A Valentine for Anyone

A Valentine for Anyone

Whether you’re attached, single, or “it’s complicated,” there’s no reason not to treat yourself on Valentine’s Day. But, I’m not necessarily talking about chocolate or cards; as investors this is a great time to scoop up high-quality consumer-driven stocks.

The Commerce Department has just announced that retail sales advanced again in January, and core sales (a better indicator of consumer sentiment), rose more than expected. Consumers are stepping up their spending habits, and you can bet that a number of them will get roped into buying goodies for their significant others today. In fact, it is estimated that consumers will spend almost $20 billion this year on the holiday, according to IBISWorld. So, let’s take advantage of the love in the air; I have a number of holiday-appropriate stocks that I’d recommend in a heartbeat.

The Matchmaker Stock: InterActiveCorp (IACI)

With over 275 million unique visitors to its 50 websites, InterActiveCorp (IACI) is one of the biggest players on the web. The funny thing is that hardly anyone has heard of it! However, chances are that you have heard of some of its online dating sites, including subscriber-only Match.com and free dating service OKCupid. These sites are regulars on Forbes’ and Time Magazine’s top online dating sites lists, and have tens of millions of members.

In addition to its larger dating sites, InterActiveCorp also manages several smaller services targeted to more specific demographics, including SingleParentMeet.com and SeniorPeopleMeet.com. In total, IAC oversees 6 of the top 50 ranked personal websites.

And, with its Urbanspoon service, IAC even gets a piece of the action behind the dates themselves. Urbanspoon is a restaurant guide that services over 90 major markets, including most U.S. cities and London. The app consolidates reviews from local newspapers, blogs and other diners, and allows users to vote on their restaurants. Urbanspoon also offers restaurants an online reservation widget that they can install on their own websites.

With its hand in so many pots, it’s no wonder that InterActiveCorp is a major player in the Catalogue & Mail Order Houses Industry. IAC is the fourth largest in terms of market cap, behind only Amazon.com Inc. (AMZN), eBay Inc. (EBAY) and Liberty Interactive Corp. (LINTA), the owner of the Home Shopping Network. And, this company is in the top five in terms of sales growth, earnings growth and long-term growth rate. It doesn’t hurt that IAC’s dividend yield is the best in the industry, either.

For a clearer picture of this stock’s fundamental health, let’s put it in my Portfolio Grader tool. You can see that this company earns solid grades all down the line. Now, it could stand to improve its operating margin growth and its return on equity, but I can forgive this due to the stock’s top-notch level of buying pressure. I’d recommend IACI as a “strong buy.”

The “Wild” Card Stock: PetSmart Inc. (PETM)

This morning, I read that Valentines Day isn’t only for human loved ones. The average person will spend about 3% of their holiday budget on gifts and treats for their pets (about $4.52 per person). So today we’re also going to take a look at PetSmart Inc. (PETM), one of the biggest specialty retailers in the business and seller of any pet supply you can think of.

The company is the largest retailer of pet food and supplies in a $40 billion industry. From fish and aquariums to puppies and veterinarian services, you can find it all at PetSmart.

Now, PetSmart will next report earnings in March, and if history is any indicator, the company is in for another solid quarter. PETM has beat analysts estimates for earnings in each of the last four quarters and current estimates show 6.6% sales growth and 16.9% earnings growth. That’s not going to win any awards, but it enjoys solid growth that many retailers would kill for.

And, if you run PetSmart through my free Portfolio Grader ratings system, you’ll quickly see that PETM currently receives a Total Grade of A. I give the company A’s and B’s in Operating Margin Growth, Earnings Growth, Analyst Revisions, Cash Flow and Return on Equity. I would like to see the company pick up some earnings momentum and beat estimates by a wider margin, but since the company has such strong buying pressure, I’m comfortable recommending the stock as a “strong buy”.

Of course, there are plenty of other companies tied to this holiday. Let’s see how other Valentines Day stocks stack up:

Company Name

Ticker

Fundamental Grade

Quantitative Grade

Total Grade

Treats for your Valentine

Kraft Foods Inc.

KFT

C

A

A

Cadbury and Milka Chocolates.

The Hershey Company

HSY

C

A

A

Hershey Kisses, Pot of Gold Boxed Chocolates.

Estee Lauder Cos.

EL

B

A

B

Perfume, Cologne, Cosmetics.

Liberty Interactive Corp. Interactive

LINTA

C

B

B

Jewelry, Shoes and Electronics through the Home Shopping Network.

Signet Jewelers Ltd.

SIG

B

C

B

Kay Jewelry and Jared Galleria of Jewelry.

1-800-Flowers.com Inc.

FLWS

C

B

C

Flowers, gift baskets and gourmet chocolates delivered to your door.

CSS Industries Inc.

CSS

C

B

C

Paper Magic premium holiday cards and Berwick Offray packaging solutions.

Tiffany & Co.

TIF

B

C

C

High-End Jewelry, Scarves and Watches.

American Greetings Corp.

AM

D

F

D

Seasonal Greeting Cards.

Avon Products inc.

AVP

C

F

F

Cosmetics, Fragrances and Jewelry.

 

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