Whether you’re attached, single, or in a more complicated relationship, you can still treat yourself on Valentine’s Day. But, I’m not talking about chocolate or cards. As investors, this is a great time to scoop up high-quality consumer-driven stocks.
The Commerce Department has just announced retail sales advanced again in January, and core sales (a better indicator of consumer sentiment), rose more than expected. Consumers are stepping up their spending habits, and you can bet a number of them will get roped into buying goodies for their significant others today. In fact, it is estimated consumers will spend almost $20 billion this year on the holiday, according to IBISWorld. So, let’s take advantage of the love in the air with a number of holiday-appropriate stocks I’d recommend in a heartbeat.
The Matchmaker Stock: InterActiveCorp
With over 275 million unique visitors to its 50 websites, InterActiveCorp (NASDAQ:IACI) is one of the biggest players on the web hardly anyone has ever heard of. However, chances are you’re familiar with some of its online dating sites, including subscriber-only Match.com and free dating service OKCupid. These sites are regulars on Forbes’ and Time Magazine’s top online dating sites lists, and have tens of millions of members.
In addition to its larger dating sites, InterActiveCorp also manages several smaller services targeted to more specific demographics, including SingleParentMeet.com and SeniorPeopleMeet.com. In total, IAC oversees 6 of the top 50 ranked personal websites.
And, with its Urbanspoon service, IAC even gets a piece of the action behind the dates themselves. Urbanspoon is a restaurant guide that services over 90 major markets — including most U.S. cities and London. The app consolidates reviews from local newspapers, blogs and other diners and allows users to vote on their restaurants. Urbanspoon also offers restaurants an online reservation widget they can install on their own websites.
With its hand in so many pots, it’s no wonder InterActiveCorp is a major player in the Catalogue & Mail Order Houses Industry. IAC is the fourth largest in terms of market cap, behind only Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY) and Liberty Interactive (NASDAQ:LINTA) — the owner of the Home Shopping Network. Also, IAC is in the top five in terms of sales growth, earnings growth and long-term growth rate. It doesn’t hurt that IAC’s dividend yield is the best in the industry, either.
For a clearer picture of this stock’s fundamental health, let’s put it in my Portfolio Grader tool. You can see that this company earns solid grades all down the line. Now, it could stand to improve its operating margin growth and its return on equity, but I can forgive this due to the stock’s top-notch level of buying pressure. I’d recommend IACI as a “strong buy.”
The “Wild” Card Stock: PetSmart
Valentines Day isn’t only for human loved ones. The average person will spend about 3% of their holiday budget on gifts and treats for their pets (about $4.52 per person). So today we’re also going to take a look at PetSmart Inc. (NASDAQ:PETM), one of the biggest specialty retailers in the business and seller of any pet supply you can think of.
The company is the largest retailer of pet food and supplies in a $40 billion industry. From fish and aquariums to puppies and veterinarian services, you can find it all at PetSmart.
PetSmart will be reporting earnings in March and, if history is any indicator, the company is in for another solid quarter. PETM has beaten analysts estimates for earnings in each of the last four quarters, and current estimates show 6.6% sales growth and 16.9% earnings growth. That’s not going to win any awards, but it enjoys the solid growth many retailers would kill for.
And, if you run PetSmart through my free Portfolio Grader ratings system, you’ll quickly see that PETM currently receives a Total Grade of A. I give the company A’s and B’s in Operating Margin Growth, Earnings Growth, Analyst Revisions, Cash Flow and Return on Equity. I would like to see the company pick up some earnings momentum and beat estimates by a wider margin, but since the company has such strong buying pressure, I’m comfortable recommending the stock as a “strong buy”.
Of course, there are plenty of other companies tied to this holiday. Let’s see how other Valentines Day stocks stack up:
|Company Name||Ticker||Fundamental Grade||Quantitative Grade||Total Grade||Treats for your Valentine|
|Kraft Foods||NYSE:KFT||C||A||A||Cadbury and Milk Chocolates.|
|Hershey||NYSE:HSY||C||A||A||Hershey Kisses and Pot of Gold Boxed Chocolates.|
|Estee Lauder||NYSE:EL||B||A||B||Perfume, Cologne and Cosmetics.|
|Liberty Interactive||NASDAQ:LINTA||C||B||B||Jewelry, Shoes and Electronics through the Home Shopping Network.|
|Signet Jewelers||NYSE:SIG||B||C||B||Kay Jewelry and Jared Galleria of Jewelry.|
|1-800-Flowers.com||NASDAQ:FLWS||C||B||C||Flowers, gift baskets and gourmet chocolates delivered to your door.|
|CSS Industries||NYSE:CSS||C||B||C||Paper Magic premium holiday cards and Berwick Offray packaging solutions.|
|Tiffany & Co.||NYSE:TIF||B||C||C||High-End Jewelry, Scarves and Watches.|
|American Greeters||NYSE:AM||D||F||D||Seasonal Greeting Cards.|
|Avon Products||NYSE:AVP||C||F||F||Cosmetics, Fragrances and Jewelry.|