The holiday season has historically been great for the economy as consumers increase spending. Even though this year has been among the most volatile and unprofitable for investors, the retail sector is still strong and is set to benefit from increased consumer spending. Thus, it might be time to buy some Halloween stocks amid what could be a relatively strong end to this year.
Estimates are that consumer spending accounts for nearly 70% of the U.S. GDP. Accordingly, if this holiday season measures up to expectations, we may even see a significant economic boost, coming off of two quarters of negative GDP growth. The retail industry, in particular, could be the biggest beneficiary this holiday season, which will peak on Christmas.
Of course, fears of an impending recession remain. However, retail stocks are among the safest for investors right now, as these could cushion portfolios against broader volatility in the economy. Therefore, I believe the following seven stocks are great investments as well head into a pickup in consumer spending this Halloween.
| TGT | Target | $165.80 |
| HD | Home Depot | $290.26 |
| AMZN | Amazon | $120.60 |
| HSY | Hershey | $234.12 |
| TR | Tootsie Roll Industries | $39.99 |
| BSET | Bassett Furniture | $17.01 |
| MCD | McDonald’s | $255.73 |
Target (TGT)
Target (NYSE:TGT) is a stock that presents an attractive buying opportunity after selling off earlier this year. Although it is among the largest retailers in the market, TGT stock is still quite volatile, which may spook some investors, considering what we’ve seen thus far in 2022. However, with the stock trading nearly 40% below its peak, getting in this name now can provide very rewarding upside over the long-term.
That’s mainly because of this company’s strong fundamentals right now. Currently, TGT stock trades at a price-earnings ratio of 18.7-times, far less than some of its top competitors. For example, Walmart (NYSE:WMT) trades at a price-earnings ratio of 28-times, while Costco (NASDAQ:COST) trades at a price-earnings ratio of 38-times. Target also has a forward annual dividend yield of 2.6% and 50 consecutive years of dividend increases. In comparison, its competitors have an average yield of 1.9%.
Gurufocus.com’s assessment also reinforces my analysis of Target’s undervaluation. This analysis considers TGT stock as modestly undervalued with no severe warnings. The analyst considers $250 a fair value for TGT stock by 2025, which makes it a great long-term stock to hold for those looking to counteract inflation.
Home Depot (HD)
If you believe TGT stock is too risky, Home Depot (NYSE:HD) might be your best bet. The company is bigger and much more profitable than Target. Moreover, Home Depot’s revenue and profits continue to grow, despite volatility and the decline in the broader stock market.
In Q2, Home Depot’s quarterly revenue grew to $43.8 billion, representing a year-over-year growth rate of 6.5%. Net income also reached $5.2 billion, or 7.6% year-over-year growth in the quarter. These metrics call for a much higher valuation for HD stock which is currently trading at a price-earnings ratio of 17.8-times.
An estimated 82% of Americans say they decorate their house for Halloween. If you are one of them, you’ve most likely bought something from Home Depot. As more consumers buy seasonal decorations this quarter, Home Depot is among the destinations of choice. It will likely be that way for the foreseeable future as the company continues to scale up. Thus, HD stock is one of the top Halloween stocks on my shopping list.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is an e-commerce giant that has almost everything one might need for the holiday season. It will likely continue to be the go-to choice for people who like to shop online. Although AMZN stock is down by almost 30% year-to-date, the company still offers robust prospects.
That said, for those looking for safer Halloween stocks to buy, there may be better options out there. Right now, I would recommend AMZN stock only to those who are willing to risk significant short-term losses. Amazon recently reported losses of $2 billion in the second quarter, so even an incoming holiday shopping spree might not rescue this stock before the end of the year.
Nonetheless, Amazon’s top line continues to grow. Thus, it is only a matter of time before the business becomes profitable again. Global retail e-commerce sales are projected to reach $8.1 trillion by 2026, and Amazon will likely be the biggest beneficiary if it does happen. That is, if the company can keep its costs in check.
If you wish to buy AMZN stock, I recommend waiting until its Q3 earnings report on Oct 27.
Hershey (HSY)
It goes without saying that Hershey (NYSE:HSY) is one of the top Halloween stocks to buy for any investor who likes candy. The company generates 10% of its annual sales from Halloween candy, which continues to grow relative to its overall sales. Last year, Halloween candy sales reached $4.5 billion, the day before Halloween being the most profitable day for its candy business. The most popular trick-or-treat to be put in kids’ buckets for Halloween is also Reese’s Peanut Butter Cups, marketed by Hershey.
Hershey’s performance this year has shown that consumers are willing to indulge in treats despite (or perhaps because of) this economic environment. Aside from being popular amongst kids, Hershey is also very popular among investors. That’s mainly due to the company’s strong financials, with Hershey’s revenue growing 19.3% year-over-year last quarter, while its net income grew almost 5% to $316 million. HSY stock is also outperforming the market, up 20% year-to-date, at the time of writing.
In addition, the stock has a forward annual dividend yield of 1.8% with 12 years of consecutive dividend increases. Combined with strong top-line growth and the upcoming holiday season growth catalyst, HSY stock can go even higher in the long-term.
Tootsie Roll Industries (TR)
Tootsie Roll Industries (NYSE:TR) is another candy company that has outperformed the market this year, and is set to reap the benefits of what could be a record year for Halloween candy sales. The company’s financials are on a roll this year, with Q2 revenue and net income up 24.3% and 20%, respectively, on a year-over-year basis. Moreover, TR stock has shrugged off recent market volatility volatility, and is actually up 10.7% year-to-date, at the time of writing.
Aside from investors with a sweet tooth, investors looking for dividend kings may also want Tootsie Roll in their portfolios. Tootsie Roll has had 52 consecutive years of dividend increases, with its forward annual dividend yield currently sitting at a modest 0.9%.
According to Gurufocus.com’s assessment on TR stock, Tootsie Roll is fairly valued. However, the company’s revenue growth is exceptional for its industry which could elicit a more premium valuation for this candy stock in the long-term.
Bassett Furniture Industries (BSET)
If you are a risk taker, consider looking into Bassett Furniture Industries (NASDAQ:BSET). This company sells a wide range of custom living room, bedroom, and dining room furniture and home decorations. Due to the historical uptick in spending on home furnishings for Halloween, I believe this small-cap stock classifies as one of the Halloween stocks to buy right now.
BSET stock has historically been very volatile and unable to hold onto its gains. Last year, the stock fell by more than 55%. Bassett Furniture has been trading in the range of $15-20 this year, down 4.9% year-to-date. That said, this return, while down, still beats the overall market.
However, Bassett’s financials seem to be making a comeback from its previous levels. Top-line growth has been comfortably in the double-digit range for the past six quarters, and its most recent quarterly report showed strong year-over-year revenue growth of 12.4%. Moreover, BSET stock trades at a price-earnings ratio of just 2.7-times. Furthermore, Bassett Furniture also boasts an annual dividend yield of 3.9%, while its competitors average at 1.9%.
With the stock trading at such a significant discount, this might be a risk worth taking.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) bringing back Halloween Happy Meal pails this year might not precisely mean it’s a Halloween stock. That’s because the company’s Halloween sales will likely be a drop in the bucket for McDonald’s overall earnings. However, with something as risky as BSET in this article, it is only fair that I recommend something as equally stable.
McDonald’s stock is a must-buy if you believe that a recession is inevitable. McDonald’s is one of the only companies that grew in 2008, as McDonald’s reported strong earnings during the great recession. If anything similar happens soon, McDonald’s stock could be a safe haven for investors once again. The 5-year beta value of MCD stock stands at 0.59%, which means for a decline of 1% in the overall market, investors can expect MCD to decline by only 0.59% on average.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.