The holidays are right around the corner. Thanksgiving is coming up soon, and it won’t be long until Christmas and New Year’s as well. While 2020 has been a historic year with all sorts of challenges and difficulties, it’s not too late for things to end on a bright note. Certainly not for the stock market anyway; the indexes are surging and thus it’s time to take a look at holiday stocks to buy as we enter the home stretch.
At this time, it’s still unclear exactly how things will play out with the novel coronavirus. The vaccine news is promising; however, the spike in cases across the United States is not. As such, it makes sense to have a variety of companies that benefit from both stay-at-home and economic recovery trends to balance out your portfolio.
With that in mind, here are seven great holiday stocks to buy now:
- Canada Goose (NYSE:GOOS)
- Facebook (NASDAQ:FB)
- Avalara (NYSE:AVLR)
- Walmart (NYSE:WMT)
- Hershey (NYSE:HSY)
- Molson Coors (NYSE:TAP)
- Waste Management (NYSE:WM)
Stocks to Buy Now: Canada Goose (GOOS)
Canada Goose stock has started to take flight in recent weeks. And it makes perfect sense why. The luxury winter apparel maker crashed earlier this year, along with most other retail stocks, as investors reacted to the unprecedented economic shock. In that environment, traders naturally dumped their holdings in the apparel sector indiscriminately.
Now that cooler heads are prevailing, however, Canada Goose is attracting the right sort of attention. Here’s the thing with GOOS stock in particular: The pandemic hasn’t been particularly harsh to it. Canada Goose is primarily a winter business anyway, so everything shutting down in March was about as ideal a time as any if it had to happen. That’s because few people were going to buy Canada Goose clothing heading into summer.
While the second wave of the virus is concerning, so far, it appears Canada Goose will avoid the worst of the retail slowdown. Meanwhile, the so-called “K-shaped recovery” helps as well. While middle-class focused retailers are struggling, luxury sales are doing well. Given the price points on the average Canada Goose product, as long as the elites still want to go skiing this winter, things should work out well enough for GOOS stock. And while Canada Goose’s shares are well off the lows, they’re still down 50% from the 2018 peak, offering considerable room for further gains as the holiday season plays out.
Facebook is arguably the cheapest and most compelling of the FAANG stocks. It’s certainly a better value than most of the other social media names. That alone is a good reason to own some FB stock — look for Facebook to rally into 2021.
That said, there’s a specific holiday catalyst for Facebook as well. That’s the Oculus Quest 2, which is on sale now for just $300. This is arguably the first time that virtual reality has been available at a reasonable price as a standalone product. You no longer need to drop a ton of money or have a high-end gaming computer to make virtual reality work seamlessly. Now folks can enjoy a futuristic gaming experience at a significantly cheaper cost of entry than the new consoles.
That’s enticing enough as is for Facebook. This should be the first big holiday season for virtual reality, at least judging by reviews and buzz. Even more so, it offers tantalizing possibilities for Facebook. Virtual reality may eventually become the next big screen, and allow Facebook to get a chunk of the hardware market that it missed with smartphones. Facebook already sports a cheaper valuation and is a faster-growing company than Apple (NASDAQ:AAPL). If Facebook starts to make in-roads into the hardware market, look out.
As the holidays approach, traders will again focus on e-commerce stocks. It has been the theme that keeps on giving throughout 2020, and the next six weeks will prove no exception. Unfortunately, these stocks are all expensive now, given the massive boost that the pandemic has given them. Many e-commerce stocks are up hundreds of percent on the year already, and simply don’t have a valuation that makes any sense compared to fundamentals.
By contrast, there’s still a fundamental argument for owning online sales tax leader Avalara. Shares up are up 130% year-to-date, so AVLR stock is no screaming bargain either. However, shares haven’t done totally exponential yet. And unlike many e-commerce names, Avalara is not facing substantial competition. In fact, there’s only one major rival to Avalara’s core business, which is to help small and mid-sized merchants automatically calculate and collect sales tax across state and international lines.
This is a huge hassle for small sellers that can’t possibly learn about the intricacies of sales tax law in dozens of U.S. states. A Supreme Court decision in 2018 made it far easier for states to collect online tax from residents of other states. Since then, various localities have rushed new taxes into effect.
Avalara is the perfect solution. It can be automatically integrated into platforms such as Wix (NASDAQ:WIX) and Shopify (NYSE:SHOP). This has allowed Avalara to pick up new clients in droves this year during the pandemic, which in turn should power further gains for AVLR stock.
If you want to mix and match e-commerce stocks such as Avalara with a more traditional holiday retail name, give Walmart a look. Yes, a skeptic might say, WMT stock is near its all-time highs. But look at this year in general; grocery stores have been booming. And Walmart in particular has shined as it has finally gotten to show off its vastly improved e-commerce capabilities thanks to the pandemic.
For Walmart, in Q2, it grew its e-commerce sales by a shocking 97%. Normally companies this big can’t show that much growth; it’s truly impressive. Additionally, this 97% was further acceleration from the 74% growth it put up in Q1, and was light years ahead of the 30-40% e-commerce growth numbers it had been showing prior to the onset of the coronavirus. While this sort of unprecedented online growth isn’t going to continue forever, make no mistake, many of these new customers will stick with Walmart.
All this online growth, in addition to strong brick and mortar sales, is leading to a boom in Walmart’s results. Analysts see earnings growing another 9% for 2021, and then mid-single digits annual growth over that. This puts WMT stock at around 27x earnings going forward. That’s not a huge bargain, but it’s more than fair price for a company that is finally starting to dominate the e-commerce game and exits the pandemic in fantastic shape.
With the holidays coming up, it’s time for folks to buy candy and snack foods. And Hershey will be ready to meet the challenge. The country’s most well-known chocolate-producer has branched out into a variety of savory foods and snacks as well in recent years.
Not surprisingly, that’s been a fine business to be in during the pandemic. In fact, Hershey’s just-reported Q3 results beat expectations across the board. Of particular note, the company’s North American sales surged 6%, powered by gaining nearly 2% of the overall chocolate market share as smaller rivals struggled to adapt to the pandemic landscape. Hershey also reinstated forward guidance, as it now has a clear picture of how the business is going in the new economic situation.
Hershey had some skeptics, given its exposure to Covid-impacted sales channels such as box office candy products and bulk buying for Halloween. However, it appears that people’s desire to eat comfort foods during the pandemic more than made up for those weaknesses. In any case, selling at 24x earnings with solid growth once again, HSY stock is a safe blue chip name offering a reliable dividend as well.
Molson Coors (TAP)
In addition to Hershey’s products, for the adults, there’s plenty of demand for beer around the holidays. That brings us to Molson Coors. After a long decline, TAP stock has surged to life over the past month, rallying from $33 to $44 virtually overnight. This came on the back of strong sales for the beer industry in general, great earnings for Molson Coors in particular, and the general rotation from growth stocks back into value names.
First, it’s worth checking in on those earnings. For Q3, Molson Coors earned $1.62 per share, which was light years ahead of the $1.03 that analysts had been forecasting. Molson Coors has had a downtrend in sales in recent years, so this quarter was far ahead of expectations that the pandemic would crush demand. Turns out, people enjoy drinking at home as well, even if they can’t go to bars and restaurants.
More broadly, Molson Coors is starting to see fundamental things turn its way. For one, the craft beer threat has slowed down dramatically, as the pandemic has crushed small businesses. This has allowed major beer companies to regain some market share. Additionally, Molson Coors is a competitor in the booming seltzer market. This offers some nice upside in addition to the company’s usual line of products.
Add it all up and the stock is still cheap, even after the recent surge. If you annualize those Q3 earnings, Molson Coors is earning more than $6/share per year. That’d put the stock at just 7x earnings. Clearly, the market doesn’t yet believe that Molson Coors has turned things around, even after Q3’s blowout results. However, if this upcoming holiday quarter continues the new trend, TAP stock could get back to $60 (10x earnings) in a hurry.
Waste Management (WM)
Finally, with all the holiday shopping, you’re likely to end up with a lot of trash. Waste Management is there to clean it up. Pandemic or no pandemic, trash disposal remains a fantastic business. It’s truly an indispensable service regardless of how the economy changes in the near-term. Investors had originally feared that trash industry profits would get hit with restaurants and offices working at reduced capacity, but this has been largely offset with gains elsewhere. The delivery-driven economy produces plenty of packaging waste, after all.
In any case, things are now back on the rise for WM stock. Shares are surging both on improving earnings prospects and shrewd moves elsewhere. Waste Management’s long-awaited $4.6 billion purchase of Advanced Disposal just achieved regulatory approval. This deal will boost earnings going forward.
Additionally, the company helped finance this expansion by issuing new debt at a magnificent interest rate of just 1% on its short-term bonds and 2.5% for bonds due in the year 2050. It’s pretty incredible that Waste Management can borrow at such low interest rates, and it makes takeover activity such as the Advanced Disposal deal a big winner. Sure, WM stock is trading for 30x earnings and that’s not especially cheap. But with plenty of growth to come for this recession-resistant business, shares are attractive here heading into the holiday rush.
On the date of publication, Ian Bezek held a long position in TAP, AVLR, FB and HSY stock.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.