PHOENIX—You might not believe this, but the numbers don’t lie…
Despite recent market volatility, the U.S. had its biggest holiday spending season ever.
According to Mastercard, U.S. sales from November 1, 2018 through Christmas Eve rose 5.1% from the previous year. Americans spent over $850 billion this holiday season—a new record.
But you’d never know that by turning on the TV…
There’s a lot of negativity in the world right now: gloom and doom about global growth slowdowns, government shutdowns, and even kids dying at the border (a hot topic here in Phoenix, which I’m currently visiting as part of my national tour).
All this is meant to scare people into watching news programs longer.
But if you’re only paying attention to the news cycle, you may have missed some nuggets of good news buried below the headlines—news that could actually make you money…
Here at the Daily, we look for these nuggets of gold. In today’s essay, I’ll show you one that I’ve uncovered. It’s a company that’s poised to benefit from changing consumer habits. And we think it has “money-making opportunity” written all over it…
Consumers Are Spending—A Lot
The market tanked 20% in the fourth quarter of 2018. But that didn’t faze U.S. consumers, who spent billions of dollars more over the holidays than they did the previous year.
While that’s great for retailers… not all retailers are made the same.
According to the same Mastercard survey, big department stores like Macy’s and JCPenney saw sales declines of 1.3% from last year. Electronics and appliances also had a bad year, with sales declining by 0.7%.
Consumers moved their spending from these big-box stores to online. In 2018, online sales surged 19.1% over the previous year.
And one company received over 80% of online sales this past December: Amazon.
Sticking With Amazon
The online behemoth isn’t just racking up sales… It’s “trapping” people on its website.
By that, I mean through Amazon Prime.
Amazon Prime is a paid service that offers benefits to members—such as free two-day shipping on eligible purchases, instant videos, and free e-books. The annual fee is $119.
And the service is “sticky.” Most members become loyal, high-paying customers.
Once they start getting free delivery from Amazon’s website, instant episodes of Man in the High Castle from Prime Video, ad-free music from Prime Music, and free books from the Prime library, they’re hooked. And they never stop giving Amazon their money…
Take it from me—I do all of the above.
Over the holiday season, Amazon signed up “tens of millions of people” to Prime. And these high-valued members bought over one billion items during the holiday season.
According to research firm Consumer Intelligence Research Partners, regular Amazon customers only spend $600 per year…
But Prime members spend more than double that—nearly $1,400 per year.
Amazon’s sales will increase next year as more people stick to its website. And the recent market sell-off is making Amazon an attractive buying opportunity right now.
Stock Volatility Crushed Amazon Last Quarter
Amazon’s stock fell 35% at one point last month. That’s despite Amazon growing sales by 31% this year and profits by even more.
During broad market sell-offs, good companies often fall with the bad. But that just creates an opportunity to buy great companies at lower prices.
Amazon is still down 25% from its peak, and that’s setting up a low-risk trade. As you can see in the chart below, Amazon has bounced off its four-year trend line for the fifth time:
The more times a stock bounces off its trend line, the stronger support it provides. This is the kind of setup I love to see in the market.
If you’re a trader, consider adding Amazon to your portfolio. I’d use the trend line as my stop. Right now, it’s at $1,300—or 15% below current prices.
As always, do your homework before making any trade. And remember, the markets are volatile right now. So even if you have a well-defined stop loss on a great company, you may want to use smaller position sizes than normal.
Analyst, The Palm Beach Daily
From Jim C.: Hi Jason, great interview with Nick on the best place to invest in 2019. (See last Friday’s Daily, “Wall Street Insider: Why U.S. Stocks Are Still the Best Bet in 2019.”) Is there a specific sector you’ve identified as a good opportunity in 2019?
Nick’s Reply: Thanks for the reply, Jim. Glad you liked the interview. Jason tells me that one sector he’s looking into this year is dividend growth stocks. These are companies that are paying higher dividends than the S&P 500, and growing them, too.
As he told me on Friday:
As a whole, the S&P 500 is yielding about the same or more as the 10-year Treasury, after taxes. But dividends are taxed at a lower rate than interest payments. So I think yield-starved investors will go to these stocks for income.
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For 16 years, Palm Beach Trader editor Jason Bodner placed orders for billion-dollar clients and big Wall Street banks.
And his private trading database has defied the market with life-changing gains seen in our historical test as high as a rare 7,384%.
Jason even recently asked “brainiacs” from the financial engineering department at Cornell University to poke holes in his system. They couldn’t do it.