(This article originally ran at 4:14 p.m. ET on Monday, Nov. 21, on Real Money, our premium site for active investors. To get great columns from Jim Cramer and other Real Money writers earlier in the trading day, click here.)
Everybody overspends at the holidays, right? You go into the period with a budget in mind, but you max out that projected dollar figure a couple of days into the shopping experience and still have some folks left on the list that you haven't bought for. Wouldn't an investment offset be ideal?!
Well, Stephen Guilfoyle of the blog Sarge's Market Recon recently laid out an investment strategy for exploiting the holiday season -- a quick ride on some strong retailing stocks, followed by a switch to the stock of package shippers.
Specifically, he recommends getting into Target (TGT) and Wal-Mart (WMT) ahead of the first reports of early-season sales, then flattening out that position and pushing into a delivery service like UPS (UPS) . Guilfoyle wrote that TGT and WMT were the last several holiday seasons' leading retailers, while UPS rallied hard into the year end in 2011, 2013 and 2014.
Now, Guilfoyle acknowledged in his posting that e-commerce has subverted traditional holiday retailing. Amazon (AMZN) "is the undisputed king of non-store retail," he wrote, acknowledging that he himself is long AMZN. But that's the very definition of a "crowded trade."
Instead, Guilfoyle's strategy of favoring Target and Wal-Mart stems from looking at recent years of trading patterns. "They have in common awesome national distribution," he wrote in his posting, adding: "There's at least a seasonal trade here."
Guilfoyle said in a recent interview that investors should "look at those two names," noting that both stocks have outperformed the broad market over the past five years during November's second half. For example, Target jumped more than 6% just last week after beating analyst forecasts for both quarterly revenues and earnings per share. Guilfoyle said TGT's big boost in results came from e-commerce, which posted a 26% bump over the year-earlier period.
His strategy looks to me like the equivalent of buying the arms merchants rather than picking who'll win a war. Investors don't have to choose which retailer's merchandising and promotional strategy has been correct, they just gain exposure to this season's expected overall uptick in consumer spending.