3 Holiday Shopping Tips for Investors
Demitri is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Holiday shoppers know that the early bird gets the worm.
Fill your gift-buying needs before the crush hits in December, and you can still snag good deals while dodging the crowds. According to shoppertrack, the sweet spot of the holiday season shopping -- when store traffic is the lowest but discounts are still high -- is the set of weekdays just following Black Friday. This year, that’s Monday, November 26 and Tuesday, November 27. So save those dates, shoppers!
Investors looking for their piece of retailers' holiday profits have their own incentives to get in early, well before the so-called Santa Claus rally that tends to lift the market around that same time. And there are a few reasons to be cautiously optimistic about this year's numbers. Marketing researcher, NPD, just released a survey showing that most consumers plan to spend more money this Christmas than they did last year. That reinforces the uptick we saw in the consumer confidence figures, which are close to their highest levels (pdf) in four years.
But, even assuming a great holiday for retailers, the increased spending won’t be spread around evenly. So here are three tips for separating the good buys from all the rest this fall.
1) Buy practical
The big box retailers, like Best Buy, that dominated previous holidays won't be repeating that performance this year. Instead, it's off-price retailers that are the growing destination for holiday shopping trips, according to NPD.
These are stores like TJ Maxx (NYSE: TJX) and Ross Stores (NASDAQ: ROST), which have had phenomenal runs over the last five years as consumers stress value over flash. TJ Maxx is up over 200% and Ross has jumped 400% in that time. And yet despite different growth prospects, both stocks are valued at exactly 20 times trailing earnings. I think Ross deserves a premium and so it makes for a solid investment here. The company had a great December quarter last year, reporting a 7% bump in comparable sales. And this year, with a bigger store base and broader merchandise selection, the company looks set to meet or beat those figures. See my full take on Ross here.
2) Be creative
Innovation drives sales at this time of year, as some of the biggest retail hits tend to be new and improved gizmos. But the leading categories of Christmases past -- like TVs, netbooks, and gaming systems -- aren’t participating this year, thanks to a dearth of new product introductions. That spells a tough holiday for producers like Sony.
But bucking that trend is the software giant, Microsoft (NASDAQ: MSFT), which has a pretty full slate of new stuff to offer consumers this year. The company’s Surface tablet lineup, due to start shipping this month, boasts some impressive innovations like a touch keyboard cover and magnesium chassis. And Mr. Softee can also plan to ring the register millions of times for its first new operating system in years, Windows 8.
3) Look for bargains
But no holiday shopping trip is complete until you bag a quality deal. And my pick on that score is a little-known tech company called Apple (NASDAQ: AAPL). With iPhone 5 sales off to a fast global start and a deep lineup of hardware around the iPad, Apple looks set to book another great holiday this year.
And perhaps thanks to "Mapplegate" ("Mapocalyse?"), the stock is having an early-fall sale, down about 10% since hitting its all time high. The tech media can't decide if the phone is an embarrassing, boring, uninspired product, or the best smartphone ever made; a "miracle." But customers are having no such confusions.
The stock is selling for just 14 times projected earnings. In my view, that's way too low for a company that's been good all year. And luckily for investors, you don’t have to wake up at 4am to stand in line for that deal.
With solid choices like Ross Stores, Microsoft, and Apple you can beat the crowds and get some of your holiday stock buying out of the way early this year. It may only be October, but it's never too early for shopping, or investing.
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SigmaSwan owns shares of Apple and Ross Stores. The Motley Fool owns shares of Apple and Microsoft. Motley Fool newsletter services recommend Apple. 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.