Halloween is nearly upon us and that means that we’re officially turning on spook mode. This week we’re going to check out some stock picks before explaining the phenomenon known as the Halloween Effect. Then we’ll do our usual go-over of the top fundamental events to watch out for this week. Read on… if you dare…
What to trade at Halloween
Not planning on Trick or Treating for candy this year? BOOO! Perhaps you would like to trade it instead? Here are 3 sweet stocks that might be worth sinking your teeth into.
Hershey Co. (HSY)
Price on 01.01: 193.21 USD
Price on 14.10: 222.71 USD
% change YTD: +15.27%
Yeah, it had to be chocolate, didn’t it? Suffice to say, Halloween is an essential day for one of the world’s largest confectionery (particularly chocolate) makers — and their shareholders.
It’s not all about Halloween, though. Hershey stock is having a great 2022 and its price is up 15.27% YTD.
The company historically does very well during times of low consumer confidence — with a recession looming that’s really important. People seemingly like to grab a little sweet treat now and then to help them keep going through tough times.
The company has also returned quarterly dividend payments to its shareholders for the last 32 years consecutively. Q2 results were also solid, showing consolidated net sales of $2,372.6 million, an increase of 19.3%.
Mondelez International (MDLZ)
Price on 01.01: 85.97 USD
Price on 14.10: 56.94 USD
% change YTD: -13.69%
If Hershey is big in the US, Mondelez is a global giant. The company is the global market leader in biscuits and chocs.
Mondelez has nine international brands including heavyweights Oreo, Belvita, Toblerone, Milka, and Cadbury. About 36% of total revenue comes from Oreo, Cadbury, and Milka.
Mondelez is going through a spot of maturity, too. The company is slashing costs and increasing margins by removing inefficiencies. Those are not just connected to supply chains, but also sustainability. The company has lowered CO2 emissions by 15%, cut, food waste by 20%, and reduced packaging by 65,000 tonnes. These decreases translate to higher margins. Which is pretty sweet.
Many analysts believe MDLZ stock is undervalued at present and with such brand dominance in multiple markets and the current cost reduction/profit maximisation strategies, it’s no wonder investors are pump-kin-ing the accelerator for Mondelez stock.
Walmart Inc. (WMT)
Price on 01.01: 144.65 USD
Price on 14.10: 130.43 USD
% change YTD: -9.83%
There are consumer staples, then there’s Walmart. The world’s largest retailer’s produce is always high in demand. Essential items at affordable prices are a guaranteed winner, especially during Halloween — and, might we add, during a recession.
Walmart looks like a relatively safe option for investors seeking lower-risk options in a volatile market. It’s a staple shopping destination for millions of consumers who buy all kinds of stuff — from Hershey to Mondelez, to skeleton costumes, Christmas presents and millions of other things besides.
Walmart’s financial strength makes it one of the few companies that can continue investing in growth through any downturn — which makes it very tempting.
The Halloween Effect
Stay with us, this is actually a thing.
The Halloween Effect is a phenomenon where stocks perform better between the 31st of October and the 1st of May than they do between the beginning of May and the end of October. Spooky stuff.
In reality, this probably has nothing to do with Halloween. The timings are thought to come from Great Britain, where the privileged class would leave London and head to their country homes for the summer, thus leaving the market and only returning to it in the autumn.
But does it actually work? It’s a bit freaky, but yeah — it does!
A number of studies have shown that the strategy of selling in May is successful more than 80% of the time when employed over a five-year period. It’s more than 90% successful within a 10-year time frame.
The chart below shows the average returns within a six-month period between November to April, compared with that of the following 6 months between 1995 and 2017.
As you can see, this is a truly global phenomenon. Fangtastic stuff indeed!
Has this got you spooked?
Do you believe in the Halloween Effect? Have you tried the strategy? Let us know by tweeting us @_Contentworks.
Top trading events this week
There’s a good smattering of events to whet your appetite this week — here are some of the most important ones.
● No major events are planned.
● NZD — Inflation Rate YoY (Q3)
● CNY — GDP Growth Rate YoY (Q3)
● GBP — Core Inflation Rate YoY (SEP); Inflation Rate YoY (SEP)
● EUR — Core Inflation Rate YoY Final (SEP)
● CAD — Core Inflation Rate MoM (SEP); Core Inflation Rate YoY (SEP); Inflation Rate YoY (SEP)
● AUD — Employment Change (SEP); Unemployment Rate (SEP)
● JPY — Inflation Rate YoY (SEP)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team