Winning Stocks Index
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Some time ago I wrote about my imaginary SWIX fund (a sweepstakes index of companies whose products are most coveted as prizes). I’ve been screening the online marketing and sweepstakes sites and this very unofficial list spits out the most wanted and most entered prizes are cash, houses, cars, and trips but since these are almost all non-stock specific there are some secondary names. Drumroll please: the winners are: Apple (NASDAQ: AAPL), Amazon.com (NASDAQ: AMZN), Coach (NYSE: COH), Visa (NYSE: V), and Wal-Mart Stores (NYSE: WMT).
The top two are the big winners by far with sweeps sponsors of all sizes offering Apple iPads, iPods, and Apple iTunes gift cards. Amazon is a close second place as Amazon gift cards in different denominations as well as the Kindle and Kindle Fire being very popular prizes (especially on sites related to authors or reading blogs).
Then in no particular order are Coach Products, Wal-Mart gift cards, and Visa gift cards being very popular as prizes. Part of this may be due to these prizes average retail value is just under the $600 IRS 1099 rule for reporting winnings. All you gamblers probably already know this.
Why should an investor care about sweepstakes? Why do companies run them? I interviewed Craig McDaniel, founder of SweepstakesToday.com and he said,” When a company runs a sweepstakes, people’s brand loyalty goes up exponentially. I’ve seen it time and time again. Also, sweeps can be written off as a business expense as advertising and they get a good return on it.” An example he gave me was an average Kraft Foods sweeps with a $25K prize will get 1000-1500 hits a day just on his site alone. The internet has made a company’s follow up after entry even more important with the smartest companies offering a condolence email with some sort of promotion or coupon to ease the pain of losing (and staying in contact with another potential customer).
Facebook, Twitter, mobile texts, and Pinterest have made sweeps even more popular to companies as they are easy to administer and gain them tons of fans or followers. However, McDaniel cautions there are more scams on these kinds of entry methods especially if the company is not a well-known name.
Sweepstakes promotions are rolling out fast and furious in time for the holidays. The trend as McDaniel has noticed since the recession, however, is more sweepstakes but smaller prizes. Five years ago total prize values (of all sweeps listed on his site) was $100 million and now it is running less than half that. He also noted more men than ever are entering sweepstakes. His website has now published over 37,000 sweepstakes, contest and giveaways.
McDaniel said sweeps with Apple prizes get a lot of hits. Apple has sold off 10% in the last few weeks and earnings are upon us on Oct. 25. There is no doubt that Apple products are popular and the store is busy. After this pullback the question is to get in before or after earnings. The P/E is still low at 14.80 and it has a yield of 1.70%. The iPad mini is expected to debut on Oct. 23. If Apple hits $580 again for another 10% drop from here I’d snatch it up like a bride grabbing a designer wedding dress at the Filene’s basement sale.
Amazon is a favorite name of mine despite its huge P/E of 295.20. It is the most speculative of these five names. Like the Apple-Google death match purportedly promised by Steve Jobs, Amazon and Wal-Mart seem to be in a clinch, with Wal-Mart recently promoting same day delivery of certain items from its online site, a direct jab at Amazon. Wal-Mart also will not carry Amazon products in its stores any longer, a move they announced weeks ago. However, Amazon offers so much more than just items you can get from Wal-Mart, even Wal-mart.com. I see a lot of promise this holiday season with the Fire, streaming, Prime, e-content, and last but not least, the cloud. It has pulled back almost 10% from its 52 week high, as well. Amazon also reports on Oct. 25.
As to Visa, I didn’t realize how popular their gift cards are with sponsors but apparently Visa even has a small department that is entirely devoted to gift card fulfillment. Visa is right at a 52 week high ..again. Its P/E is getting a little pricey here at 67.90, much higher than its competitors and the industry average of 18.58. Competitor Discover’s P/E is only 8.95. Visa’s yield is minimal at .60%. While the name has been a standout over the last 52 weeks it could be considered overextended compared to its peers. Visa reports on Halloween, October 31.
Then there’s the aforementioned Wal-Mart with a P/E of 15.98 and a 2.10% yield. Despite a threat of worker walkouts on Black Friday, Wal-Mart will probably do just fine. Deal sites are eagerly anticipating any news on the Wal-Mart Black Friday bargains. Despite my personal aversion to being at a Wal-Mart on Black Friday, the stock has been doing very well this year and is starting some new initiatives like same day delivery and teaming up with American Express to offer the millions of Americans (approximately 50-60 million) who have no checking account or credit cards a banking service called Bluebird. The monolith that is Wal-Mart is now a bank, and people will spend their newly cashed paychecks in Wal-Mart. November 15 earnings should theoretically be good as back to school sales were reported to be robust, but those numbers may already be baked in.
Finally, a surprise to me was that Coach products, especially handbags, were so popular as a prize. Coach is trading at a 15.22 P/E with a 2.20% yield. CEO Lew Frankfort still owns 2,070,858 shares as of Sept. 30, a real sign of conviction to my eyes and it is trading closer to its 52 week low than its high of $79.70. Coach is the first of these five to report on Oct. 22.
Coach may be the name with the most upside and has the highest yield and a reasonable P/E. Apple is also quite reasonable, especially on any further pullback. The ones I would be particularly careful with would be Visa and Wal-Mart, already so close to multi-year highs. Amazon I like and would like even more on a big pullback but I think they will do just great on Cyber Monday.
leglamp has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, and Coach. Motley Fool newsletter services recommend Amazon.com, Apple, Coach, and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.