Halloween stocks anyone? Many veteran stock investors are keenly aware of the October Effect. This is a long-held market perception that stocks tend to decline during October.
It’s not an actual phenomenon but rather an expectation built up over the years. Most yearly results actually show gains rather than declines. However, many historical market crashes happened in October.
This year, in particular, stocks will find the upcoming Halloween season a test for the rest of the holidays.
While inflation remains upwind and the supply chain remains a mess, many consumers still have the urge and the means to spend. This means there are good opportunities for investors in retail stocks.
Halloween Stocks, You Might Want To Invest In
According to a Mastercard report, US retail sales are bracing for a 7.4% growth, not including automotive and gas. In particular, economists see e-commerce sales to increase by 7.5% year on year. Meanwhile, in-store sales are also looking at a 6.6% gain.
Here are four of seven Halloween stocks from Nasdaq that investors might find scarily attractive. These companies, while priced low now, are well-positioned to benefit from increased consumer spending this upcoming holiday season.
#1. Farfetch (FTCH)
First among our list of Halloween stocks is UK-based Farfetch. It’s an online platform where buyers and sellers of personal luxury goods converge.
Over 1,000 brands and companies promote their products here. The company’s second-quarter results showed a revenue of $523 million, which is a 43% increase year over year.
Net income bounced back from a negative $436 million the same quarter the year before to $88 million this quarter.
Farfetch released second-quarter results in mid-August. Revenue increased 43% year over year to $523 million.
The group generated a net income of $88 million compared to a net loss of $436 million in the prior-year period. Farfetch is also getting strong attention from the big online players.
Alibaba, together with Richemont, recently invested around $1.1 billion. FTCH is currently mired in the $40 range. Any further drop would be an opportunity for long-term holders.
#2. GAP (GPS)
California apparel company GAP actually has a couple of brands under its roof. This includes the GAP, Old Navy, Banana Republic, Athleta, and Intermix brands.
The retail clothing company recently posted a $4.2 billion revenue during the second quarter, which is up 29% year-over-year.
Instead of the next loss of $82 million the same times last year, GAP now sports a $258 million net income as well as earnings of 70 cents. Right now, GAP is sitting on $2.7 billion in cash and short-term investments.
For the entire 2021, GAP expects to generate adjusted earnings of between $2.10 and $2.25 per share. This is based on 30% YOY revenue growth.
With current stock prices at $23, GAP is currently an attractive investment for long-term investors. This present trading price is 40% below its recent high last May 2021, which means maximum potential returns.
#3. Mondelez International (MDLZ)
Next on the Halloween stocks list is a consumer staple. Snack food lovers seemed to enjoy the pandemic. Mondelez, the US global snack food maker, is enjoying a renaissance.
Its recent Q2 results showed that net revenue surged 12% year-on-year to $6.6 billion. As a result, net earnings for the quarter jumped to $1.08, nearly double the previous quarter. Meanwhile, adjusted EPS came in at 66 cents.
Even as the pandemic changed a lot of things, snack food consumption isn’t one of those affected. In fact, appetite seemed to grow as most people stayed indoors.
The global snacks market size value is at $439.9 billion in 2018. It’s expected to grow at a 6.2% CAGR from 2019 to 2025.
If nothing else, it’ll grow large despite COVID. MDLZ stock, which is currently around $60 per share, is up 3%. It’s a good time to ride on the stock now.
#4. Target (TGT)
With nearly 2,000 stores across the country, Target is one of America’s largest retail chains. Before the pandemic, Target already made significant investments in online sales.
Now, the chain’s foresight is paying dividends. In its recent quarterly report, Target said that revenue went up 9.5% year-over-year to $25.2 billion.
Net income was at $1.8 billion, which meant $3.65 earnings per diluted share. Cash and equivalents ended the quarter at $7.4 billion.
Currently, Target is trying to make itself pandemic-proof. It brought its container ship to make sure it gets its products delivered on time. In addition, hiring has been ramped up in time for the holidays.
Target is currently valued somewhat pricey at $250 territory, which is up 43% year-to-date. With shares trading at 19x forward earnings, it’s only going to get better.
Watch the Bloomberg Markets and Finances video exploring “Why Do Investors Fear the ‘October Effect?”
Happy Halloween and Happy Halloween stocks hunting! Do you believe in the October effect? Do you think the stock market will have some problems during the month before the holidays?
Let us know what you think. Share your thoughts below.