Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

4 Solid Stocks to Make the Most of All Hallows' Eve

The U.S. stock market seems to have defied the eerie All Hallows’ Eve by maintaining its bull run, and the ‘Halloween Strategy’, a technique in which investors start placing big bets on All Hallows' Eve after restraining in the preceding six months, gives us even more optimism right now.

Demand for candies and costumes in the Halloween season drives sales at U.S. retailers, including discount stores. Sales of such items are poised to beat the previous year numbers, courtesy of upbeat consumer sentiment. The finances of consumers have, largely, benefitted from an improving economy with lower unemployment and better wages.

Spooky Stock Market Ghosts, Goblins and Ghouls

The fears and apprehensions concerning the broader market are unsubstantiated.

For instance, has the war of words between North Korea’s Kim Jong-Un and Trump scared investors? Apparently not, as the market continues to gain unhindered.

Another fear is that the Fed will hike rates, killing a bull market fueled by cheap borrowing. But, policymakers haven’t hiked rates yet. They fear that a rate hike will strengthen the dollar, eventually denting U.S. exports and hampering economic growth.

Finally, should a lofty valuation give you goosebumps? Nope and nope. Bull markets often scale to a string of record highs. So, if you succumb to the fear of highs, you eventually lose money.

Halloween Drives Record Sales of Candy

With more money expected to pour in, candy sales are expected to rise. In fact, Halloween accounts for about 10% of the industry’s total annual sales, which in turn leads to fierce competition among confectioners.

According to IHS Markit data, candy sales are set to rise 4.1% from last year, reaching a seasonally adjusted $4.1 billion. This is particularly impressive given that candy prices have declined 0.9% from last year, marking the second successive drop in Halloween candy prices.

Halloween is like Super Bowl Sunday for North America’s largest chocolate maker — Hershey Co HSY. Banking on this upbeat sales forecast, the maker of Kisses, Reese’s, Krackel, Symphony and Mr. Goodbar expects sales to go up 8% from last year. The company has seen its earnings grow over the last five years, driving its share price from $70 to nearly $105.

Another major player, Mondelez International Inc MDLZ, is expected to gain immensely from this year’s rise in candy sales. It is a successor to Kraft Foods Inc, which owns household names in the candy industry like Nabisco, Cadbury and Toblerone. It has seen its share price climb from around $27 the year it was introduced to almost $40 today.

Halloween to Boost Costume and Discount Store Sales

A large chunk of Halloween spending will go to costumes as well. According to a survey by the National Retail Federation (NRF), Americans are expected to spend $3.4 billion on costumes. The survey also shows that majority of consumers will shop online for costumes, while about 30% will do so at retail stores.

In fact, as per the NRF, spending on All Hallows' Eve this year will be more than $9 billion. This marks a rise from around $8.5 billion last year.

Consumer Confidence Rides High

The upbeat reading on Halloween sales says a lot about consumer sentiments, which have been improving on a strengthening economy. The U.S. economy expanded at a solid seasonally adjusted 3% annual rate in the third quarter of 2017, according to the Commerce Department. Such an expansion came on the heels of 3.1% growth in the second quarter. It also marks the first time of two consecutive quarters of 3% growth or more since mid-2014.

The economy was boosted by solid consumer spending, and a steady job market buoyed household optimism. The unemployment rate declined to 4.2% in September, the lowest since February 2001, while wages increased 0.5% to an average of $26.55 an hour, per the Labor Department. In fact, in the last 12 months, hourly pay increased 2.9%, up from 2.7% in the prior month and also in line with a post-recession high (read more: US GDP Hits 3% Despite Twin Hurricanes: 5 Top Gainers).

4 Solid Picks

Here we look at four publicly traded companies from the aforesaid areas that are positioned to gain the maximum this Halloween. These companies flaunt a Zacks Rank #1 (Strong Buy) or #2 (Buy).

PepsiCo, Inc. PEP is a global food and beverage company. It is known for manufacturing different types of candies and is among the top 50 candy producers in the world. The stock has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings rose 1.4% over the last 90 days. PepsiCo’s expected growth rate for the current and next quarters are 8.6% and 7.5%, respectively.

Zumiez Inc. ZUMZ operates as a specialty retailer of apparel, footwear, accessories, and hard goods for young men and women. The company currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its current-year earnings rose 13% in the last 90 days. Zumiez is expected to yield a return of 8.7% and 5.4% in the current and next quarters, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canada Goose Holdings Inc. GOOS designs, manufactures, and sells premium outdoor apparel for men, women, youth, children, and babies in Canada, the United States, and internationally. Right now, the company has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings climbed 16.2% over the last 90 days. Canada Goose Holdings’ expected growth rate for the current year is 29.3%, in contrast to the industry’s projected decline of 5.3%.

Big Lots, Inc. BIG — a Zacks Rank #2 company — is a non-traditional, discount retailer in the United States. The Zacks Consensus Estimate for Big Lots has moved north over the past 90 days, with estimates rising from $4.18 per share to $4.22 per share. The stock’s expected growth rates for the current and next quarters are 8.3% and 4.8%, respectively.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Pepsico, Inc. (PEP): Free Stock Analysis Report
 
Hershey Company (The) (HSY): Free Stock Analysis Report
 
Mondelez International, Inc. (MDLZ): Free Stock Analysis Report
 
Zumiez Inc. (ZUMZ): Free Stock Analysis Report
 
Canada Goose Holdings Inc. (GOOS): Free Stock Analysis Report
 
Big Lots, Inc. (BIG): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research