4 Stocks to Buy Now for the Coming 'Santa Claus' Rally
A rising stock market, lower gasoline prices, strengthening home prices, and falling unemployment all add up to a more confident consumer in a mood to spend for the holidays. And remember this Wall Street axiom: Never bet against the American consumer. About 70% of U.S. gross domestic product is consumer spending, three-fourths of which occurs during the upcoming holiday season.
So, yes, you can believe in a "Santa Claus" rally this year. With recovery on track and consumers manifestly eager to open their wallets and purses, seasonal tailwinds will lift the shares of this foursome of well-positioned stocks. (Conversely, here are some lump of coal stocks to check out -- and avoid.)
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1. Ford (F) - Get Report
This week, the U.S. auto industry reported its best October sales in a decade.
Ford, the second-largest American carmaker, reported that it sold 213,000 vehicles in October, a year-over-year increase of more 13.4%. The company reported huge sales gains in its SUV product line; Explorer sales jumped 30% year-over-year and sales of its Edge rose 39%.
Economic growth is prompting Americans to rekindle their love affair with cars and trucks. Among the big Detroit automakers, Ford stock will go the longer distance for investors.
Despite a bumpy start to 2015, Ford appears to be the strongest stock in the auto sector.
According to the industry bible Kelley Blue Book, the auto industry is on track to sell 16.8 million to 17 million vehicles in 2015, marking the first time since the end of World War II that sales have increased over six consecutive years.
In the recovering eurozone, Ford is cutting costs and offering a host of new and exciting models with stylish designs that appeal to Europeans. Ford also is aggressively boosting production in China, a huge source of opportunity for the company.
China is home to 244 million people who are licensed to drive cars, the largest number worldwide. Currently, there are 264 million civilian motor vehicles in use there, accounting for 15% of all automobiles in use in the world. Ford enjoys an impressive 3% of the Chinese market, which will continue to grow despite the country's slowing GDP overall.
In the U.S., Ford has enhanced its small car offerings, achieving particular success with its well-received Focus and Fiesta subcompacts, as well as the crossover SUV niche.
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2. Brown-Forman (BF.B)
And now for season spirits -- distilled spirits, to be precise. Louisville-based Brown-Forman is one of the largest U.S.-based makers and marketers of spirits and wines. The company makes well-known brands such as Jack Daniel's sour mash Tennessee whiskey, Southern Comfort, Woodford Reserve, Finlandia vodka and many more.
Because of its strong brand labels, Brown-Forman was able to successfully raise prices on its premium products in recent quarters.
The company markets its famous products into North America, France, Germany, Italy, Spain, Poland, Australia, Mexico, Japan, Korea, Russia, Turkey, the Czech Republic, South Africa, and Brazil.
Brown-Forman has been cutting costs, expanding into developing nations and raising prices -- a three-pronged strategy that's paying off. The company is aggressively marketing its popular cinnamon-flavored whiskey and introduced Jack Daniel's Tennessee Fire across the U.S. nationwide in 2015.
Brown-Forman is prudently expanding into emerging markets without getting overextended. Before the company increases its footprint in any geographical region, it first conducts extensive market testing and develops realistic assessments of potential sales over the long haul.
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3. Discover (DFS) - Get Report
Discover is a leading global direct bank and electronic payment services company, with 20.8 million total merchant locations.
Discover's direct bank operates the company's flagship credit card business, the Discover Card, and offers an array of banking products, such as private student loans, personal loans, certificates of deposit, savings accounts and prepaid cards.
Discover is profiting from farsighted management that set the table for growth by making shrewd strategic moves. As the beleaguered global economy finally recovered after the Great Recession of 2008-2009, Discover cleaned up its balance sheet and launched an aggressive stock buyback program.
In October, Discover reported strong third-quarter 2015 earnings results. As they feel increasingly confident, American shoppers are more prone to whip our their credit cards and in the process drive Discover stock. Which brings us to...
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4. Visa (V) - Get Report
Visa is a ubiquitous brand best known for its credit card of the same name, but it's also a well-diversified processing company that has adapted to the latest technological advancements in payments and cyber security.
Visa recently forged a agreement with consumer icon Apple to launch Apple Pay, a new mobile payments platform. Visa also connects businesses with consumers in more than 200 countries through fast and secure electronic payments. VisaNet, the company's processing network, can process in excess of 30,000 transaction messages per second.
This year, Visa adopted "smart cards" (also known as chip cards) embedded with integrated circuits that enhance security and help prevent cyber fraud. In an era whereby cybercrime is epidemic, the company's emphasis on the latest security tools gives it an edge on rivals.
At the same time, as consumers increasingly embrace cashless and checkless shopping, Visa's pole position as the largest and most innovative electronic payments company in the world will drive the stock this holiday season and beyond.
You should expect all four stocks to rise this holiday season. On the flip side, here's a list of terrible stocks that are poised to collapse before the year ends.
John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.