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4 ETFs & Stocks to Treat You on Halloween and After

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Are you being spooked by the stock market volatility due to the impending presidential election or the menace caused by global growth issues?

Well, spookiness is common before Halloween. But unlike the real event, its effect on the market is not at all scary. In fact, instead of tricking investors, the Halloween Effect is usually a treat.

Halloween Effect is a historically observed increase in stock prices from the month of November through the end of April. It is exactly opposite the popular adage "sell in May and then walk away” which refers to the six months between May 1 and October 31.

Among overall buoyancy, retail sales deserve a special mention this time around. Vacations, holiday season buying (both Christmas and spring season) and seasonal optimism may play a huge role behind this surge (read: Should You Buy Retail ETFs for Q4?).

The National Retail Federation expects total holiday sales excluding autos, gas and restaurant to expand 3.6% to $655.8 billion, a little higher than the post-recession average of 3.4% since 2009. Also, the International Council of Shopping Centers sees a 3.3% uptick in spending at physical stores against 2.2% gains in sales last year.

In fact, the likely rosy trend starts with Halloween itself as the event greets the fall season. And “conventional wisdom is that strong Halloween spending is an indicator of strong Christmas season spending” as per an analyst. This makes it more important to carve into the Halloween sales projection for 2016.

Spending to Touch All-Time High This Halloween

National Retail Federation estimated that Americans will likely spend a staggering $8.4 billion on Halloween candy, costumes, and decorations this year. In the last 10 years, Halloween outlays grew about 70%, crowning the event the runner-up in terms of decoration sales, just after Christmas.

Costumes will take the highest share of spending though just 67% of consumers will likely go for them. On the other hand, 94.3% will likely shell out around $2.5 billion on candies. As much as 70% of consumers will spend about $2.4 billion on decorations and 35.4% will pay out nearly $390 million on greeting cards.

Needless to say, retail sales will be on a roll in the upcoming days and put the following ETFs and stocks in focus (read: Tap Q3 Earnings Growth with These Sector ETFs & Stocks).

ETF Picks

VanEck Vectors Retail ETF RTH

The $117.2-million fund holds 26 stocks in total. It is heavy on Amazon with 17.71% of exposure, followed by Home Depot (7.28%) and Wal-Mart (6.42%). The fund charges 35 bps in fees (read: Retail Sales Recover in September: ETF & Stock Winners).

SPDR S&P Retail ETF XRT

The $396.7-million ETF holds 98 stocks in total. It has a tilt toward small-cap stocks. No stock accounts for more than 1.60% of the basket. The fund charges 35 bps in fees.

PowerShares Dynamic Retail Portfolio ETF PMR         

The $37.8-million fund holds about 30 stocks in total. Walgreens Boots Alliance (5.43%), Ross Stores (5.24%) and Wal-Mart (5.09%) are top three holdings. The fund charges 63 bps in fees.

Amplify Online Retail ETF IBUY

The $2.8-million fund has 49 stocks in its portfolio. No stock accounts for more than 4.84% of the basket. The fund charges 65 bps in fees (read: 3 Sector ETFs with Revenue Growth Potential).

Stock Picks

Ross Stores Inc. ROST

About 47% of shoppers will likely hit discount stores to purchase their Halloween-related stuff this year. Ross Stores runs a chain of off-price retail apparel and home accessories stores. The stock has a Zacks Rank #2 (Buy) with a VGM score of ‘B’, at the time of writing.

Shutterfly Inc.

The company provides internet-based social expression and personal publishing service. It has a wide array of Halloween cards and stationeries on offer. SFLY has a Zacks Rank #2 (Buy) with a VGM score of A. Its Zacks Industry Rank is in the top 30%.

Amazon.com Inc. AMZN

With all the celebration around, who can get forget Amazon – a hot destination of online shopping for costumes, home decor and candies? This is especially true given NRF’s projection of 7% to 10% sales surge in non-stores, including online buying. The stock has a Zacks Rank #1 with a VGM score of ‘B’. The Zacks Industry Rank is in the top 17%.

Party City Holdco Inc. PRTY

The company is into manufacturing and selling of party goods, including paper and plastic tableware, balloons, Halloween and other costumes and stationery. Though the stock has a Zacks Rank #3 (Hold), it has a VGM score of ‘A’ and its Zacks Industry Rank is in the top 40%.

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