11 Stocks to Buy for the Holiday Season

Many Americans are probably already making shopping lists for the holiday season. But as you seek out places to spend your hard-earned cash, you should also consider setting aside some of that money for long-term investments.

Let’s examine 11 companies that will likely profit from the holiday shopping scramble, and why it might be wise to stuff your kids’ stockings with shares of these promising companies.

Last year, a Survata survey found that 80% of U.S. shoppers planned to do their holiday shopping on Amazon (NASDAQ:AMZN). That wasn’t surprising, since eMarketer claims that Amazon claimed 49% of the country’s e-commerce market last year.

The expansion of Amazon’s Prime ecosystem, which research firm CIRP claims surpassed 100 million subscribers in the U.S. earlier this year, reinforces that growth. CIRP estimates that the average Prime member spends $1,400 annually on Amazon, compared to just $600 for non-Prime members.

Rising sales of Amazon’s Echo speakers and Alexa-powered devices also keeps consumers constantly tethered to its ecosystem. Therefore, Amazon -- the 800-pound gorilla of online retail -- remains a top stock to own for the holidays.

ALSO READ: Amazon's Alexa Is a Multibillion-Dollar Business

Amazon might be the first stop for many shoppers, but those looking for unique handmade gifts will probably visit Etsy (NASDAQ:ETSY), the resilient artisan marketplace that Amazon tried (but failed) to crush with its Handmade platform.

Etsy held Amazon at bay with its first mover’s advantage, lower seller fees, and fewer restrictions on seller’s promotional activities. Etsy had a 9% mindshare in Survata’s survey last year, which is impressive for a company that generates less than 0.3% as much annual revenue as Amazon.

Etsy grew its active sellers and buyers 18% and 19% year over year, respectively, in the first half of 2019, as its total revenue rose 20%. Analysts expect its revenue and earnings to improve 33% and 16%, respectively, this year.

Another retailer that kept pace with Amazon in e-commerce is Walmart (NYSE:WMT). Under CEO Doug McMillon, who took over in early 2014, the retail giant aggressively matched Amazon’s prices and delivery options, expanded its digital ecosystem, and leveraged its base of over 4,700 U.S. stores as fulfillment centers and pick-up points for online orders.

That transformation throttled Walmart’s earnings growth, but it paid off as its U.S. e-commerce sales surged by the high double digits. eMarketer estimates that Walmart only controls 4% of the U.S. e-commerce market, but Survata found that 57% of shoppers planned to do their holiday shopping at Walmart last year -- putting it in second place behind Amazon.

Walmart’s superstore rival Target (NYSE:TGT) also adopted similar strategies to keep up with Amazon.

Target CEO Brian Cornell launched the retailer’s e-commerce turnaround five years ago, but it didn’t kick into high gear until late 2016, when dismal holiday sales forced it to significantly increase its investments in renovating stores, expanding its online offerings, and matching Walmart and Amazon’s prices and delivery options.

As a result, Target’s digital comps grew 30%-50% every quarter over the past year, as new same-day fulfillment services like Order Pick Up, Drive Up, and Shipt locked in more shoppers. Of the shoppers on Survata’s holiday survey, 28% stated that they would shop at Target last year, and that percentage could increase this year.

Yet another big box retailer that survived the retail apocalypse was Best Buy (NYSE:BBY), which initially struggled with shoppers using its cavernous stores as showrooms for online purchases on Amazon.

Hubert Joly, who served as Best Buy’s CEO from 2012 to 2019, reversed the retailer’s declines by partnering with Amazon, Apple (NASDAQ:AAPL), Samsung (OTC:SSNLF), and other tech giants to open mini-showrooms in its stores. It also expanded its e-commerce platform and aggressively matched Amazon’s prices.

Those moves brought back shoppers, kept Best Buy relevant, and boosted its sales. The retailer remains a top destination on Black Friday and Cyber Monday as shoppers seek big doorbuster deals on big ticket electronics -- so its sales could jump significantly during the holiday quarter.

ALSO READ: Better Buy: Apple vs. Samsung

Speaking of big ticket electronics, Apple is actually the third largest e-commerce company in America after Amazon and eBay (NASDAQ:EBAY), according to eMarketer, with a 4% slice of the market.

Apple’s iPhone sales, which accounted for nearly half of its revenue last quarter, have been lumpy in recent years. However, the initial reception for the new iPhones has been warm, thanks to its new colors and upgraded cameras, and CEO Tim Cook recently told German newspaper Bild that iPhone 11 sales were off to a “very strong start.”

The introduction of new services, like Apple Arcade and Apple TV+, could also squeeze out more revenue per user over the long term as its hardware sales decelerate. Therefore, I believe Apple should generate robust sales growth this holiday season.

Another high-end company that should fare well during the holidays is LVMH, the luxury giant that owns Louis Vuitton, Dior, Tag Heuer, Bvlgari, Sephora, and Hennessy.

Affluent customers generally aren’t as exposed to economic headwinds as lower and middle-class shoppers, and the gift-giving season will likely spur purchases of LVMH’s pricier products. LVMH’s organic revenue rose 12% annually in the first half of 2019 as its adjusted net profit rose 10%. It posted double-digit organic revenue growth across all of its worldwide regions except the U.S., which still posted 8% growth.

That momentum should continue into the end of the year, even as European companies remain exposed to higher U.S. tariffs. However, only a small portion of those tariffs should impact luxury goods makers like LVMH.

lululemon athletica (NASDAQ:LULU) is one of the few apparel stocks that survived the retail apocalypse. Over the past year, the yoga and athleisure apparel maker repeatedly churned out double-digit comps growth as it expanded its gross margins and opened new stores.

Lululemon expects to double its digital and men’s revenue, quadruple its international revenue, and keep posting double-digit comps growth through 2023. Four tailwinds will likely lift Lululemon towards that goal -- new athleisure products, its expansion into shoes and menswear, the expansion of its direct-to-consumer channels, and community events (like free yoga classes) enforcing brand loyalty.

Lululemon posted strong holiday shopping seasons in recent years, and it will likely impress investors again this year as its core business fires on all cylinders.

The TJX Companies (NYSE:TJX) -- which owns off-price retailers like TJ Maxx, Marshalls, HomeGoods, HomeSense, and Sierra Trading Post -- profits from the retail apocalypse because it scoops up excess inventories from struggling retailers at rock-bottom prices.

TJX sells these products back to shoppers at lower prices than Amazon and still reaps decent profits. TJX also encourages its shoppers to frequently return by rapidly rotating its in-store products.

That strategy enabled TJX to post 24 straight years of positive comps growth as its brick-and-mortar peers withered, and this holiday season should be a strong one for its core banners. That’s why Wall Street expects its revenue and earnings to rise 6% and 7%, respectively, this year.

ALSO READ: The Retail Apocalypse Isn't What You Think It Is

Tanger Factory Outlets (NYSE:SKT) lost 60% of its value over the past three years due to concerns about e-tailers and superstores gutting malls. However, Tanger operates outlet centers, not malls, and it’s a landlord instead of a retailer.

Outlet centers are less capital intensive, don’t have big anchor stores, and attract the same bargain-hunting shoppers as off-price retailers. Tanger’s occupancy rate remains in the mid-90s, and sales per square foot at its tenants remains in the high $300s.

Tanger is admittedly relying more on short-term leases than long-term ones to keep its centers occupied, but its properties could attract more shoppers during the busy holiday season. If Tanger’s growth stabilizes during the holidays, its stock could be a bargain here at 17 times forward earnings with a whopping forward yield of 9%.

Lastly, investors shouldn’t overlook smaller businesses, many of which use Shopify’s (NYSE:SHOP) services to establish an online presence. Shopify offers bundles of tools for creating e-commerce websites, processing orders and payments, crafting marketing campaigns, and more -- making it a “one-stop shop” for digitizing a business.

Demand for Shopify’s services is robust -- it works with over 800,000 merchants, and many of them are smaller businesses that lack the digital and marketing firepower of bigger companies.

Last year, Shopify noted that “hundreds” of merchants were joining Shopify Plus, its premium platform for high-volume merchants, ahead of the holiday shopping season -- and that seasonal growth could continue this year. That’s why Wall Street expects Shopify’s revenue and earnings to rise 43% and 61%, respectively, this year.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Leo Sun owns shares of Amazon, Apple, and Tanger Factory Outlet Centers. The Motley Fool owns shares of and recommends Amazon, Apple, Etsy, Lululemon Athletica, and Shopify. The Motley Fool has the following options: short October 2019 $37 calls on eBay, long January 2021 $18 calls on eBay, short January 2020 $155 calls on Apple, long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, and long January 2020 $150 calls on Apple. The Motley Fool recommends eBay, Tanger Factory Outlet Centers, and The TJX Companies. The Motley Fool has a disclosure policy.