Holiday Factors Favor This Niche Industry

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  • Most investors know that the holiday season is when retail companies post their best numbers. Indeed, the term Black Friday may have even come into existence on the notion that the day after Thanksgiving was the first day many stores posted a profit for the year.

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  • This year is also pointing to a strong holiday trend following a year of lockdowns. With many retail stocks already on the radar, one niche area still has some room to run.

    That sector? The toymakers. It’s no surprise that toy sales are a huge part of the holiday season. And UBS recently upgraded Mattel (MAT), expecting a 40 percent move higher in shares.

    Shares are certainly coming back to profitability after reporting a loss earlier this year. Revenues are now up 10 percent over the prior year, and earnings are up a staggering 347 percent. Even with shares near a 52-week high, there appears to be more upside through the holiday season.

    Action to take: The April 2021 $16 calls, trading for about $1.10, are an inexpensive way to bet on a seasonal trend likely to play out in this sector. Traders will have more than enough time to digest the holiday season with this strike date, and there’s a good chance of the trade moving in-the-money as early holiday shopping data comes in.

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