Christmas Shopping 2014: A Market Prospective

Capture  I thought I would share some thoughts today of a healthy Christmas buying season and the positive effects for some of thebuttonwoodproject candidates, as constructive employment figures, decent consumer sentiment numbers and lower gasoline prices may provide for an improvement in holiday spending this year. One of my favorite plays is United Parcel Service (NYSE: UPS – $110.98) as more online and mobile shoppers will need their goodies shipped by one of the three major carriers: UPS, FedEx and the US Postal Service. IBM projects another strong e-commerce shopping season with online sales projected to increase 15% over the five-day period between Thanksgiving and Cyber Monday from a year ago. Last year, UPS had some major logistical glitches and, along with some rough weather, disappointed last-minute shoppers with missed deliveries. To avoid another public debacle, it has made about $450 million in new investments including 30 new technologies to improve package visibility, volume forecasting and customer communication. It will add 47 expanded or temporary facilities around the country, and hire 90,000-95,000 seasonal workers this year versus 85,000 in 2013. On a pure-play retail basis, Foot Locker (NYSE: FL – $56.70) should do well as we have seen strong trends in its sales and earnings so far this year. I believe that the athletic shoe retailer is less vulnerable to on-line competition from the likes of Amazon, as shoppers prefer to “try on” footwear for size and comfort rather than buy from a computer screen. While CVS Health (NYSE: CVS – $90.70) gets only about 11% of revenue from its front-end retail business and a fraction of that from seasonal products, the fourth quarter is the company’s busiest and most profitable period. Hopefully this year will be no exception as holiday shoppers grab gift wrap, cards, stocking-stuffers and decorations and snap more pictures for CVS’ photo departments to process and print. Absent last year’s tobacco business, that has been fully discontinued, CVS/pharmacy’s 7,660 stores will be hard-pressed to show respectable front of store comparable sales numbers this year, but the retail business should benefit from decent holiday traffic. Likewise, 3M Co. (NYSE: MMM – $162.27) receives only about 14% of its revenue from consumer sales, but all of those shipping boxes will require packaging tape and holiday gifts will need plenty of Scotch Tape. 3M is also a major supplier of electronics and electronic accessories that may also find their way under the tree. Now that Intel (NASDAQ: INTC – $37.67) is ramping up its semiconductor presence in mobile, a robust buying spree in smartphone upgrades and tablets, as well as its core laptop innards, should do no harm to INTC’s integrated circuit business. Intel has also been increasing its consumer products advertising campaign budget, as you may have seen. Likewise, QUALCOMM (NASDAQ: QCOM – $73.37) is another beneficiary of higher spending for mobile devices around the world with profits from its licensing and chips at record highs and perhaps some gifts of its Toq smart-watch. Hopefully Verizon’s (NYSE: VZ – $48.61) wireless business can eke out some data plan upgrades this Christmas despite tough competition and now reap 100 percent of future profits thanks to its purchase of the remaining interest in the mobile business from Vodafone earlier this year. JPMorgan Chase (NYSE: JPM – $62.70) is one of the largest providers of credit cards and Christmas buying with plastic should be strong, especially with the increase in online shopping. So, absent any pops in loan-loss provisions or hacking issues, JPM should see some worthwhile gains in its card services business this quarter. Similarly, Royal Bank of Canada (NYSE: RY – $70.38), offers a wide-array of credit cards to our neighbors up north and the Canadian economy is showing respectable signs of strength, thus providing consumers with more buying power. So, in all, let’s hope for an upbeat holiday buying season, not to mention a year-end Santa Claus rally.

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