For many retailers, the holiday shopping season kicks off the day after Halloween, but for investors, the race to cash in on holiday sales starts the day after Labor Day.
That’s right — according to our seasonality studies, the retail and consumer discretionary sectors start to outperform the market in September, as investors start taking position ahead of the season and then dropping the same companies shortly after Thanksgiving.
The seasonality reflects a clear “buy the rumor, sell the news” trend when it comes to the holidays.
There are a few companies that are standouts among this group, as their average performance and consistency outpace their peers. One at the top of our proprietary model’s list is online retailer Amazon (AMZN).
AMZN Offers a Different Shopping Experience
Seen as the “brick-and-mortar killer” in its early days, Amazon stock has stolen shares from traditional retailers with its competitive pricing and free shipping for Prime members. AMZN’s Prime shoppers take joy in checking merchandise out in the brick-and-mortar stores and then buying items on their phones, knowing the trinkets will be waiting on their doorstep within days.
AMZN also panders to those who don’t even want to cross into the craziness that sometimes erupts in retail shops during the holidays.
The last five years have seen the three-month corridor from September to November provide a total of 14.5% gains on average.
Also notable is the precipitous drop in share prices in December, as Amazon stock’s average performance comes in at -3% for the month, further stressing the “sell the news” activity that takes hold after Black Friday.
Analysis of AMZN’s charts show an intermediate-term bullish outlook as we head into this seasonally strong period. Currently, the shares are trading above support from their 50-day trendline. This puts AMZN in rarefied air among the market, as the recent volatility has resulted in fewer than 20% of the S&P 500 companies trading above their 50-day trendlines.
Bottom Line
Sentiment towards AMZN remains neutral, which is good, as it suggests the stock has not become “overloved.”
Currently, 84% of the analysts covering the stock have it ranked a “buy,” which is a little above average. This means that there is less of a “wall of worry” for Amazon shares to climb, and that wall doesn’t worry us given Amazon stock’s seasonality and technical strength.
Overall, AMZN looks ready to charge into the holiday season as a leader, with our model targeting a move to $600 shortly after Black Friday.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
