Just as with Thanksgiving, the Center for Disease Control and Prevention (CDC) recommends that Americans don’t travel for the Christmas holidays or gather in large numbers to celebrate the festive season. Due to the novel coronavirus, the kinds of Christmas stocks one might buy this holiday season are anything but typical.
For instance, if you’re richer than god, this holiday season, you might send your mom and dad a Peloton (NASDAQ:PTON) treadmill or exercise bike so they can pass the time in their self-imposed virus lockdown.
If this is you, you might also buy Peloton stock to benefit from the fact everyone and their dog seems to be buying the machines. That’s why Needham analyst Laura Martin upped her target price Dec. 2 to $140 from $125. At current prices, that’s still 21% upside over the next 12 months.
I’ll take that kind of return every day and twice on Sundays.
Today’s exercise is to come up with seven more Christmas stocks that you normally wouldn’t see benefit from the holiday season. My picks?
- Microsoft (NYSE:MSFT)
- Lululemon (NASDAQ:LULU)
- Pfizer (NYSE:PFE)
- GrubHub (NYSE:GRUB) / Just Eat Takeaway (OTCMKTS:TKAYY)
- BlackRock (NYSE:BLK)
- Kroger (NYSE:KR)
- Apple (NASDAQ:AAPL)
Next year at this time, here’s to hoping all of these stocks deliver the goods.
Christmas Stocks to Buy: Microsoft (MSFT)
With many Americans choosing to listen to the CDC and not travel this holiday season, families will be getting together virtually to wish each other well.
Naturally, the first stock most people will think of when it comes to online video calls is Zoom Video Communications (NASDAQ:ZM). However, with its stock up fivefold year-to-date through Dec. 7, it’s trading at an expensive 62 times sales.
Whereas, if you go for Microsoft, you get all its goodies such as Azure, Office 365, Surface, and Skype. All for just 11x sales.
Believe it or not, I still Skype with my 86-year-old mother twice a week. I could change to Zoom, but why would I, now that she’s become a pro with Skype?
As InvestorPlace’s Tom Taulli wrote on Dec. 1, Microsoft’s moves in artificial intelligence alone are worth investing in MSFT stock for the long haul.
“Microsoft’s machine learning ambitions also go beyond typical business processes. Note that the company has invested $1 billion in OpenAI, which is one of the leaders in AGI (Artificial General Intelligence). This is where AI is able to have broad intelligence like a human,” Taulli wrote.
“True, this will take time — maybe in even decades. But to remain competitive, Microsoft knows it needs to make long-term bets on fundamental technologies.”
But it begins with Skyping your loved ones over the coming weeks.
If we were talking about Lululemon, the apparel company, then it wouldn’t make sense to include the Vancouver-based business in a list of Christmas stocks for an atypical holiday.
However, since LULU stock bought Mirror, the in-home interactive home gym, for $500 million in July, Peloton’s got some company. And if there’s one thing the athleisure giant knows how to do, it’s rally a crew of global ambassadors to sell the Lululemon message.
This means you’re going to see Mirror in its brick-and-mortar locations.
Starting with 18 stores for the holiday season in most major cities across America, including New York, Miami, and Los Angeles, it will move to roll it out across its U.S. store network in 2021.
“Mirror’s workouts will feature Lululemon ambassadors, along with other instructors,” Retail Dive reported in November.
“The athletics retailer is also introducing a range of new engagement features for the tech, including letting users turn on a built-in camera to see and interact with other members, somewhat recreating the in-person workout experience.”
If there’s one thing I’ve learned about Lululemon over the years. it’s that it listens really well to its loyal customers by giving them what they want.
Isn’t that what every retail brand should do?
I think it’s safe to say that Pfizer normally wouldn’t be on most people’s Christmas stocks list but this year is a holiday like no other. Google the word “Pfizer” in quotation marks and you get 255 million results.
Here in Canada, Prime Minister Justin Trudeau said on Dec. 7 that 249,000 vaccine doses are expected to arrive before the end of the month. For those on the front lines, those can’t come soon enough.
Just the news stories about the freezer requirements of Pfizer’s vaccine will bring new investors to PFE stock as people attempt to educate themselves about the eventual shot they might receive in 2021.
“Right now, Pfizer says its vaccine needs to be kept at minus 70 degrees Celsius and can last in a specialty freezer for up to six months,” NPR reported in November. “The specialty shippers can hold up to five ‘pizza box’ trays of vials and be refreshed with dry ice every five days for up to 15 days to keep the vaccine at the right frozen temperature.”
It’s going to be a logistics feat getting the vaccine doses to various parts of the globe while keeping them safe. It’s not surprising then that most of the vaccine winners or prospective winners are large companies.
This isn’t a cheap process.
GrubHub (GRUB) / Just Eat Takeaway (TKAYY)
I can’t remember the last time I wrote about the food delivery service. In fact, unless I’ve mentioned Uber Eats in a story about Uber Technologies (NYSE:UBER), I’ve never written about it either.
Just days after its inital public offering, DoorDash (NYSE:DASH) has a market capitalization that’s more than twice ($50.83 billion) the combined value of GrubHub and Just Eat Takeway. But a share of DoorDash’s stock will cost you more than twice that of GRUB stock and about 16x a share of TKAYY stock.
GrubHub’s in the process of being acquired by Just Eat Takeaway for $75.15 a share in the first half of 2021. While some feel that GrubHub’s losing considerable market share in the U.S., its acquisition by Just Eat Takeaway gives the European food delivery service four huge markets: the U.S., the U.K., the Netherlands and Germany.
Some might think Uber or DoorDash is the better play. I think the GRUB-TKAYY tie-up might surprise investors in 2021 and beyond.
The latest weekly update to the net flows for exchange-traded fund providers shows that BlackRock increased its net assets by $5.6 billion as of Dec. 3. The next largest in terms of total dollars was Invesco (NYSE:IVZ) at $2.1 billion.
Of course, BlackRock has almost $2 trillion in assets under management, so it ought to win this contest most weeks.
You don’t usually think of asset managers when naming off Christmas stocks. However, in a year when the savings rate hit its highest level in almost 40 years, the money’s got to go somewhere. For those who’ve been working through the entire pandemic, investments such as BlackRock’s iShares ETFs make a lot of sense.
If you’re worried that you’ve missed the boat on ETFs, the party’s just getting started, and BLK stock’s YTD return of 42.8% is indicative of why it still makes sense to own the shares for the long haul. As I wrote in June 2018, BlackRock is a founder-led company worth owning forever.
“Since BlackRock’s IPO in October 1999 at $14, BLK’s achieved an annualized return of 23%, not including dividends, making it the best performing stock from the 69 financial services companies in the S&P 500,” I wrote in 2018.
Since I wrote those words, the stock’s gained another 35%, not including dividends. They’re consistent, if not spectacular, returns.
The one thing that people can’t do without is food and sustenance. Throughout the pandemic, grocery stores like Kroger have remained open as an essential service, likely the most essential other than hydro and healthcare.
Profits for many retailers have suffered as more precautions are necessary to keep the shopping environment healthy and safe. Still, the alternative, as many small businesses have found out, is to close permanently.
Interestingly, despite the fact Kroger’s online grocery sales topped $7 billion for the last 12 months through Nov. 7, and it more than doubled its operating profit to $792 million during the third quarter, Wall Street expected more, sending KR stock lower on the news.
After hitting a 52-week high in early September, it’s since fallen back into the low $30s. If you’re looking for a value play — it currently has a free cash flow yield of 9.2% based on $3.9 billion in free cash flow and an enterprise value of $42.2 billion — KR stock is definitely a smart play.
And it has a healthy 2.3% dividend yield.
Just remember that it comes with some baggage including employee complaints about store safety precautions during Covid-19 and negative public relations over its refusal to continue providing employees with hazard pay during the pandemic.
As stocks go, you can’t get any bigger than the maker of iPhones. Apple closed Dec. 14 trading with a $2.07 trillion market capitalization, making it roughly $450 billion larger than Microsoft in second position.
This is an article about Christmas stocks for an atypical holiday. As such, I’ve included Tim Cook’s baby because of its Services business. The less-heralded part of its business that’s come in handy during the pandemic.
The entertainment news site, ScreenRant, recently recommended an Apple One subscription as a holiday stocking stuffer. If you’re not familiar with Apple One, it’s the Apple services bundle the company launched on Oct. 30.
For $29.95 per month, the Premier Apple One subscription gives you Apple Music, Apple TV+, Apple Arcade, 2 terabytes of iCloud storage, Apple News+, and Apple Fitness+, which should be out before the end of the year.
You can share these services with up to five other people and save yourself as much as $25 per month based on the price of the individual services sold separately.
Except for Apple Arcade, I already use three of the services, so I’d be a prime candidate for the Premier subscription.
In February 2017, I wrote that its recurring revenue from its Services businesses would take its stock to $200. At the time, it was trading at $64 (before the 2-for-1 split). It went over $200 in July 2020.
I expect that Apple’s services business will continue to drive AAPL stock higher in 2021 and beyond. It’s the ultimate Christmas stock.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.