Stephanie is a hip 15-year-old girl who lives in the Chicago suburbs (see figure 1). Like many other teens, she’s got a lot going on. She’s a gymnast, cheerleader, model, singer, and actress. She’s appeared in campaigns for American Girl and episodes of Chicago Fire. In her free time, she likes to create and edit videos. But what investors want to know is: what does a girl like Stephanie want for Christmas this year?
What are the hot items flying off holiday shelves? What’s on every teenager’s Christmas list? As investors, we play this game every year. But this year it’s different. Last week’s retail sales number reached an eight-month high. Falling fuel prices coupled with positive job growth have many third-party analysts believing that Americans will spend more on gifts this year than ever before.
What will shoppers and investors buy? Main Street investors are notorious for investing in companies that they know. At TD Ameritrade, our average client is 55-years-old. This means we have a lot of parents, grandparents, aunts, and uncles as clients. These are consumers who often invest in companies that make products their teens—like Stephanie—covet. She wants a GoPro (GPRO) camera so she can step up her game on YouTube. She wants makeup. Lots and lots of makeup. But what else can we can glean from the wants of teens, tweens, and the younger crowd?
Teens like live streaming
On the heels of last week’s positive retail sales number, I took a closer look at the consumer discretionaries our clients have been building positions in since the start of the holiday shopping season. Over the course of the last six weeks, TD Ameritrade clients have invested over $100 million in GoPro. The stock is currently trading around $60—a notable drop since September’s high of $98.47. Many of our clients may have been motivated to buy the company based on the dip in the price of the stock. In the third quarter alone, GoPro shipped over a million units and brought in over $280 million in revenue compared to the high end of the $255 million guidance range. Many analysts look for the company to make between $550 to $580 million in the fourth quarter. While GoPro’s institutional ownership is pretty low at 15%, retail investors seem to love this company. The big question is, will they love GoPro’s camera enough to buy it as a stocking stuffer?
Glamour girls rule
The name that surprised me the most? Ulta Salon Cosmetics and Fragrance (ULTA). I had never heard of the brand, which is a sad commentary on my beauty effort as of late. That’s the thing about people who work on Wall Street—we don’t get out much. Which is why I think it’s so important to tap into what excites everyday consumers like our gal Stephanie, who says she buys “a ton of stuff” at Ulta stores and is easily swayed by their sales people. She said she would buy pretty much anything they recommend, especially the Urban Decay line (with glittery shadows that carry names like Snakebite). Many beauty websites mention a professional airbrush makeup system as the big ticket item (over $500 retail) on teen wish lists. As for social media, Ulta is killing it with an increase in mentions and sentiment for their stores, website, and the brands they carry. Our friends at LikeFolio indicate that Ulta was associated with “Christmas list” more than other makeup brands, and there is a lot of talk about Ulta gift cards. Retail investors appear to be very bullish on this stock.
GameStop (GME) was another name on our list. If there’s one thing teenage boys like, it’s girls. After that, it’s video games. I hit up all the moms on my Facebook feed to ask what their teen sons want for Christmas. High are on the list are Xbox consoles and games, as well as PlayStation systems. Xbox One seems to be especially dominant in social media chatter. But, we found GameStop absent from a lot of Twitter posts. In fact, a lot of the conversations we observed show disappointment due to product unavailability. Comparatively, Microsoft (MSFT) seems to be getting most of the positive benefit of the gaming system upgrade cycle as people buy direct or from a variety of discount retailers like Amazon (AMZN) and Wal-Mart (WMT).
Pretty much every mom indicated their teen boy wanted pumped up kicks. And not just any brand. They want Nike. The Elite Collection at Nike seems to be all the rage this year. Over the last six weeks, our clients have been net buyers of both Nike (NKE) and Foot Locker (FL).
Not letting go of the toy aisle
Many TD Ameritrade clients have also been steadily accumulating Disney (DIS) stock all year. Over the past six weeks, clients were net buyers of over $53 million in Disney. This stock has enjoyed a fantastic run. I asked Andy Swan at LikeFolio what he’s been seeing in social media. He reports extreme enthusiasm for Disney products and movies, plus a ton of Star Wars chatter on the heels of the trailer release for The Force Awakens.
Swan indicated that based on Twitter traffic alone, there seems to be more demand for Frozen dolls than Barbie. That’s not the worst thing in the world for Mattel (MAT) as they manufacture many of the toys under the Frozen brand. Disney mentioned in their fourth quarter earnings release that the Consumer Products segment grew primarily due to merchandise licensing revenue from the strength of Frozen. The Consumer Products and Interactive Media division of Disney drives roughly 16% of the company's total revenue (see figure 2).
The next stock our clients have been accumulating? RetailMeNot (SALE). Our clients have been net buyers of more than $31 million of this stock over the past six weeks. Think about it—if you have a lot of spendy gifts on your list, you’re probably interested in discounts. This stock has been under pressure after third quarter earnings indicated their users were migrating to mobile—an area where they had less success with monetization. Clearly, many retail investors think cyber shoppers will be searching for offers on RetailMeNot.com this season. On December 4, the company announced record traffic on their site between Thanksgiving and Cyber Monday. But in social media, we actually noticed mentions of this brand slipping over the course of the past month.
Checking it twice
Naughty or nice? Doesn’t matter. We can see that what teens, tweens, and younger kids have on their Christmas lists is influencing the retail items and stocks that are on our clients’ minds. No matter what your list looks like—for products or stocks, or both!—I wish you a very happy holiday season.