The holiday season is here with us. Already, the Black Friday and Cyber Monday have come and gone, but the reality is that the shopping season will continue until the end of the year.
In the just-concluded thanksgiving weekend, Americans spent an average of $800 on shopping. In China, more than $25 billion was spent in shopping during the Singles Day event.
This year, the unemployment rate has declined to a 17-year low, wages are growing, and consumer confidence is at a 17-year high, more Americans are expected to increase their discretionary spending. In addition, the senate passed the tax reform package that is expected to add more money in the pocket of Americans – for now.
When considering trading during the holiday season, the first assets that come to mind are e-commerce companies. This year, e-commerce sales represent the highest level ever as shown in the chart below.
In the U.S., the largest companies in the e-commerce sector are Amazon, eBay, and Walmart which is seeing online sales contribute a significant part in its operations. In the emerging markets, the biggest e-commerce plays are Alibaba and JD.
This year, Amazon has seen its value increase by about 55% while Walmart has grown by more than 44% and Alibaba has more than doubled.
On the other hand, this has been a tough year for traditional retailers. Sears has been forced to shut down thousands of retailers while others like Toys R Us have been forced into bankruptcy.
However, all hope is not lost for retailers. The just ‘concluded’ earnings season showed that some retailers are seeing improved traffic, albeit at a slower rate.
Markets have taken advantage of this effect by trading traditional retailers and e-commerce companies like Amazon. The secret is to listen to the news and pay attention to what matters. For example, in retail, people want to invest in companies that are showing growth not only in foot traffic and revenues but also comp sales. They also want to invest in companies that are showing growth in the digital market like Walmart.
Apart from retailers and e-commerce companies, other companies investors will be hawking during the holiday season are payment processing companies. Globally, the biggest card companies are Visa and Mastercard while other payment processing companies like PayPal and Square. These companies are going to benefit from the increased spending in e-commerce because of the convince they offer.
Companies like Tesla and Apple, can be of special interest, being that their products have a die-hard following. Recently, Apple has released the new iPhones and Tesla has announced the Tesla Semi and the Roadster. While Apple’s scheduled speakers have encountered challenges, investors tend to give Apple the benefit of the doubt.
Tesla’s announcement of the Semi and its vision for the future of travel opens other opportunities for traders. These opportunities are in commodities like Copper and Nickel which are used in the manufacturing of electric vehicles and batteries. Last week, Elon Musk unveiled the world’s biggest battery in Australia. This year, copper, nickel, and lithium have surged with the increased demand.
As this happens, the possibility of currencies from countries like Australia and Canada that supply these commodities may to do well as a result.
The argument among many investors and market participants is about the valuation of different companies. In a recent letter, David Einhorn wondered about whether value investing worked anymore. While the argument has merits, during this holiday season, it will be about the story and not about value investing.