4 Holiday Spending Stock Winners

Michael Shulman

Black Friday has spoken.

Third quarter GDP rose 3.5%, as engine of growth continues to be consumer spending.

The Michigan Consumer Confidence Survey reported out a 112 figure, way high in pre-holiday mode and only half a point shy of its 52-week high of 112.6 posted in the last week of April.

The stores I visit are busy this year.

And the stock market keeps chugging along.

So, what are the holiday spending stock winners?

That which are pure consumer …

… Your comfort.

… Your food.

… Your video.

… Your pocketbook.

Here are 4 stocks that will be this year’s big holiday spending winners…

 

“Athleisure” Wear

Unless you’ve been living under a rock for the past few years, you are no doubt familiar with the popularity of “athleisure” wear.

Chances are you, or other members of your household, own items that fall into this category of clothing designed to be worn for exercise or lounging.

Lululemon Athletica (NASDAQ: LULU), one of the original “athleisure” brands famous for its high-end yoga gear, now offers a wide range of products including pants, tees, tanks, outerwear and backpacks — for women and yes… men.

Expansion into Men’s Wear

The company’s expansion into men’s apparel has helped boost sales growth. Management recently said they are ahead of schedule on their goal of reaching $1 billion in sales of men’s apparel by 2020. Lululemon also expects to hit $1 billion from online sales by 2020 thanks to investments in its e-commerce business, including the re-launch of its website.

LULU was up more than 50% in 2018, a clear standout in the retail sector, which overall logged an 8% decline last year.

 

Where’s the Beef?

Beyond Meat (NASDAQ: BYND) has generated a lot of headlines these days.

The maker of plant-based meat substitutes generated quite a bit of hype after it went public in May. It has partnered with big names like McDonald’s (MCD), Dunkin’ Brands (DNKN) and Costco (COST). While shares have struggled since peaking in late July, they offer plenty of volatility for option sellers like us.

We began trading the stock in late October, following a big sell-off on the heels of the company’s latest earnings report. But that selling had little to do with Beyond Meat’s results, which were solid.

The company saw its first profitable quarter since going public, earning $0.06 per share on $92 million in revenue — $10 million more than analysts expected. Management also raised full-year sales guidance by $30 million to $270 million.

Rather, the post-earnings sell-off was spurred by the end of the IPO lockup period, as insiders took the opportunity to cash out.

Since then, shares, while volatile, have traded in a relatively tight range. And the stock is up today following a UBS analyst report that says Beyond Meat could see $1 billion in revenue if it focuses on its foodservice partnerships.

The stock appears to have stabilized since then, but volatility remains high, making this a prime put option selling candidate.

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Streaming Wars

Like Beyond Meat, Roku, Inc. (NASDAQ: ROKU) is a speculative stock but not a speculative company.

Shares are up more than 900% since going public in September 2017, yet the company has yet to turn a profit. That said, its TV streaming platform is at the heart of the entertainment streaming boom.

Roku makes video-streaming devices and also licenses its operating system to TV makers. At the end of Q3 2019, the company had 32.3 million active user accounts, compared with 27.1 million at the end of 2018. And its trailing-12-month average revenue per user was up 30% year over year.

The stock is extraordinarily volatile, especially around earnings announcements. When the most recent earnings report disappointed the Street, the stock fell from $141 to $116 in one day. A week and a half later, it was trading above $165.

ROKU’s volatility is a dream for income investors. Premiums on the stock’s options are extremely high, creating an opportunity to collect returns of 79% to 132% on an annualized basis.

But given the extreme volatility, you may want to sell puts that are well out of the money to reduce risk. And earnings should always be avoided.

 

Beating Amazon at Their Own Game

While a number of retailers have delivered disappointing results recently, Target Corp. (NYSE: TGT) has blown through analysts’ earnings and sales estimates. That’s due to the performance of new, smaller footprint stores, strong same-store sales growth and big gains in digital sales.

Well-managed big-box stores have survived being “Amazoned” and are now pushing back. Clearly, Target is leading the way.

It recently announced a new initiative — its Good & Gather grocery brand — which it expects to be a multibillion-dollar brand by the end of 2020. This move shows management has the guts to spend money to make money.

For a well-managed retailer growing faster than its peers and overall consumer spending, TGT is extraordinarily undervalued. That’s great news investors and options sellers alike.

Those who trade the stock every week with put options can earn 15% to 38% a year.

 

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About The Author

Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.

Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. Michael has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.

He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com and is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.

His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.