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Halloween Spending to Hit $9B in 2018: 3 Fund Picks

Zacks Equity Research
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Americans are clearly gearing up to make Halloween 2018 more special than the ones witnessed over the past few years. After all, Halloween spending this year is now projected to touch as much as $9 billion, according to the National Retail Federation (NRF). This would be the second-highest spend since the Great Recession.

After the NRF expected holiday retail sales to increase significantly this year following last year’s record gains, strong projections for the Halloween season also added to the positive sentiment. As Halloween spending is expected to be a treat for retailers, investing in funds focused on stocks from such a space seems to be a wise choice.

Halloween Spending: Fewer Spooks, More Fun

The NRF currently expects Americans to spend $9 billion or $86.79 per person on Halloween this year, higher than the year-ago level of $86.13 a person. Shoppers are expected to spend about $3.2 billion on costumes, $2.6 billion on candy, $2.7 billion on decorations and $400 million on greeting cards.

Per the NRF survey, shoppers are targeting discount, specialty and department stores for their Halloween purchases. Of the total Halloween purchases, 44.6% is done in discount stores, 34.9% in specialty stores and 24.7% in department stores. In fact this time, men are participating more in spending, according to NRF.

NRF President and CEO Matthew Shay said: “The economy is good and consumer confidence is high, so families are ready to spend on Halloween this year.” Shay added that this Halloween season, retailers are piling up new supplies for children and adults “with their favorite decorations, candy and costumes.”

Holiday Season to Boost Retail Sales

Retail sales during the last two months of 2017 climbed 5.5% to reach $691.9 billion, per the NRF. Unlike last year, when retail sales witnessed its best growth since the Great Recession, holiday sales are projected to advance between 4.3% and 4.8% in 2018, settling at about $720.9 billion.

Although this year’s retail growth forecast is not as high as the 2017 performance, an increase between 4.3% and 4.8% is considerably higher than the five-year average of 3.9%. Holiday sales are important for retailers with some even making around 40% of its annual sales in the November-December period. NRF President Matthew Shay said that “healthy economy and strong consumer confidence” will facilitate growth even this year like 2017.

On the earnings front, in the Zacks Retail And Wholesale sector, nine companies have already reported in the third-quarter reporting cycle. Of these, six posted an earnings beat, while two met their consensus estimate.

Buy These 3 Mutual Funds

Mutual funds that invest significantly in the consumer cyclical sector also registered strong returns. According to Morningstar, the consumer cyclical mutual funds posted three-month and one-year returns of 1.5% and 10.3%, respectively.

This upbeat backdrop calls for investing in three mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive one-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

Fidelity Select Leisure Fund FDLSX seeks appreciation of capital. The fund normally invests a large chunk of its assets in common stocks of companies mainly involved in the design, production and distribution of services or goods in the leisure industries. FDLSX invests in both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 12.8% and expense ratio of 0.77% as compared with the category average of 1.39%. FDLSX has a Zacks Mutual Fund Rank #1.

Moreover, FDLSX requires minimal initial investment of $2,500. The fund’s top holding, McDonald’s Corp launched a new national game called “Trick. Treat. Win!” for this Halloween season.

Fidelity Select Retailing Portfolio FSRPX invests a huge portion of its assets in securities of companies engaged in merchandising finished goods and services primarily to individual consumers. FSRPX invests in both U.S. and non-U.S. companies. The fund seeks appreciation of capital.

The fund has one-year annualized returns of 43.7% and expense ratio of 0.77% as compared with the category average of 1.39%. FSRPX has a Zacks Mutual Fund Rank #2.

Moreover, FSRPX requires minimal initial investment of $2,500. The fund’s top holding, Amazon.com Inc offered a wide variety of products in its “Halloween Store.”

Fidelity Select Consumer Discretionary Portfolio Fund FSCPX seeks appreciation of capital. The fund normally invests a bulk of its assets in common stocks of companies involved mainly in the manufacturing and distribution of consumer discretionary services and products. FSCPX invests in both U.S. and non-U.S. companies.

The fund has one-year annualized returns of 30.7% and expense ratio of 0.77% as compared with the category average of 1.39%. FSCPX has a Zacks Mutual Fund Rank #1.

Moreover, FSCPX requires minimal initial investment of $2,500. Along with the fund’s top holding, Amazon, its second top holding, Home Depot Inc offered a variety of holiday decors in its “Halloween Decorations” segment.

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