Which Stocks will Profit from Christmas Holidays?
7 minutes for reading
I hope many of you have noticed stock prices react to financial reports. The reaction is especially prominent when the reports turn out to be better than the expectation of analysts. In such cases, the trading session starts with a gap, i.e. the stock starts trading at a much higher price than it has closed.
Knowing the companies which can surprise the market with their income, you can buy their stocks beforehand and wait for the quarterly report to be published. We are in the midst of the new year rally now when stock prices grow on expectations that certain companies will profit from the upcoming winter holidays (if the new strain of the coronavirus does not scare off investors).
In this article, I will speak about the companies which can make money on the holidays and, hence, see a better income than forecast.
The first category of companies to pay attention to is retailers. I single out Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN).
Walmart Inc.
Walmart is a multinational trade corporation that manages a chain of malls, grocery stores, and discounters. It also owns Sam’s Club – a US chain of clubs the members of which can buy goods with discounts.
In 2020, Walmart manages 11,500 stores and clubs in 27 countries. According to Fortune Global 500, Walmart has been a number one company in terms of revenue since 2014. Walmart’s income has reached 524 billion USD.
During the pandemics, the company’s net profit was a record. The reports of the second quarter show that the company has made 6.47 billion net profit, which is the best result in its history.
In the third quarter, the company made 5.13 billion USD – 15% more than in the same quarter last year. The results of the fourth quarter might surprise investors as well.
On the chart of Walmart stocks, we see a support line formed at 145.00 USD. The price has been trying to break through it for 5 days already. This means there is a large buyer (or buyers) that does not let the price down and accumulates Walmart stocks in their portfolio. Another factor of growth is the uptrend indicated by the 200-days Moving Average.
Amazon Inc.
Amazon is a no less famous company than Walmart. It is leading the market of electronic commerce. Apart from selling various goods, the company provides various services in the spheres of cloud calculations, streaming, and artificial intelligence. In 2018, the company launched the Delivery Partner Service (DPS). This autumn, they went even further and sought permission from the Federal Aviation Administration to deliver parcels by drones.
Moreover, on December 17th, Amazon Pharmacy started working; it delivers prescription drugs, which is vital in times of pandemics.
Amazon’s net profit during the pandemics started growing fast. While in 2019 the average profit amounted to 2.9 billion USD, in December 2020, it reached 4.7 billion USD. The second and third quarters were the most profitable ones – the profit turned out two times bigger than in the same quarters last year.
Amazon’s strong side is the system of electronic commerce. This is the segment that profits the most from the pandemics. Winter holidays are normally characterized by bursting sales; hence, Amazon, offering goods online, will not be left behind and is likely to enjoy the growth of the profit in the fourth quarter as well.
Amazon’s stocks are trading in an uptrend, which is indicated by the 200-days Moving Average. Also, there is a Triangle on the chart, and the upper line has already been broken away. This means that the price is likely to go on growing with the aim of 3,800 USD per stock.
Delivery services
Sales cannot grow if there are no goods on the shelves or the seller cannot deliver them to the client. Hence, delivery services are other beneficiaries of the holidays.
It is a common practice over the globe for companies to have their headquarters in one country and their production capacities in another one, which is usually China. Many companies use China as their manufacturing facility because there you can produce goods with fewer expenses, even with the lengthy delivery to the final consumer. Among the largest delivery services, I would name FedEx and United Parcel Service, Inc. (UPS).
The Amazon Shipping service, meant to be a competitor of UPS and FedEx, scared the investors of the latter companies noticeably. FedEx’s stocks have been trading in a downtrend since 2018 and have declined by over 50%.
Investors of UPS turned out more enduring: the stocks corrected to the nearest support at 90 USD and keep trading in a range between 120 and 90 USD.
Then in spring 2020, Amazon Shipping was put on a halt indefinitely. As a result, it took FedEx’s stocks 6 months to return to the levels of 2018, while UPS’s stocks are already trading for 170 USD each. Investors trust their money to these companies again. Let us have a look at both in more detail.
United Parcel Service, Inc.
United Parcel Service, Inc. (NYSE: UPS) is an American company specializing in delivering parcels and documents. It is the largest delivery service over the globe. It has its own aircraft fleet managed by the UPS Airlines department, and a sea transport fleet managed by UPS Supply Chain Solutions. UPS delivers in 200 countries.
It has become known that the company works with a global distributor of drugs McKesson and will help with the delivery of the vaccine against COVID-19. Delivery will be facilitated by the UPS healthcare department that complies with all standards of the modern pharmaceutical industry. Thus, UPS has found another source of income on the verge of the New Year.
UPS’s stocks are trading above the 200-days MA. The halt in the work of Amazon Shipping pushed the stock price steeply upwards, so they look overbought. Nonetheless, investors are waiting for positive quarterly reports and do not let the price go down, so the stocks are trading at their all-time highs. A breakaway of 175 USD might lead t further growth, and one has to be bold indeed to buy the stocks at such a high price.
FedEx Corporation
FedEx Corp. (NYSE: FDX) is the second-largest delivery service in the world (in terms of the revenue size) after FedEx. It works in 220 countries, employing 220,000 people. Apart from just delivering, the company helps with custom clearance – this is the business of FedEx Logistics. Today, FedEx carries out over 15 million deliveries a day.
FedEx also sought permission for delivering the COVID-19 vaccine, only it works with Pfizer. Hence, each of the companies has a new unexpected source of income.
Also, due to the pandemics, many will abstain from vising their relatives and send them presents by mail instead; this means an increase not only in international traffic but in domestic deliveries as well. This is another factor supporting delivery services.
FedEx’s stocks are trading at their all-time highs in an uptrend. The nearest support is at 260 USD per stock, and a bounce off this level might provoke further growth.
Summary
On December 14th, the minister of the British healthcare announced that a new strain of the coronavirus had been discovered, and it spreads especially fast. Several days later, Europe closed air traffic with Britain. This event made stock indices drop.
Investors are trying to assess the damage now but the market remains optimistic. At the end of the trading session on Monday, stock indices were mostly back on their positions before the decline. Judging by the price chart, the negative news was interpreted as an opportunity to buy stocks at a lower price.
The companies IO has presented to you are quite likely to make a large profit during the winter holidays. The only thing that can destroy the optimistic plans is the details about the new strain that might be worse than expected. Otherwise, if there is no news or it is neutral, stocks will go on growing.
