"Whoever said money can't buy happiness simply didn't know where to go shopping.” For investors, here are five sectors that should benefit from increased activity during the Black Friday and Cyber Monday shopping bonanza.
This is the long weekend where the words of American novelist, poet, playwright, and art collector Gertrude Stein come to mind as UK shoppers are set to splurge some £3bn in Black Friday and Cyber Monday sales.
But the weekend which overspills in the days before and after, is truly a global event. Americans would immediately think of long, snaking crowds going around the corner of big discount stores the day after Thanksgiving – marking the unofficial start of the Christmas shopping season.
While a recent research report found some 59% of Europeans make a list of Black Friday shopping targets a month ahead of time, I wish I was that organised!
But back to these shores – where the cost-of-living crisis looms large. For example, 1.4 million UK mortgage holders could see their disposable income fall by 20% because of elevated interest rates, according to the Institute for Fiscal Studies (IFS).
It does have a knock-on effect as the aforementioned £3bn estimate for Black Friday weekend spending in 2023 is down 23% (£900m), from the previous year, according to Statista.
Nevertheless, Black Friday and Cyber Monday are still a major opportunity for hard-pressed retailers to lure customers ahead of the all-important festive period.
With over half of the UK population planning to spend during the Black Friday weekend – at an average of £113 per person – the opportunity remains vast.
But who is benefitting most – consumers, suppliers or even investors?
As Marilyn Monroe once said: “Happiness is not in money but in shopping”.
With this in mind, I’ve taken a break from my own online spending to consider five sectors that should benefit from increased activity this holiday season.
Arguably the first name that comes to mind is Amazon, the internet-based retailer that has been leading the way in e-commerce for decades.
The chosen destination for millions of people – almost regardless of what they’re buying. For the full year 2022, Amazon’s sales were up 9% to a remarkable $514bn (Feb 2023).
Amazon is one of the largest holdings in the T. Rowe Price US Large Cap Growth Equity fund, which is managed by Taymour Tamaddon.
This fund looks to invest in large US firms that demonstrate innovation and change, focusing on those with the potential for above average and sustainable rates of earnings growth.
Whether it’s a big TV, a new handbag or a designer dress, household names also do well in the sales as big discounts often attract customers who may otherwise not be able to afford the goods.
Samsung, the second largest holding at 7.5% in FP Carmignac Emerging Markets, is one example of an electronics giant that attracts the bargain hunters.
Those parents looking for the latest in gaming might consider the latest Xbox, a brand produced by Microsoft. Revenue for the company was up 8% during its last quarter earnings.
Microsoft is one of the largest holdings in GAM Star Disruptive Growth, which invests in companies across a variety of industries which are set to benefit from the disruption that the next wave of technological change will bring about.
Of course, it’s not just retailers that will potentially cash-in if Cyber Monday is a success. There are plenty of linked businesses that have a hand in their success.
Take Shopify, for example. This is a multinational e-commerce player that enables businesses to set up online outlets. It currently powers millions of businesses in more than 175 countries, including top brands such as Gymshark, the fitness apparel and accessories provider.
Shopify is the fourth largest holding (6.3%) in the Baillie Gifford American fund. This fund is run by a team of four co-managers that focus on the small number of US companies creating exceptional returns. Usually, these will be tapping into the trends of the future.
Another aspect, of course, is online payments: all those purchases have to be paid for. Visa and Mastercard are the sixth and ninth most valuable global brands respectively in 2023 and it’s easy to see why: where would we be without our credit cards as we enter a more cashless society?
The Guinness Global Innovators fund has identified payments and FinTech as one of nine core innovation themes, within that theme, the fund currently holds Mastercard. This portfolio will be of particular interest to investors who like to be at the forefront of innovation.
Research from Experian, a top holding in WS Evenlode Global Equity, found that more consumers also used Buy Now, Pay Later over the holiday period.
These payment methods can require companies such as Experian to run checks before approval. WS Evenlode Global Equity is run by Chris Elliot and James Knoedler. The portfolio focuses exclusively on quality companies, which are characterised by their ability to achieve sustainable growth over time while minimising the need for additional capital reinvestment.
According to Salesforce, traffic referrals from social media hit an all-time high last holiday season, driving 12% of all mobile traffic. If my own social media feeds are anything to go by, this isn’t a trend that’s going away any time soon.
Meta (formally Facebook), a top ten holding in AXA Framlington Global Technology, generated over $113bn in ad revenues in 2022, accounting for the vast majority of the social platform’s annual revenue.
Manager Jeremy Gleeson has many years of experience in this specialist sector and has a flexible approach to this fund, which allows investments in companies where technology is providing a significant competitive advantage.
Juliet Schooling Latter is research director at FundCalibre and Chelsea Financial Services