSE:COH[8]). The company is known for designing and selling designer purses. The business markets a variety of other accessories for both men and women, including footwear, jewelry and fragrances. Coach operates stores in North America, Japan, Hong Kong, Macau and China. It also sells its products online and through the Coach catalog.

Currently COH is rated as a “B” stock in Portfolio Grader[9], making it a solid investment. The stock has strong sales growth, excellent ROE and consistent buying pressure moving it up in market value. For the current quarter, the analyst community expects 15% earnings growth and 12.9% sales growth from the company.

Another retail company I want you to take a look at is 1-800-Flowers.com (NASDAQ:FLWS[10]). The online retailer’s fresh flower bouquets, plants and assortment of gift baskets provide easy gift options — especially for the last-minute buyer. You can conveniently log on to the company website, search through product options, pay and have your order shipped with a few simple clicks.

FLWS is a “B”-rated stock that also enjoys solid sales growth and buying pressure. But the company could work on improving its earnings growth and momentum. Over the last four months the stock has continued to improve and is a strong buy overall.

UPS stock[11]Shipping Services

Once all those gifts are purchased, you’ll need a way to get them to where they need to go. Unless you live close, or are able to give everyone their gifts in person, you probably utilize a shipping company like UPS (NYSE:UPS[12]) or FedEx (NYSE:FDX[13]).

Even if you choose to ship online and use the handy shipping services stores provide, most retailers have deals with major shipping companies to deliver their packages. During the holiday season, delivery employees work overtime and move massive volumes of merchandise. I’ll bet over the last couple of weeks, you haven’t gone a day without seeing a delivery truck on the road or received packages on your doorstep.

For delivery services, UPS and FedEx are two of the biggest names. Let’s see how the companies compare with each other and how their respective stocks have been performing.

UPS opened its doors in 1907. For over 100 years, the company has been delivering packages across the U.S. and internationally. UPS operates in three segments: U.S. Domestic Package, International Package and Supply Chain and Freight. Internationally, UPS offers air and ground delivery to approximately 220 countries and territories. The Supply Chain and Freight branch is also responsible for providing forwarding and logistics services.

UPS is a “C”-rated stock, meaning you should hold off on buying or selling any shares you may own. The stock has meandered for the majority of the year, unable to find its footing and make a positive showing. While the company consistently meets earnings estimates, earnings and sales growth are in the low numbers. Currently, the analyst community expects UPS to pull in 16.7% earnings growth and 7.4% sales growth for the quarter — the numbers are still a far cry from the 49.3% earnings growth expected by the rest of the industry in the quarter.

UPS’s major competitor, FedEx, opened in 1971. The company provides transportation, e-commerce and business services domestically and internationally. FedEx operates in four segments: FedEx Express, FedEx Ground, FedEx Freight and FedEx Services. In addition to ground and air freight delivery, the company offers international trade services specializing in customs brokerage, customs clearance services and global trade data. FedEx has approximately 58,000 vehicles and trailers through 366 service centers.

FDX is also currently a “C”-rated stock. It’s been a difficult year for the stock, which hasn’t been in buy territory, as outlined by Portfolio Grader[9], in the last 12 months. It’s actually received “D” ratings for most of the year, failing to deliver a positive turn. On the stock’s fundamental metrics, it receives fair to middling grades across the board. What’s really hurting the stock right now is the poor buying pressure behind it. A “C” quantitative grade is not what I like to see. Analysts are expecting a 63% boost in earnings growth for the current quarter, which would be a significant improvement, but, for now, you should hold off on buying this stock.

Marriott Hotel[14]Lodging

Whether you’re off to grandmother’s house or set to take a holiday vacation abroad, the season becomes a busy time for the travel industry. And unless you’re a fan of staying over with the in-laws, you’re likely going to have to find a hotel to stay overnight.

That’s why the hotel industry also sees a substantial boost in bookings this time of year, which helps drive fourth-quarter earnings. Here’s a look at two major hotel chains and what we can expect from them in the coming quarter.

Marriott (NYSE:MAR[15]) runs and franchises hotels and lodging facilities around the world. Its hotels and resorts operate under the Marriott, JW Marriott, Renaissance, Courtyard and The Ritz-Carlton names — just to name a few. In all, the chain operates or franchises 3,661 properties. Through its subsidiaries, the company develops and sells timeshare and residential properties, as well as furnished corporate apartments and temporary executive housing.

At present, Portfolio Grader[9] rates MAR as a “D” stock. So if you own any shares, I suggest selling them now. The stock has struggled throughout the year, receiving “C” ratings for the months of January, February and March, but receiving “D”s since then. Marriott inconsistently meets analysts’ estimates, and by taking a look at the stock’s fundamental markets it’s clear Marriott needs to improve in every area. Analysts expect Marriott to show 20.5% earnings growth in the current quarter, but they are way off the mark compared with the rest of the industry, which is expecting over 1,383% earnings for the quarter. In this case, MAR is among the bottom of the hotel totem pole.

The final stock we’ll take a look at is Starwood Hotels & Resorts Worldwide (NYSE:HOT[16]). With its subsidiaries, the company primarily operates luxury, full-service hotels, resorts, retreats and residencies worldwide. Starwood also develops and operates vacation ownership resorts and provides financing provisions to customers who purchase interest in vacation properties. The company’s brand names include the St. Regis, W, Westin, Sheraton and Element, among others. At the end of 2010, Starwood owned or operated 1,027 hotel properties worldwide and 23 vacation resorts.

HOT is a “C”-rated, hold, stock. The stock has improved over the last couple of months but, like MAR, has struggled throughout the year. This is another position that has failed to gain any significant positive momentum of the market. Looking at HOT’s stock report, it’s significant to note the company’s failing grade in earnings momentum and the weak buying pressure behind the stocks. These areas are especially important in determining investment potential, and it’s clear HOT currently has little of that potential to entice investor interest.

Endnotes:

  1. [Image]: https://investorplace.com/wp-content/uploads/2011/11/Presents-Holiday-Retail.jpg
  2. spike in consumer spending: https://investorplace.com/2011/12/best-worst-cyber-monday-stocks-amzn-msft-ebay-grpn/
  3. Black Friday: https://investorplace.com/2011/11/black-friday-retail-stocks-shld-aapl-bby-amzn/
  4. [Image]: https://investorplace.com/wp-content/uploads/2011/05/retail-shopping-display1.jpg
  5. WMT: http://studio-5.financialcontent.com/investplace/quote?Symbol=WMT
  6. BBY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBY
  7. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  8. COH: http://studio-5.financialcontent.com/investplace/quote?Symbol=COH
  9. Portfolio Grader: https://navelliergrowth.investorplace.com/portfolio-grader/
  10. FLWS: http://studio-5.financialcontent.com/investplace/quote?Symbol=FLWS
  11. [Image]: https://investorplace.com/wp-content/uploads/2011/07/UPS_truck_close_up_630_flickr.jpg
  12. UPS: http://studio-5.financialcontent.com/investplace/quote?Symbol=UPS
  13. FDX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FDX
  14. [Image]: https://investorplace.com/wp-content/uploads/2011/05/Marriott-Hotel.jpg
  15. MAR: http://studio-5.financialcontent.com/investplace/quote?Symbol=MAR
  16. HOT: http://studio-5.financialcontent.com/investplace/quote?Symbol=HOT

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