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3 Spooky-Profitable Stocks for Billions in Halloween Spending

Halloween has its roots in ancient festivals, but in the modern era, it's about big business. How big? Try over $9 billion, according to the National Retail Federation (NRF). That's up from around $8.5 billion last year.

That's a lot of money. And it gets even scarier. Also according to the NRF, average spending per household on All Hallows' Eve this year will come to $86.13. One naturally assumes the largest chunk of Halloween spending is on candy, but the bulk of the spending -- $3.4 billion or 37.4% -- will be on costumes. Candy and decoration spending are tied, at $2.7 billion and 29.7% of all spending each. 

Data source: National Retail Federation. 

All the more interesting, in our e-commerce driven age, is that most Americans are making their Halloween-themed purchases in person:

Image source: NRF.

It should be noted from the infographic that the sum of all planned spending exceeds 100% because most Americans purchase from multiple sources. But one thing is for sure: Discount and Halloween-themed pop-up stores are big beneficiaries of the planned $9.1 billion in spending.

Image source: Getty Images.

Halloween is an economic force to be reckoned with. And it won't surprise the reader to learn that these estimates also point to some fantastic stock picks. 

The king of discount retail

You probably saw this one coming, but for Americans looking to buy Halloween costumes and candy in person and at a discount, there's no better place than Wal-Mart Stores (NYSE: WMT). And that makes it my first pick for a spookily profitable Halloween. Although Amazon.com continues to expand and dominate the industry, Wal-Mart is no slouch. Revenue in 2016 came in at $485.87 billion. For its latest fiscal quarter, ended July 31, revenue was $123.4 billion, up 2.06% from the same quarter in 2016. Wal-Mart is likely to continue to benefit from holidays like Halloween for years to come, as you can get pretty much everything else you and your family need from a Walmart store while you're looking for costumes and candy. 

The masks we wear

In its annual Halloween spending estimates, the NRF didn't just stop at broad spending. Foolish investors might also be able to glean some useful leads from the NRF's survey of the top 10 Halloween costumes.

Rank

Children Adults Pets
1 Action/superhero Witch Pumpkin
2 Batman character/ princess* Batman character (Batman, Catwoman, Harley Quinn, etc.) Hot dog
3 Animal (cat, dog, monkey, etc.) Animal (cat, dog, etc.) Dog/lion/pirate*
4 Spider-Man Pirate Bumblebee
5 Star Wars character Marvel superhero (Spider-Man, Captain America, etc.) Devil
6 Witch Vampire Batman character
7 Pirate/Marvel superhero* (excluding Spider-Man) Zombie Ghost
8 Disney princess DC superhero* (excluding Batman, Wonder Woman)/Star Wars character Cat
9 Ghost Slasher-movie villain (Jason, Scream, etc.) Witch
10 Wonder Woman Wonder Woman Star Wars character

Data source: NRF's Annual Halloween Spending Survey, conducted by Prosper Insights & Analytics. *Costumes tied for ranking. 

The costumes we're buying are the usual suspects: Batman, Disney princesses, Spider-Man, Star Wars characters, Marvel superheroes, pirates, and monsters. While investors can't really position their portfolios around the value of a public-domain type of character like Dracula, many of the characters that made the list are owned by just two companies that also happen to be fantastic stocks for Foolish investors.

AT&T

What? A phone company for Halloween-themed stock? I know it sounds crazy, but hear me out. 

Though it's still subject to government antitrust approvals, AT&T is in the final stages of buying the owner of characters such as Batman, Superman, and Wonder Woman -- Time Warner (NYSE: TWX). The giant telecommunications conglomerate is making this move because content is the future. Comcast purchased NBCUniversal in 2009 for the same reason.  And there are few companies with more content under its umbrella than Time Warner. 

Once complete, the company will be a content-distribution powerhouse. Not only is it the second biggest cell-phone network provider in the U.S., but it is also a big provider of internet and television, though its U-verse and DIRECTV services. Even now, the company is a scarily profitable enterprise: It has a 5.8% dividend yield and generated $17.8 billion in free cash flow last year.

Disney

How many Captain Americas will you see on Halloween? Few companies own as many premium content brands and characters as Disney (NYSE: DIS). And that's why it is arguably the best pick of the three stocks we've looked at. Not only does the House of Mouse own the rights to Mickey Mouse and the Disney princesses, but it also lays claim to the entire Marvel suite of characters, which includes Iron Man, The Hulk, Thor, Spider-Man, and, yes, Captain America. To top it all off, in 2012, Disney agreed to buy Lucasfilm, the production company of Star Wars and Indiana Jones creator George Lucas. With it, Disney bought a whole new world (catch the Aladdin reference there?) of intellectual property (IP) and cross-selling opportunities. A Star Wars land titled Galaxy's Edge is coming to Disney world in 2019. 

With the stock trading at just 15 times forward earnings per share, a valuable IP portfolio, and a 1.59% dividend yield to top it all off, Disney shares are likely to produce frighteningly big profits for years to come. 

10 stocks we like better than Wal-Mart Stores
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean O'Reilly has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Walt Disney. The Motley Fool recommends Time Warner. The Motley Fool has a disclosure policy.