In this article, we discuss the 10 shopping stocks to buy in the holiday season. If you want to skip our detailed analysis of these stocks, go directly to the 5 Shopping Stocks to Buy in Holiday Season.
Several key trends that are expected to shape the market in the upcoming holiday season provide meaningful insights about the overall economic situation this year. For example, the average holiday spend is likely to increase to $1,463, up 5% year-on-year, as in-store experiences make a comeback. A study by Salesforce claims that even though the pandemic is receding, the global online shopping spending will rise to $1.2 trillion in the coming months, up 7% compared to the record year for ecommerce in 2020.
However, supply chain concerns and inflation are likely to act as spoilers to the whole process. Deloitte, a professional services firm, recently revealed in a survey that 64% of retail executives have expressed fears about not receiving inventory on time this year while 75% of shoppers are not confident that stocks will last. In addition, 5 out of 10 retail executives believe prices may rise during the holiday season. McKinsey believes that discretionary, travel and entertainment sectors will experience elevated spending during the season.
Investors who are eager to ride the economic boom this holiday season should check out some of the firms that stand to benefit from this environment. Some of the top shopping stocks to buy in the holiday season include Abercrombie & Fitch Co. (NYSE:ANF), American Eagle Outfitters, Inc. (NYSE:AEO), and Kohl’s Corporation (NYSE:KSS), among others discussed in detail below.
Our Methodology
The companies were picked based on their business fundamentals and analyst ratings. Stocks that stand to directly benefit from the increase in shopping during the holiday season were preferred for the list. The hedge fund sentiment around each stock was calculated using the data of 873 hedge funds tracked by Insider Monkey.
Why pay attention to hedge fund holdings? Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021 our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Jason Batterham/Shutterstock.com
Shopping Stocks to Buy in Holiday Season
10. J.Jill, Inc. (NYSE:JILL)
Number of Hedge Fund Holders: 7
J.Jill, Inc. (NYSE:JILL) operates as an omnichannel retailer of apparel for women. It also sells jewelry, footwear, and other accessories. The share price of the firm has jumped in the past few weeks on the back of reports that retailers had stocked up on inventories for the holiday season and would not be caught off-guard as the shopping for Christmas begins. Supply chain disruptions had earlier threatened to derail the holiday shopping boom for retailers.
J.Jill, Inc. (NYSE:JILL) was one of the stocks that climbed after the news. The company has bounced back from 2020 lows this year and reported a revenue of $159 million in the second quarter, up close to 72% year-on-year.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Royce & Associates is a leading shareholder in J.Jill, Inc. (NYSE:JILL) with 714,539 shares worth more than $14 million.
Just like The Abercrombie & Fitch Co. (NYSE:ANF), American Eagle Outfitters, Inc. (NYSE:AEO), and Kohl’s Corporation (NYSE:KSS), J.Jill, Inc. (NYSE:JILL) is one of the stocks on the radar of elite investors.
9. Carter’s, Inc. (NYSE:CRI)
Number of Hedge Fund Holders: 21
Carter’s, Inc. (NYSE:CRI) makes and sells apparel, accessories, and luxury goods. The primary focus of the firm is branded apparel for children. It recently beat market expectations on earnings per share by $0.20 for the third quarter. Michael Casey, the CEO of the firm, said during the earnings call that the company was seeing strong demand across all channels of distribution as the holiday season began and that sales for the year would probably climb to 98% of pre-pandemic levels.
On October 4, investment advisory Wedbush’s analyst Tom Nikic named the stock among a group of apparel and footwear stocks that stand to gain based on healthy consumer demand and return of tourism.
At the end of the second quarter of 2021, 21 hedge funds in the database of Insider Monkey held stakes worth $266 million in Carter’s, Inc. (NYSE:CRI).
Palm Valley Capital Management, in their Q2 2021 investor letter, mentioned Carter’s, Inc. (NYSE:CRI). Here is what the fund said:
“We sold Carters (ticker: CRI) after the share price exceeded our intrinsic value estimates. These company was negatively impacted by the pandemic but is beginning to see light at the end of the tunnel.”
8. Designer Brands Inc. (NYSE:DBI)
Number of Hedge Fund Holders: 23
Designer Brands Inc. (NYSE:DBI) makes and sells branded footwear and accessories. The stock has climbed since late September after it was revealed that Jay Schottenstein, the executive chairman of the firm, bought more than 1.5 million shares for over $21 million. The share price of the firm has climbed more than 182% in the past twelve months, with room for further upside in the holiday season.
On September 1, investment advisory Deutsche Bank maintained a Hold rating on Designer Brands Inc. (NYSE:DBI) stock but raised the price target to $19 from $18, noting the solid second quarter earnings report of the company.
Among the hedge funds being tracked by Insider Monkey, Atlanta-based firm Masters Capital Management is a leading shareholder in Designer Brands Inc. (NYSE:DBI) with 1.4 million shares worth more than $23 million.
7. The Home Depot, Inc. (NYSE:HD)
Number of Hedge Fund Holders: 64
Wells Fargo analyst Zachary Fadem recently raised the price target on The Home Depot, Inc. (NYSE:HD) stock to $365 from $360 and maintained an Overweight rating, noting the long-term opportunities in the housing sector and the strategic initiatives the company had made to profit off them as key growth catalysts. Even as supply chain issues haunt the housing industry, Home Depot has announced that it will be partnering with Walmart to expand same-day and next-day delivery services for home improvement customers.
The Home Depot, Inc. (NYSE:HD) stock was also recently named among a list of Best Core Ideas by Evercore ISI. The investment bank appreciates the transformation of the firm in the past few years and lauded it as the “benchmark multichannel consumer company”.
Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm AQR Capital Management is a leading shareholder in The Home Depot, Inc. (NYSE:HD) with 1.1 million shares worth more than $360 million.
In its Q1 2021 investor letter, Ensemble Capital, an asset management firm, highlighted a few stocks and The Home Depot, Inc. (NYSE:HD) was one of them. Here is what the fund said:
“Notable contributors to the Fund’s returns this quarter (included) Home Depot. Home Depot (8.9% weight in the Fund) continued to benefit from a red-hot housing and home improvement market, delivering record financial performance in 2020. As a high return on invested capital business, any step-up in growth results in considerable shareholder value creation. While 2021 comparable sales may not yield impressive headline results, we believe there are several secular tailwinds supporting continued housing investment, including millennials entering prime household formation/peak earnings years, relatively low interest rates, and government policies.
Home Depot (8.9% weight in the Fund): The big orange sign of Home Depot is a familiar sight for homeowners across the country. Despite the rise of Amazon, Home Depot has generated outstanding results for shareholders during the rise of eCommerce, even as Home Depot’s end market in housing suffered the worst collapse in a century. Over the last fifteen years, a period which began at the peak of the housing bubble, Home Depot’s stock has generated annual returns of 17% a year, outperforming the S&P 500 by approximately 7% a year.
But while homeowners can attest to their continued shopping at Home Depot, they may not be aware that only about half the company is dedicated to serving Do It Yourself homeowners, with the other half acting as a key supplier to small contractors – which the company calls Pros – who depend on Home Depot as a mission critical business partner.
While the company does not report on their contractor business separately from their homeowner business, they have regularly offered comments indicating that contractors make up just 4% of their customer base, but about 45% of revenue. Basic math implies…”[read the entire letter here]
6. The TJX Companies, Inc. (NYSE:TJX)
Number of Hedge Fund Holders: 56
The TJX Companies, Inc. (NYSE: TJX) is an off-price apparel and home fashions retailer. The company has a market cap of $82 billion and posted over $32 billion in revenue last fiscal year. It also pays a regular and healthy dividend, recently declaring a quarterly dividend of $0.26 per share with a forward yield of 1.47%. The stock has returned more than 32% to investors in the past twelve months.
Jefferies analyst Janine Stichter recently maintained a Buy rating on The TJX Companies, Inc. (NYSE: TJX) stock with a price target of $90, noting that the firm could increase prices in the coming months without hitting demand.
At the end of the second quarter of 2021, 56 hedge funds in the database of Insider Monkey held stakes worth $2.38 billion in The TJX Companies, Inc. (NYSE:TJX), down from 63 in the preceding quarter worth $2.34 billion.
Alongside Abercrombie & Fitch Co. (NYSE:ANF), American Eagle Outfitters, Inc. (NYSE:AEO), and Kohl’s Corporation (NYSE:KSS), The TJX Companies, Inc. (NYSE: TJX) is one of the stocks that hedge funds are buying.
Giverny Capital, in their Q1 2021 investor letter, mentioned The TJX Companies, Inc. (NYSE:TJX). Here is what the fund said:
“We’re pretty happy with the current portfolio and so were not very active during the quarter. Our only consequential decision in the first quarter was to exit the off-price retailer The TJX Companies in January. My prior firm owned TJX for most of the past 20 years and enjoyed appreciation on the order of 20 times the original purchase price.
TJX is a great company, but the growth rate has slowed in recent years and the operating margin has been under pressure, mainly from rising wages for store workers. When the pandemic hit, I bought the stock for GCAM in the belief that if the US fell into a prolonged recession, TJX would be a winner because of its extreme value position.
The US didn’t fall into a prolonged recession. Rather, many consumers are flush with cash thanks to government relief programs. But brick-and-mortar stores are losing out to online competitors for reasons of safety and convenience. TJX has fared much better than most of its competitors during this time and should continue to do so, thanks to its model of buying inventory close to need and reacting to what is happening in the marketplace rather than trying to create hot product. But the stock rose about 50% in the few months we owned it and that increase seemed to price in a complete recovery and more. We sold in early January.”
Click to continue reading and see 5 Shopping Stocks to Buy in Holiday Season.
Suggested Articles:
- 10 Best Dividend Growth Stocks to Buy Now
- Stanley Druckenmiller is Selling These 12 Stocks
- 25 Coldest Countries in the World
Disclosure. None. 10 Shopping Stocks to Buy in Holiday Season is originally published on Insider Monkey.
