You may be familiar with the "January Effect," when the stock market experiences gains across the board once the new year begins. Then there's the "Halloween indicator," which prompts some investors to sell stock holdings prior to May 1 and re-purchase October 31, in order to avoid a summer slump in gains.
The idea that seasonality plays into stock value trends is nothing new, but what about specific holidays?
Certain companies undoubtedly benefit from the holidays, when particular foods or gifts are in high demand. However, a short-term surge in sales may not be enough to make an attractive investment out of some stocks, while other companies are only strengthened further by a holiday-related lift. The following is a look at the stocks that get a bump from particular holidays, but remain smart investments year-round.
Valentine's Day: Limited Brands Inc. (LTD)
Nothing says Happy Valentine's Day like a new "outfit" from Victoria's Secret. Owner of this leading lingerie brand, as well as Bath & Body Works, Limited Brands has the romantic holiday covered. It has also paid 149 consecutive dividends and has just reached an all-time high of just under $46 per share.
St. Patricks Day: Diageo (DEO)
St. Paddy's day is known as the perfect excuse to get sloshed on stout, so it's no surprise Diago sees a huge spike in sales that day. The owner of some of the most famously Irish spirits, including Guiness, Baileys and Bushmill, Diago is expected to keep up the solid performance it's demonstrated in the past, with some help from this holiday, of course.
Ivan Menezes, chief executive of Diageo North America, agrees:
Guinness is trending at a high single-digit [annual growth] rate. We see enormous potential for this brand as it plays into key trends of Americans drinking better and wanting more taste.
Easter: The Hershey Company (NYSE: HSY)
If you plan to be one of many adults filling plastic eggs with sugary goodies for children this coming Easter, chances are you'll be stocking up on Hershey's products. However, chocolate makes a sweet investment as well.
With a market cap of over $13.65 billion, The Hershey Company is undoubtedly the largest candy maker in the world, with big brands such as Kisses, Reece's, Jolly Rancher and of course, Cadbury, to its name. A combination of price increases and volume growth led to a 7.2% increase in revenue last year - at $6.08 billion - with sales growth projected to range between 5% and 7% this year.
Independence Day: PepsiCo, Inc. (PEP)
Many prefer Coke (KO) over Pepsi, but this company produces much more than cola and you'll likely be consuming mass quantities of Pepsi products throughout the 4th of July weekend. This $60 billion company makes popular backyard barbeque snacks and beverages like Mountain Dew, Lay's, Doritos and Gatorade.
Jensen Fund (JENSX) co-manager Rob McIver, who recently increased the fund's holding of Pepsi by 45%, said,
This is a hugely profitable, quality growth company...From 2007 through our forecast 2010 results, the company's earnings have risen by 22%. There was hardly a dip in 2008 or 2009. We think that's a very, very powerful case for investment.
Halloween: Nestle (NSRGY.PK)
While it's true that plastic pumpkins and pillowcases brim with Nestle treats every Halloween, the company benefits from more than just a spike in Kit Kat and Gobstopper sales in October. Nestle, the world's largest food and beverage company, acquired Libby's - known for its pumpkin products - in 1971 as well.
Nestle's pumpkin processing plant is located in the "pumpkin capital of the world," Morton, Illinois, where over 85 percent of the world's pumpkin is canned every fall.
U.S. investors can purchase Nestle ADRs over the counter under the ticker NSRGY or NSRGY.PK. Though Nestle isn't traded on any of the major stock exchanges, it remains a solid investment with a history of increased earnings since 2001 and increased dividend since 1996.
Thanksgiving: Hormel Foods (HRL)
Hormel owns several meat and food product brands, including Turkey Day favorite Jennie-O. However, in addition to frozen birds, Hormel also focuses heavily on the distribution of convenient products like meat party trays, microwavable meals and refrigerated dinners, covering Thanksgiving dinner from appetizers to the main course, and all the fixings, too.
Hormel's focus on quality products and brand building contributes its continued growth and investor confidence, while the fact that the stock's annual dividend has increased 46 years in a row isn't bad either.
Christmas: Mattel, Inc. (MAT)
Celebrating Christmas goes hand in hand with buying toys, whether you have kids of your own, nieces and nephews or maybe even younger siblings who have written long letters to Santa. Mattel just so happens to be the name in toy manufacturing, with worldwide Barbie and Hot Wheels sales alone ($2.7 billion and $1.1 billion, respectively) blowing competition out of the water.
New Years: Nike (NKE)
Admit it, you've made a New Year's resolution to get in better shape at least once in your life. While many serious athletes adorn the Nike swoosh all year, newbies to the gym or track also flock to this big name brand come January 1. It doesn't hurt that Nike stock value has more than doubled in the last three years as well.
Understanding the relationship between seasons or holidays and stock market values can certainly help investors anticipate trends, but successful stock picks should be based on more than just timing the market.
People certainly won't stop celebrating the holidays anytime soon, and the companies that continue to profit off the festivities certainly have an edge, but it's still important to thoroughly investigate the companies you intend to invest in before buying shares.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
