What Holiday Shopping Means for Retail Stocks

I hope everyone enjoyed their Thanksgiving holiday weekend. I spent time with family in Illinois that I don’t get to see nearly enough and avoided the Black Friday shopping madness.

When I was in high school I knew very little about the stock market or trading in general. I assumed a surefire strategy would be to buy Coca-Cola before the summer since a lot of people will probably drink Cokes in the hot summer months. I also thought there could be no way to lose money buying Wal-Mart or other retailers before the holidays since that’s where a large focus of spending occurs in a short amount of time.

A recent Wall Street Journal article looks into this notion of retail sector performance during the holidays and based on research by Strategas, the retail names struggle during the period between Black Friday and late-December.

From the WSJ:

Retail stocks typically struggle from Thanksgiving through Christmas amid lofty holiday expectations. On a longer time horizon, though, these stocks tend to bounce back once the holidays are over and the calendar flips to a new year.

Retail stocks have outperformed the S&P 500 during the first quarter in 14 of the last 18 years, according to Strategas Research Partners.

February and March, historically, are the best months of the year for this particular sector.

This is a perfect example of challenging what many people would assume is common-sense investing. We cannot always make assumptions that because consumers will act one way the benefiting stocks will act a certain way. Trading takes work and we must always challenge our thought process to improve.

Source: Don’t Bank on Retail Stocks Now, But Later… (Wall Street Journal)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.

About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.