Holiday stock picks: Playbook for the season of cheer

Key points

• Strong outlook for holiday spending: A soft landing, rising wages, and robust consumer confidence set the stage for record holiday spending.

• Stock opportunities across sectors: Retail giants, e-commerce, specialty stores, travel companies, and gaming firms could be primed for growth this season.

• ETFs for diversification: Explore thematic ETFs to capture gains in retail, leisure, and e-commerce trends.

A Merry outlook for holiday spending

As the holiday season kicks into high gear, the U.S. economy is setting a strong foundation for robust spending. A resilient consumer, paired with improving macroeconomic conditions, is driving optimism for 2024's holiday shopping period. Here’s why this season could deliver record-breaking numbers:

Soft landing on the horizon: The U.S. economy has navigated the challenges of inflation and interest rates remarkably well. With expectations of potential rate cuts in 2024, the outlook for growth has improved significantly.

Resilient consumers: Rising real wages and a wealth effect from stock market gains and home-price appreciation have bolstered purchasing power. Consumer confidence remains robust, even amid higher borrowing costs.

Record holiday spending: The National Retail Federation predicts a 3% increase in holiday sales over last year, reflecting sustained consumer demand despite a shortened shopping season. Deloitte’s survey shows that consumers plan to spend an average of $1,778 this year, up 8% from 2023, with experiences prioritized over gifts.

Early shopping trends: Nearly half of holiday shoppers started before November, a trend reflecting greater consumer planning and demand for seasonal deals.

Strong company guidance: Positive earnings reports are boosting confidence for the season, with Walmart hitting a record high. Abercrombie & Fitch, Gap, and Williams-Sonoma report strong starts, while Airbnb and United Airlines forecast strong holiday demand, particularly in travel and experiences.

Source: Deloitte

Stock playbook for the holiday season

From retail to travel, here’s a breakdown of sectors and stocks expected to benefit from holiday spending:

Retail giants

Walmart (WMT): Captures holiday demand with affordable essentials and gifts.

Amazon (AMZN): Dominates with its Prime ecosystem and Black Friday sales.

Costco (COST): Appeals to bulk shoppers for holiday feasts and gifts.

Best Buy (BBY): Benefits from strong demand for electronics and tech gadgets.

Specialty retail

Ralph Lauren (RL): High-end apparel and accessories for holiday gifting.

Tapestry (TPR): Owner of Coach and Kate Spade, capitalizing on luxury trends.

Abercrombie & Fitch (ANF): Trend-driven clothing for younger shoppers.

Urban Outfitters (URBN): Unique offerings for Millennial and Gen Z shoppers.

Lululemon (LULU): Popular athleisure brand with loyal customers.

Gap (GAP): Affordable, stylish apparel attracts premium holiday shoppers.

Travel and leisure

Delta Air Lines (DAL): Increased travel demand drives higher ticket revenues.

United Airlines (UAL): Stands to gain from the uptick in holiday travelers.

Expedia (EXPE): Increased bookings for flights, hotels, and vacation packages.

Marriott International (MAR): Popular for family reunions and holiday vacations.

Airbnb (ABNB): Strong demand for unique stays during the holidays.

Booking Holdings (BKNG): Robust bookings for global holiday travel.

Carnival Cruise Lines (CCL): Experiential gifts boost cruise bookings.

Toys and gaming

Hasbro (HAS): Popular toys like Monopoly and Nerf drive seasonal sales.

Mattel (MAT): Barbie and Hot Wheels remain top holiday picks.

Electronic Arts (EA): Video games like FIFA are perennial favorites.

Roblox (RBLX): Immersive gaming platform loved by kids and teens.

Streaming and entertainment

Netflix (NFLX): Tyson fight exclusive and strong original content should drive subscriptions.

Disney (DIS): New movie releases and Disney+ offerings could boost revenue. Holiday travels could also boost theme parks. 

Credit cards and payments

Visa (V): Higher transaction volumes during peak shopping.

Mastercard (MA): Benefits from global holiday spending trends.

American Express (AXP): Strong demand among affluent shoppers.

PayPal (PYPL): E-commerce transactions surge during the holidays.

Affirm (AFRM): Buy Now, Pay Later services drive holiday sales.

Health and personal care

CVS Health (CVS): Positioned to benefit from increased demand for wellness products.

Walgreens Boots Alliance (WBA): Continued demand for pharmacy and personal care.

Bath & Body Works (BBWI): Holiday scents and gift sets boost sales.

Procter & Gamble (PG): Household and personal care products see increased demand.

Estée Lauder (EL): Holiday gifting boosts sales of premium skincare and cosmetics.

ETF ideas for broader exposure

For investors looking to diversify, these ETFs provide targeted exposure to sectors poised to benefit from holiday spending:

SPDR S&P Retail ETF (XRT): Tracks top U.S. retail stocks.

iShares US consumer staples ETF (IYK): Covers consumer staple goods.

VanEck video gaming and eSports UCITS ETF (ESPO): Focused on the gaming and esports industry.

Invesco Leisure and Entertainment ETF (PEJ): Offers exposure to travel and leisure.

Global X E-commerce ETF (EBIZ): Captures the online retail boom.

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