Christmas Stocks

Fall may have just begun, but with markets suffering from months of choppiness, investors are already beginning to look forward to the holiday season for more reasons than just the festivities. Inflation and rising rates could limit the budget of many holiday shoppers this year. But the fact remains that Americans love to buy and receive gifts, and Christmas time is one of the few annual events where everyone has items on their list to purchase.  

Generosity isn’t just reserved for gift-givers either — many stocks, especially in the retail sector, can offer generous returns thanks to the Christmas season. So if you’re looking to boost your portfolio heading into 2023, consider some of these downtrodden stocks that may get a boost from holiday shoppers.

The Best Christmas Stocks

These stocks aren’t necessarily related to Christmas directly — they benefit from the excesses of the holiday season. Here are five companies where consumers are sure to spend their cash this winter.

Amazon.com Inc. (NASDAQ: AMZN)

Were you expecting someone else? Few companies benefit more from holiday shoppers than Amazon, where swaths of gift buyers, decorators and party hosters can find all the items they need. Amazon sells merchandise of all kinds, whether from its own brands or through third-party vendors with stores hosted on Amazon’s website. Additionally, Amazon Web Services offers computing, cloud and API solutions to businesses and governments across the globe. Amazon has one of the most oversized market caps in history at $1.1 trillion and has grown revenue from $232 billion to an astonishing $485 billion in just four years. The stock had tremendous stability during the 2020 COVID-19 crash and today has a beta of 1.33, which makes it more volatile than the overall market but less volatile than you’d expect from a stock with a 100+ P/E ratio with quickly rising rates.

Online shopping has gradually taken market share away from brick-and-mortar stores for years, but the COVID-19 pandemic expedited this process. According to Statista, in-store vs. online holiday shopping was a 50/50 split in 2017. But in 2020, 61% of holiday shoppers said they were buying online, and that number only dwindled to 57% when pandemic concerns eased. So online shopping is here to stay, and no one stands to benefit more than Amazon.

Best Buy Co Inc. (NYSE: BBY)

Speaking of companies with a solid online footprint, Best Buy combines the best of both worlds — brick-and-mortar stores and comprehensive online platforms. Best Buy sells electronic and tech devices like TVs, desktops, laptops, mobile phones, speakers and video game consoles. It also has a vast library of music and games, digital fitness equipment like smartwatches and appliances like refrigerators, dryers, dishwashers and vacuums. The company operates more than 1,100 physical locations in the United States and Canada. They also operate the Geek Squad, a traveling tech support team to help set up or tune up electronics in homes and offices.

Best Buy stock is appealing for a few reasons. The market cap is much smaller than Amazon's at $14 billion, but the stock has a low 8.71 P/E ratio and pays a dividend yield of over 5%. In addition, the company has grown revenue and earnings in each of the last four years. The stock reached its all-time high in November of last year but has since been cut by 60%. It remains a volatile stock, so have a plan for entry and exit when investing in BBY shares.

Target Corp. (NYSE: TGT)

It’s always a good sign when a company has a catchphrase, and a “Target run” is a pretty well-known weekend endeavor for most Americans. As a general retailer of electronics, food, discount clothes, furniture and other merchandise, Target sells everything from frozen pizzas to flat-screen TVs across its 2,000 stores in the United States.

Target has a robust online footprint through Target.com and offers curbside pickup at most locations. Founded in 1902, the company employs 450,000 people and is well known for its Black Friday sales and deals on popular Christmas toys, electronics and other merchandise. One of the largest retailers in the country, Target boasts a $70 billion market cap with a P/E ratio of 17 and a dividend yield of just under 3%. Target has been one of the less-volatile retail stocks over the last 12 months, with a beta of just 1.02, meaning it moves basically in lockstep with the broader indices. Target has grown revenue and profits in the last four years, but consecutive earnings misses have left investors cautious about the stock. However, that could change quickly with a solid November number.

eBay Inc. (NASDAQ: EBAY)

eBay is no longer just an online auction site but a vast retail network that connects buyers and sellers all over the globe. In addition, eBay is no longer just a hub for used and discount goods; it sells apparel, electronics, toys, sporting goods and vehicles through its online marketplaces. Peer-to-peer sales are no longer the primary form of business, as eBay links customers directly to retailers, distributors, shopping channels and catalogs.

Founded in 1995 as an online auction site, eBay has expanded into various digital realms and now employs more than 10,000 people. The stock has a market cap of $20 billion and a modest P/E Ratio of just 2.03. eBay stock has fallen more than 50% since reaching an all-time high in October 2021, and revenue growth has slowed, but the company continues to consistently surpass earnings expectations with four straight beats.

Etsy Inc. (NASDAQ: ETSY)

Etsy is a bit like eBay for artists. With a vast online marketplace, Etsy connects artists, designers and other entrepreneurs with customers to sell handmade or vintage items. The focus is primarily on homemade crafts and unique gifts (perfect for that outside-the-box thinker on your list), but Etsy also sells clothing, toys, furniture, party favors and tools for artists and designers to construct their crafts. The company estimates that more than 100 million items are available for purchase on its marketplaces.

Etsy had its IPO in 2015, making it one of the newer entries on this list, but its results have been strong. Revenue and profit have grown yearly since the IPO, and the stock has beaten analysts’ earnings expectations in the last four quarters. Etsy stock has a market cap of $12.6 billion with a P/E ratio of just under 36. It’s a volatile stock (beta of 1.85), so be cautious of entry and exit points when planning to buy Etsy shares.

Why Invest in Christmas Stocks?

Investing in so-called Christmas stocks can have several benefits, such as:

1. Taking advantage of a predictable sales boost: The holiday season comes at the same time every year, and shoppers are out in force once its starts. It results in as predictable a bump in sales as you’ll find in the retail sector, which is why Black Friday has become a holiday all to its own.

When Should You Buy Christmas Stocks?

Obviously, you don’t want to wait until Christmas is approaching to invest in stocks that may benefit from a holiday shopping rush. Black Friday (the day after Thanksgiving) is usually the opening bell for holiday shopping, but that still may be too late in the game since markets are forward-looking, and Black Friday sales are usually baked into the price of a stock.

To profit from a potential rise in stocks that benefit from Christmas festivities, you’ll want to own these companies earlier than you think — you maybe should think about buying now. Halloween and Thanksgiving may still be a ways off, but buying Christmas stocks now could allow investors to get ahead of the priced-in data.

Stocks to Watch Around Christmas

Retail stocks usually get the most attention during the holiday season, but that’s not the only sector that can see a boost from the Christmas season. A few other sectors and stocks to keep an eye on as the temperatures drop include:

• Shipping: Companies like UPS and FedEx are always hiring extra workers this time of year because of increased business. With online shopping taking more market share, these companies should benefit even more when the holiday season rolls around.

• Railroads: UPS and FedEx aren’t the only methods of shipping items. Many of the goods that will be purchased for gifts this year will be transported by companies like Union Pacific, CSX Corp and Norfolk Southern.

• Food and beverage companies: Gifts aren’t the only things exchanged around Christmas time. Stocks of food and beverage companies like Mondelez International, Constellation Brands and Hormel Foods could also be good buys during the holiday season. And don’t forget the beer companies like Sam Adams, Diageo and Anheuser-Busch.

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Benzinga has detailed coverage about each of the stocks presented on this list plus a few more that may be flying under the radar. Compare stock brokers below.

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