Holiday Share-ing
The holiday season is finally here, and so is the window to take advantage of seasonally-driven stocks. Throw out your rotting pumpkin and pull out your broker's number. It's that time again.Everyone including your grandmother wants one of those sleek LCD televison sets, right? If you're thinking hi-tech, you're probably also thinking Best Buy (BBY), the Canadian consumer electronics giant. Going to Best Buy can easily become addictive-cell phones, digital home theatres, MP3 players--these guys stock everything! Not only do they know what's hot; they thrive off the low costs. Thankfully, the dynamics of economies of scale are gradually driving down the prices of LCD-TVs, which I suspect will sell like hotcakes during this last fiscal quarter. In preparation, the company has upped their employee force by 20%--but we'll have to wait until January to see how clear their crystal ball is.
Speaking of techno-gadgetry, what a year it has been for Apple (AAPL)--living in New York City, the only thing more ubiquitous than yellow cabs are Apple's iPods. Together with thier iTunes online store, Apple has been one of the great turnaround stories of the year, one in which CEO Steve Jobs has morphed into something of a quasi-mythological figure. A freshly signed deal with U2, the introduction of iPod photo, and the proliferation of iPod accessories should further boost Apple's success.
You'll probably need something nice to carry your iPod in, correct? Coach (COH), albeit a bit pricey--the stock is now fetching 31 times earnings--could still be a catch. Coach--which specializes in premier leather apparel and accesories--has found a way to simultaneously cut costs and drive up margins under the leadership of Lew Frankfurt--They've even found a way to survive economic slowdowns: As David Schick, an analyst with Legg Mason, notes "(The) accessories business doesn't dry up when consumer spending slows down because many folks choose to accessorize than to rebuild a wardrobe." Fortunatey for Coach, the demographic and economic data is at their back: The urge to splurge has never been as pervasive as it is now--today, there are more millionares in the US than ever before. Fact. As a recent Barrons investigation pointed out, a host of luxury retailers may reap the rewards assocated with a more receptive consumer. So long as they can continue to exploit their niche market, expand internationally, and inoculate themselves from the bootleg epidemic, a Coach stock certificate could make a nice stocking stuffer.
If you're like me, you're a last minute shopper. In steps Californa-based Red Envelope. RedEnvelope (REDE), which specializes in upscale gift retailing primarily through the internet--72% of thier orders are generated through their eye-candy of a website--has spent most of 2004 recovering from the order-processing cataclysm they suffered last December. RedEnvelope continues to make gift-giving a lot less complicated than it has to be. For instance, gifts can be ordered by occassion or by recipient--however you want it. If their logistical operations have been mended, this company could soon get back on the road to profitablity. They already possess a strong balance sheet and little debt. Inventory controls and poor execution botched the company last year--this holiday will really test their mettle.
So what happens after the aisles have been combed, shelves ransacked, and orders duly processed? Think Overstock. Overstock (OSTK), which sells surplus inventory up to 80% off its face value, will ship your order for a paltry $2.95, regardless the size. Lately, Overstock has turned into a sort of punching bag for Street pundits. After surviving a short squeeze, the company's CEO Patrick Byrne caught heat for lambasting an analyst during a conference call gone astray. Whatever the case may be, this company is customer-thirsty. They've just recently started advertising, which they had previously eschwed. If Overstock has been wrongfully oversold, you're looking at a diamond mired in dirt.
A recent study by Shop.org discovered that holiday shopping has already gotten off to a strong start--and consumers plan on spending more this year than last year. Keep that in mind as you plan your holiday stock shopping list.
[At the time of publication, the author did not own any shares in the companies mentioned in this story.]
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