Holiday Stocks to Look Out For
Tags: Stocks, Stock Market

Since 1950, the S&P 500 has had a positive return during the last five trading days of December and the first two of the new year for 55 out of 70 years (or 79% of the time).

The Santa Claus Rally refers to the tendency for the stock market to rally over the last weeks of December into the New Year.

Researchers have suggested a variety of theories as to why the Santa Claus rally happens. Some cite a general feeling of optimism, portfolio rebalancing, and the investment of holiday bonuses. Others offer more concrete reasons, including tax considerations or the idea that more bullish retail investors tend to take control of the market when institutional investors go on vacation over the holidays.

While the exact reasons for the Santa Claus rally are unclear, it is best to cast your nets towards stocks of companies in high demand during the holiday season.

Santa Claus Rally Stocks

With Pfizer’s (PFE) vaccine in distribution, Moderna’s (MRNA) already approved, and Johnson & Johnson’s (JNJ) on stage 3 trials, the U.S. may soon have an excess of vaccines, instead of a shortage. This means the U.S is likely heading towards a booming economy — one where the restaurant, retail, travel and leisure, and industrial stocks might all rally.

Apple (AAPL)

The tech giant just boosted iPhone production y in preparation for the growing demand in 2021. Its Fitness+ has been the talk of the day. Apple stock has been range-bound for weeks, however, the holiday could break the ranging movement.

Amazon (AMZN)

Amazon needs no explanation. This is one of the best stocks to buy, period. It’s not just that AMZN stock is levered to the e-commerce revolution, the underlying company is the ultimate disrupter, changing the rules for any game it plays.

Target (TGT)

If you want the best stocks to buy with proven resilience, you may want to check out Target. Target is probably winning in delivery service after acquiring Shipt in 2017. Historically, Target stock offers Santa Claus rally performances with its shares averaging 1.63%.

Avantor (AVTR)

A global provider of products and services for the life sciences industry. Science is on display in a big way now that COVID vaccines are being distributed. The sophisticated technologies used to produce these vaccines on a global scale have never been done before, and they require ultra-pure materials that Avantor produces.

Lululemon Athletica (LULU)

The athletic apparel maker said direct-to-consumer sales now account for 43% of their business. Lulu continues to focus on product innovation. Lulu is ending the year with 45 locations in China and between stores, local ambassadors, and online sales, Lulu is off to a great 2021.

Nike (NKE)

The holiday season is always a big booster for Nike, as its products are some of the favorites for outings and relaxations. Nike is well established for online sales as the pandemic reduced the number of walk-in customers worldwide.

RingCentral (RNG)

The video conferencing and communications platform that’s at the heart of our COVID world. It’s providing their customers with a complete communications platform that works for today’s world. RingCentral has strong partnerships around the globe, from AT&T (T) to Vodafone (VOD) to British Telecom and beyond.

Lowe’s Companies (LOW)

Lowe’s offers exactly the service required during the holiday season. With a range of products for maintenance, repair, remodeling, and decorating. The Company offers home improvement products in categories, including Tools and Hardware; Appliances; Fashion Fixtures; Rough Plumbing and Electrical; Lawn and Garden; Seasonal and Outdoor Living; Paint; Flooring; Millwork, and Kitchens.

Home Depot (HD)

The home improvement retailer, sells an assortment of building materials, home improvement products, and lawn and garden products. Home Depot stores serve three primary customer groups: do-it-yourself (DIY) customers, do-it-for-me (DIFM) customers, and professional customers. Exactly the service required during the holiday season.

Triterras (TRIT)

Trade finance disruptor and contender to become the Amazon of Blockchain. If you’ve been a big fan of bitcoin, then this is for you. A blockchain-enabled trading and trade finance platform. Triterras’s marketplace provides “immutable records which can reduce fraud,” allows participants to track traded goods, and lowers lenders’ costs.

McDonald’s (MCD)

At first glance, McDonald’s doesn’t seem like one of the best stocks to buy for December 2020, not with the COVID-19 raging uncontrollably. However, you would be surprised at how much people are addicted to fast food. Every time you swing past a McDonald’s, you see people waiting. It’s remarkable and it’s great news for its stock long term.

Disney (DIS)

Remarkably, Disney is one of the most consistently strong Santa rally plays among blue chips, averaging 1.4% since the 1960s. When you think about Christmas and the winter holidays, you think of Disney. Thus, there might be some quantifiable logic to this phenomenon after all.

IBM (IBM)

One of the legacies that it presently enjoys is that it remains one of the best stocks to buy for the Santa Claus rally. Since the 1960s, IBM stock averages 0.49% when you buy and sell around the last week of the year. That was still the case last decade when it returned an average of 0.42% despite it being a difficult one.

The usual winners

Retail stocks always win. Why go to the store for simple items when they can be delivered right to your home? Lululemon (LULU) has 43% of its sales from e-commerce and companies like Williams-Sonoma (WSM) have over 70% from online sales. Just like we’ve seen in past holidays, expect big online sales numbers from Nike (NKE).

You can’t talk about holiday stocks without mentioning the usual winners from this trend, from Amazon (AMZN) to Walmart (WMT) to Costco (COST), and Target (TGT), which acquired Shipt — a same-day grocery delivery service to bolster its direct-to-consumer efforts.

*This article is aimed to provide information and education for investors. Chaka does not recommend or advise investors to buy or sell particular stocks or securities.