Valentine’s Day seems to be a divided holiday between those who love to spoil their significant others and those who feel it’s become completely commercialized. Bottom line is that the day should be about love of any kind, such as the Motley Fool’s love of providing investing advice. My passion is analyzing consumer markets, extracting vital information for readers, and make investing a bit simpler for everyone. Valentine’s Day is far from my favorite holiday, but I enjoy making connections to stocks any time of the year. Let’s see how the most common gift categories stack up for your portfolio.
Everyone knows a guy that goes all out for the holiday. It’s likely that if he has some money to blow, he will check out Tiffany & Co. (NYSE:TIF). Whether it’s in February or any time of the year, diamonds and women are going to get along until the end of time. Tiffany dominates the jewelery industry by selling its luxury products in many regions around the world with a market cap of $8 billion. The stock is down in TTM, but is joining the rest of the market rallying in 2013, up about 10% so far. Investors went bonkers because the dividend yield rose above 2%. However, with a free cash flow of just $74 million (consider the market cap again, not even 1% of it), this isn’t promising to hold up for the long run.
Tiffany was downgraded by Canaccord Genuity, but upgraded by HSBC within a day. Speculation appears to be running rampant, with the upside call heading beyond the 52-week high. Being the established leader, Tiffany operates on a safer quarterly margin of 7.41% compared to its online competitor Blue Nile, Inc. (NASDAQ:NILE), at 1.94%. The company has plans to open more stores to further increase this critical factor. The banks can make educated calls on the company, but forecasting precious metals can be impossible. Inevitably, they will increase, and profits of the industry will suffer. The chance is there for some quick profit, but take your proposal somewhere else for stability.
Will a Short-Term Gift Pay Off?
Next up is the romantic, or the guy who wants to apologize. 1-800-FLOWERS.com, Inc. (NASDAQ:FLWS) has revolutionized the way the lady gets her favorite bouquet for a special occasion. This year, the company advertised delivery by Valentine’s day if ordered just two days before it. This day is huge for 1-800-FLOWERS.COM, and the company pushed advertising on Facebook Inc (NASDAQ:FB) (particularly the mobile medium this year), Twitter, and most other forms of media. The company is in the second half of it’s fiscal year and revenues are up 1% in the consumer floral segment despite setbacks from Hurricane Sandy, which heavily affected both consumer orders and deliveries. Contribution margin from the segment is up 3%, so even with the increased spending on advertising, 1-800-FLOWERS.COM is finding a way to keep volumes up.
Many wish that ProFlowers was still available to investors, but 1-800-FLOWERS.COM isn’t a terrible alternative. It trades at a slight premium but has raised its top and bottom lines for 2013 and projects to be sitting on $20 million in free cash flow. This is promising for a smaller company and may be worth keeping on your watch list as mobile advertising grows from its infancy.
Forget the Heart-Shaped Box
This isn’t the first thought when trying to pair some chocolate with those flowers, but the winner of this discussion is The Hershey Company (NYSE:HSY). Flirting near its 52-week high and up about 35% TTM, the century-old chocolate king is an excellent company. Chocolate is an $83 billion dollar business and Valentine’s Day puts some fire under the sales. Numbers from recent years reveal that 58 million pounds of chocolate are sold in the US during the week preceding Valentine’s Day. Some might argue that premium chocolate is the item of choice, but among children and consumers on a budget, Hershey makes some hefty profits.
For some reason or another, chocolate and candy take less fire from health advocates than soft drinks and salty snacks. Chocolate is generally viewed as a dessert, a treat, and eaten in smaller quantities at one time. Whatever the reasoning, people continue to consume it and will flock to Hershey because of their quality and variety of products at a fair price. These trends are projected to grow, with Hershey increasing its 2013 EPS forecast to grow at least 10%. If so, the 2% yield could become a thing of the past.
The other winner, if eligible for investors, would be Mars, Inc. The M&M giant is one of the largest and successful privately held companies in the sector, and if it ever went public, buyers would be lining up, myself included. The world is consuming more than enough chocolate for both of these companies to prosper for many years. In my personal case, they have an edge with my better half’s favorite being pretzel-M&M’s (Hershey–get on board!).
Bottom Line
Valentine’s Day influences impulse buying, but don’t carry this mindset when building your portfolio. The first two companies are higher risk, so careful understanding and a discretionary investment is a possibility. However, the chocolate industry shows no signs of slowing down, and Hershey offers a stable opportunity to get in on the success.
The article These Stocks Will Last Beyond February 14 originally appeared on Fool.com and is written by Kyle Vaughan.
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