These stocks should benefit from a great holiday shopping season.
Here we are at the end of the year. You don’t need to hope for a Santa Claus rally for your portfolio to see some gains. If you buy into a few good stocks that are likely to benefit from the holiday season, you may see some gains from those alone.
One of the earliest sectors to recover after the financial crisis was the travel industry. It seems counterintuitive. You’d think that since times were so bad and people got so badly hurt that nobody would go on vacation, because it is a discretionary expense.
It turned out that travel picked up right about the same time that the airlines all got their acts together financially. Business travel recovered a bit more quickly than people expected. Once people who weren’t hurt that badly realized things were okay, they moved back into vacation mode.
There are two investment opportunities I’d explore in travel.
The first is the hotel industry. Not only are people going on vacation and businesses spending on travel, but the secular trend in hotels is favorable. There is not enough supply coming online to meet hotel construction demand. Hotels have little trouble raising debt or equity capital. Revenue and occupancy is booming. This should lead hotels higher for a few years.
I personally like Ashford Hospitality Trust (NYSE: AHT) and its upscale spinoff, Ashford Hospitality Prime (NYSE: AHP). The former pays a 4.7% dividend, and the latter pays 1.1%. It is the only hotel REIT that did not suspend preferred stock dividends during the financial crisis, and it is exceptionally well managed. The CEO has been in the hotel business for 25 years, and has higher insider ownership than any of his peers at other companies. That means he has plenty of skin in the game — and thus more incentive to see Ashford stock rise.
Airlines have also been doing very well. With all the consolidation, the fears of higher ticket prices have come true. Airlines are also charging us for everything, and that may soon include an actual seat. That’s good for airline stocks. Southwest Airlines (NYSE: LUV) and Alaska Air Group (ALK) are best positioned. I would avoid Hawaiian Airlines (NYSE: HA) because of increasingly poor customer service.
The auto sector was also quick to improve after the financial crisis. First, used car sales picked up, then came the trucks, then new cars. Autos make for great gifts, and many are offering attractive incentives. I think that will spur demand.
AutoNation (NYSE: AN) and CarMax (NYSE: KMX) are the best choices because they sell a variety of autos and trucks, and offer diversification over one type of dealer.
Another good choice is likely to be luxury retail. Wealthy folks are still doing well in this economy, and the holidays tend to be very big for luxury sales. The economy seems more likely to improve next year, based on constantly improving consumer confidence data.
I think it’s worth looking at Michael Kors Holdings (NYSE: KORS), Tiffany (NYSE: TIF) and Coach (NYSE: COH), the latter of which seems to be in the midst of a turnaround or may even get acquired.
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