Now that the holiday season has really kicked off, investors are busy trolling both shopping malls and the stock market for those must-have items. But where can you find the hot items that can finish off your shopping list? A handful of retail and consumer-oriented stocks may have potential to deliver holiday returns, if recent history is any guide.
According to market data and analytics firm Kensho, certain stocks tend to perform better during the holiday shopping season. We used the 100 members of the SPDR S&P Retail exchange traded fund as our universe. We then calculated stock performance for 20 trading days following Thanksgiving, which roughly equates to the time each year between Thanksgiving and Christmas. Only stocks that were positive at least 80 percent of the time during this season (with a minimum of seven years of history) were included. Of the 100 stocks in the universe, just 12 passed the above criteria.
The best performing stock was online travel company Orbitz Worldwide. Even though it's only been in existence as a public company since July 2007 and has just seven holiday seasons under its belt, it's gained an average of 24 percent each time—and has never posted a negative return. Shares are up around 8 percent this year and have underperformed the broader market.
The No. 2 performer during the last 10 holiday seasons is Sonic Automotive. The $1.3 billion, Charlotte, North Carolina-based auto retailer has posted an average 10 percent gain in each of the last 10 holiday seasons and has been positive 90 percent of the time. Like Orbitz, Sonic Automotive has underperformed in 2014, gaining just 6.5 percent year to date.
The company is part of a bigger theme among retail stocks that outperform during the holiday season. Of the 12 stocks being highlighted, half are related to the automotive industry. Car dealerships like Sonic Automotive and AutoNation have tended to outperform. Auto parts retailer AutoZone also passed the screening criteria.
Some experts attribute the strength in auto-related stocks to anticipation of higher sales toward the end of the year, especially for light trucks and sport utility vehicles.
"Generally when winter comes, we see an increase in these types of vehicles," said Jessica Caldwell, Edmunds.com senior analyst. "People want to be prepared for the inclement weather."
This year, consumers are being helped by lower fuel costs, which Caldwell says could make them feel as if they could use their extra cash for a car payment.
The third best-performing stock was Nutrisystem. Shares of the weight loss and nutrition company have gained more than 8 percent on average over the last 10 holiday seasons and have been positive 80 percent of the time—perhaps driven by investors considering all those New Year resolutions.
Nutrisystem, in fact, notes in its annual report that typically the first calendar quarter is the strongest for revenue in the weight-loss business, and the fourth quarter is the lowest.
See below for the full list of 12 stocks in the S&P Retail ETF that passed the screening criteria used.