Macy's: Parade of Profits?

12/02/2014 7:00 am EST


Ian Wyatt

Publisher & Chief Investment Strategist, Wyatt Investment Research

For retailers, the last six weeks are a critical time of the year. And one stock has a history of delivering healthy returns every holiday season, asserts Ian Wyatt, editor of Million Dollar Portfolio.

Macy's (M) gets great brand exposure from its Thanksgiving Day Parade; some 47 million people tune in to watch. That exposure is just one small piece of Macy's success.

This year, lower gasoline prices should help fuel holiday spending. That's because every one-cent drop in the price of gas puts an extra $1 billion in the pockets of American consumers.

Also contributing to confidence are rising home prices, record stock prices, and falling unemployment. That confluence of factors should encourage consumers to spend generously this holiday season.

Strong results during the crucial holiday season have consistently lifted Macy's stock. I reviewed Macy's stock performance from mid-November through the end of February (after four quarter earnings are released).

What I found was that in each of the last five years, the stock gained an average of 9.3% during this period. Those gains are more than three times the returns for the S&P 500 (SPX).

Macy's stock has been having a good year. Shares are up 19.6% year-to-date. That's well ahead of the 11.9% gain for the S&P 500. I think that outperformance will continue through the end of the year and into the first quarter of 2015.

If you're looking to buy a stock for the holidays, Macy's is a top choice. If history is any indication, buying it now and selling in February could deliver decent profit.

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