Investing tactics ahead of the Christmas shopping frenzy


The smart investor will look at trends during the holiday season to map out sectors where money will roll. FILE PHOTO | NMG

As we approach the Christmas festive season, several trends in the global scene emerge that can be profit-making opportunities for investors. It is important to understand these trends so that you can position your portfolio to reap from them.

The most common and obvious is the impulse buying tendency by consumers. This often creates a buzz of retail consumer spending that benefits several firms. The retail consumer discretionary sector tends to boom during this time of the year.

Sales revenues for e-commerce platforms are expected to rise dramatically across the world. This implies that stocks such as Amazon, eBay, Alibaba, Etsy, and Bed Bath & Beyond could jump. This is mainly supported by the shift in shopping trends during the pandemic where consumers are now going online.

Apparel companies are also set to benefit from holiday season shopping as consumers rush to purchase clothes and related gear. Top companies in this sector include Nike, Levi Strauss, Sketch, Lululemon, Adidas, and Next. During holidays, people tend to travel a lot and purchase kits for various activities.

This may vary from sporting clothes, swimming apparel, hiking gear, or just normal denim for hanging out at a favourite entertainment joint.

The working class normally makes use of their leave days in December to tour places and this creates massive demand for travel and related services. Companies offering air transportation, ride-hailing services, hotel services, and entertainment services tend to benefit from this. Examples of stocks that may benefit from such activity include Air France, Uber, Airbnb, TripAdvisor and DraftKings.

Covid-19 taught us to make our homes comfortable and well-equipped for entertainment especially when one is forced to stay or work from home. As people head for holidays, we may expect demand for home entertainment products to rise as the spread of the Delta variant continues to discourage outdoor entertainment.

Online gaming, movie streaming, and social video conferencing could see a surge in demand as people meet and seek online entertainment. I expect companies such as Zoom, Sony, and Netflix to get a significant rise in sales revenue through the holiday season.

With a rise in spending habits over the holiday season, it is obvious to expect a jump in mobile online payments. This may increase revenues for fintech companies offering payment processing services. For instance, Kenyans spending significantly more may mostly transact through M-Pesa which may raise Safaricom’s sales revenue.

The same is expected for other payment processors such as PayPal, CashApp, Visa, and Mastercard. Businesses and individuals tend to consolidate their business transactions at the end of the year in preparation for honouring taxes and other obligations.

This period often coincides with the holiday season. Some will make procurement decisions such as purchasing electronics or simply taking advantage of employee absence to do minor improvements and repairs such as repainting their premises. Subscriptions to software services may also be renewed before the year ends.

In 2021, the global stock markets have been strong judging from the performance of the SP 500 stock market index that is up 26.94 per cent year-to-date and it normally averages about 13 per cent per year. This has created great wealth for individuals and companies alike who invested in them.

This year, the rise of cryptocurrencies and digital art through Non-Fungible Tokens (NFTs) is a trend we cannot assume. More people are entering the cryptocurrency space and institutions such as PayPal and JPMorgan Chase are rapidly grabbing their space in this new technology.

Investors residing in jurisdictions where cryptocurrencies are banned can also benefit by purchasing stocks of companies that offer crypto services. Examples of firms that are benefiting from the massive crypto adoption include Square Inc., PayPal, and Coinbase.

A significant number of consumer products that will be consumed in the holiday season will be imported. Wholesalers and retail shops are already importing these products for sale during Christmas.

This is spiking demand for shipping services, which have been experiencing bottlenecks since January 2021. Shipping costs have risen over five times in some global routes due to supply chain challenges.

The intelligent investor is the one who understands market trends and takes action before the prices adjust. This investor enjoys early market entry before the trading opportunity gets media attention and other market players FOMO (fear of missing out)

Rufas is a Research & Markets Analyst at Scope Markets Kenya Email [email protected]