Two Stocks to Avoid... and Two to Buy in a Post-Holiday Market

Matthew Carr
by Matthew Carr, Emerging Trends Strategist, The Oxford Club Market Trends Market Trends
Santa stocks to avoid

The food court was a shifting sea of wandering shoppers. They were packed so tightly that the current moved agonizingly slow. Bags in hands, they shuffled their feet, flowing around tables and bottlenecks.

I stood there, awed at how busy everything was. “You should’ve been here yesterday,” the woman behind the counter said to me. “It was even worse.”

Outside, the parking lot was packed. People walking to their cars were patiently and quietly stalked. Vehicles circled like sharks, waiting to zip off toward the first open parking spot.

Even outside the mall, in the stand-alone brick-and-mortars, lines stretched to the doors.

This wasn’t the days before Christmas, mind you. This was the week after. And everywhere I went, I saw the same thing.

The Jewel of the Holiday Season

For some retailers, the traffic was the result of an annual deluge of returns. For others, year-end sales did their job, drawing in fresh customers.

To me, it was just another sign that the American consumer is alive and well. Now we await those coveted holiday sales figures...

I believe, despite what I saw at the mall, Amazon (Nasdaq: AMZN) will be the jewel of the holiday season. I lost count of all the Amazon boxes I saw opened at gatherings of family and friends.

It supports the case I've made for years now... that more and more people are doing the majority - or all - of their shopping online.

And no online marketplace beats Amazon.

There are other obvious winners of the holiday season as well. For example, Disney (NYSE: DIS) and toymaker Hasbro (Nasdaq: HAS) should make a killing on Rogue One tie-ins.

But today, let’s look at some upcoming retail earnings releases that are worth keeping an eye on...

A Big-Box Retailer With a History of Disappointment

This week, PriceSmart (Nasdaq: PSMT) will reveal its fiscal year 2017 first quarter earnings. If you’re unfamiliar, PriceSmart is a warehouse membership club, like Costco (Nasdaq: COST) and Walmart’s (NYSE: WMT) Sam’s Club.

Back on December 7, the company reported that November sales were $245.8 million, a 2% increase over the year before. And for the three months ending November 30, sales increased 3.7% to $716.1 million.

Wall Street is looking for PriceSmart to report $743.3 million in first quarter revenue. Plus, analysts are expecting $796.53 million for the company’s second quarter.

But here’s the deal...

PriceSmart’s fiscal first quarter report has not historically been well received. Since 2009, shares have fallen an average of 3.62% on this release. For five straight years, prices have declined, including two drops of 10% or more.

The company will report earnings after the market closes on Thursday. But knowing what we know, we’ve got a good idea of what to expect from shares.

Cash In on Beer-Drinking Season

We’ll also hear from the world’s largest beer import company this week, Constellation Brands (NYSE: STZ).

You see, holiday cheer isn’t fueled simply by gift-giving. Alcohol plays a large part. All the end-of-year holidays - Thanksgiving through the New Year - rely heavily on booze. And during the same time, NFL, NBA and NHL seasons are in full swing.

“Beer-drinking season,” as I like to call it, begins Memorial Day weekend and stretches toward the Super Bowl.

For Constellation, the third quarter report was historically a painful one for investors. Between 2009 and 2013, shares fell every year on the release. But then, something magical happened... Constellation acquired the U.S. rights to Corona.

Since then, the third quarter report has been full of good cheer. In 2014, shares popped 9.55% on this report. They popped 4.5% in 2015 and 4.5% again in 2016. The growth of Corona and Modelo seems to have re-energized the company and its investors.

For beer lovers, this is one to watch. Constellation will release its third quarter results before the market opens on Thursday.

This Stock Loses Its Shine in January

Tiffany & Co. (NYSE: TIF) will report holiday sales in the next couple of weeks. Historically, this one’s a real Grinch.

Shares of the luxury jeweler have struggled in January. On average, it’s been far and away the worst month for Tiffany shares since 2004.

Wall Street has high expectations for this sector each year. The belief is that high-end jewelry will be doled out like candy canes to wives and girlfriends across the country. And inevitably, Tiffany’s holiday sales numbers disappoint.

In recent years, however, Tiffany’s shares haven’t experienced just minor wobbles... they’ve been outright torpedoed on this release. Since 2012, the stock has fallen an average of 7.16% on the company’s holiday sales report, including two drops of 10% or more.

This is one of the reasons why I don’t hold jewelry shares in January. But the likely lows provide great opportunities for bargain shoppers in the future.

Let’s end on a high note...

One of My Favorite Stocks to Watch

This one’s not only a company with a product I enjoy... it’s one of my favorite stocks to watch this time of year: Netflix (Nasdaq: NFLX).

The company’s fourth quarter release is typically packed with fireworks. It’s a great way to kick off the new year.

For Netflix, this has consistently been the company’s best-received earnings report. Since 2009, shares have gained an average of 19.55% on its fourth quarter release. Remember, we’re talking about their average one-day move. Few companies jump that much over a week or month.

In six out of the last seven years, Netflix shares have seen a double-digit pop on this report. It’s one of those companies where revenue and earnings are secondary. The focus is subscriber numbers. And Netflix sells a lot of gift cards during the holiday season... more than most people realize.

The company will release its fourth quarter earnings on January 18.

So even though the holidays are over, investors still have plenty of entertainment ahead. Earnings will soon begin to trickle in from all those retailers I’ve covered in recent months. Our focus is on the anticipated reactions from Wall Street.

I’ve already warned you that January is an unforgiving month for investors. I also gave you two companies to avoid and two companies to embrace above.

If you recognize these trends, you can use them to your advantage. Let’s kick off 2017 with profits.

Good investing,

Matthew

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