Making the Grade

Seasonal Trading Is About to Pick Up

We’re entering my favorite time of the year.

Not because I love fall or a cornucopia of pumpkin spice-flavored goodies. Or because I’m a fan of winter. (In fact, I hate all of those things.)

But the reason I love this time of the year is it’s the busiest season for trend traders like me.

Think about everything that’s going on around the world…

It’s September. The kids are back in school, the eldest ones off to college. And we just exited back-to-class shopping season. This represents nearly $81 billion in consumer spending.

We celebrated Labor Day and all the sales that came along with it.

At the end of October, we’ll have Halloween. This is a short, sugar-fueled stretch where Americans plunk down another $9 billion.

Then on November 11, we have the largest online shopping day on the planet, China’s Singles Day. Last year, more than $30 billion was shelled out on Singles Day… more than any two U.S. holiday shopping days combined.

And lastly, there’s Thanksgiving – the official start of the holiday shopping season.

This, of course, is the big daddy.

Total U.S. holiday spending is forecast to top $1 trillion this year.

When I was growing up, my dad told me, “Companies really only make money three to six months out of the year. The rest of the time, they’re just trying to break even.”

For many consumer-dependent companies, we’re heading into those months. In fact, the fourth quarter alone can account for as much as 40% of a retailer’s annual revenue.

So for today’s Making the Grade, let’s look at the 15 companies expected to see the biggest sequential increases in revenue from the current quarter to the next.

And keeping all that I just laid out in mind, investors should not be surprised by the names on this list…

Chart - Top 15 Consumer Stocks Ranked

In terms of gains, these are what I’d call the most seasonal of seasonal businesses.

With a more than 579% sequential increase, Peak Resorts (Nasdaq: SKIS) shouldn’t be a head-scratcher for seasonal trend traders. The American ski resort operator is expected to see revenue skyrocket from $12.8 million in the current quarter to more than $87 million next quarter.

That’s the revenue-generating power of ski season!

What’s another super-seasonal business besides ski resorts?

How about flowers and gift baskets.

And that’s why 1-800-Flowers (Nasdaq: FLWS) will see a nearly 239% sequential increase in revenue from $180.85 million to $612.53 million.

Mother’s Day is a big one for flower deliveries. But so are the winter holidays, including Valentine’s Day. The company also owns several gourmet food and gift basket brands, like Harry & David. These are extremely popular corporate send outs each year.

That’s why 1-800-Flowers experiences what I call a “sawtooth” pattern in revenue…

Chart - 1-800-Flowers Quarterly Revenue

We also have Baozun (Nasdaq: BZUN), the Chinese e-commerce platform, as well as retail brands, like Duluth Holdings (Nasdaq: DLTH), Five Below (Nasdaq: FIVE), L Brands (NYSE: LB) and Sonos (Nasdaq: SONO).

L Brands is the parent company of Victoria’s Secret and Bath & Body Works. Sales for these two segments in the holiday quarter are projected to top $4.85 billion.

We also can’t forget that we’re entering what’s known as “engagement season.” Christmas Day is the most popular day of the year to pop the question. That’s why Signet Jewelers (NYSE: SIG) gets an extra boost in sales this time of year.

Here’s the deal… shares tend to follow revenue.

When sales are sluggish, a company’s shares will tend to fall. Then, they’ll power higher as business booms.

Consumer spending touches more than 70% of U.S. gross domestic product. But it isn’t evenly spread throughout the year. Some sectors are busy during the summer… others in the winter.

Recognizing which companies have this sawtooth pattern in their revenue is a great way to capture profitable upswings in share prices.

And with all of this consumer spending on the horizon, now you know why a trend and seasonal trader like me loves this time of year.

Good investing,

Matthew