E-motions: Vol. No. 1, Issue No. 17 Brought to you by California News Tech (OTC BB: CNTE)

By: Tai Nicolopoulos E-Motions Writer 12/12/2005

Searching for Hot Holiday Retail Picks? Take a Tip From the Nearest Department Store Santa and Ignore Black Friday

Printer Friendly Version

Email Article to a Friend

E-Motions Podcast

1. Emotions in Focus:

    Confusion surrounds the best way to make the best stock picks in order to take advantage of the holiday retail season. Some investors over-complicate the research process, others simply misapply logic that may work in other areas of investing, but do not translate to the particularly emotion driven universe of holiday gift giving. In particular, investors eager to get an early forecast on the best bets for the upcoming season often look to Black Friday for what stores, brands and products will be winners. Black Friday is the day after Thanksgiving, the biggest shopping day of the year. It acquired its name because Black Friday is the time when more companies go out of the red and into the black than any other. Black Friday used to be a bell weather indicator for not only the holiday success of particular companies, but also for retail as a whole.

    In recent years, however, the accuracy of Black Friday sales as an indicator of the rest of the season has been seriously called into question. As the status of Black Friday as a retail sales indictor grew, stores started to take advantage of the press surrounding post Thanksgiving sales results. Today, there are so many special offers, featuring limited quantities of popular goods at close to cost, or other cheap, low quality items specially positioned to draw consumers into stores. As a result, while there are still large numbers of shoppers on Black Friday, what they end up buying does not necessarily reflect what the top items for the holidays are going to be.

    This year a prime example of this trend is the new Xbox 360. Rumor has it that Microsoft (NasdaqNM:MSFT) planned a deliberate shortage of the latest Xbox so that it would initially sell out, creating buzz and demand, and then later become one of the hottest items for the holiday. Having already made its initial debut and practically sold out, the Xbox 360 was virtually non-existent during Black Friday sales, despite the fact that it is still at the top of Holiday lists for many consumers. Likewise, consumers are unlikely to purchase other popular items like the iPod Nano on a day devoted to deep discounts on special sale items.

    Another example of the failure of Black Friday to accurately predict holiday sales is Wal-Mart Stores (NYSE: WMT) last year. A Wal-Mart senior VP stated that last year’s Black Friday sales were strong, but then Saturday sales the next day ended up being lower than expected. Inevitably, investors pulled out quickly after the news of Saturday’s resulting slower sales. Ultimately Wal-Mart came out strong, as it is a very popular source for holiday staples and last-minute gift items, but manipulating its inventory quantity on Black Friday turned out to be a losing proposition for the company and investors.

Presented By:

2. The Big Movers and Why

    Recently, MediaSentiment Heads Up™ has covered a couple of companies that made big moves based on holiday retail buzz. Hastings Entertainment Inc. (NasdaqNM: HAST) , which operates 153 superstores selling books, music, software and DVDs in small and midsize domestic markets, reported on November 21st a wider third-quarter loss. Heads Up™ gave Hastings a thumbs-down, despite protestations in its earnings release that high sales figures at the start of the holiday shopping season in the electronics sector in general would help to heal the company. A large part of the Hastings business model relies on an outdated video service and other off-brand goods, rather than focusing on the trendiest electronics. Later that day, Hastings went down 15.27%. When it comes to technology, especially electronics as retail gifts, being in the right sector, but having items that are not the latest, or carrying off-brands, is not good enough. Consumers make emotional purchases. Labels, trends, and ads perhaps make more of an impact than at any other time of the year.

    Conversely, Heads Up™ recently gave Alloy, Inc. (NasdaqNM: ALOY) a thumbs-down because they reported a loss for the first 9 months of 2005. Nonetheless, the street seemed enthused about the prospects of the company. The company reported profits for the quarter but losses for the year to date. Suddenly, so much revenue was coming so fast. Alloy Inc., is a marketing and retail company that targets young people, mostly girls aged 10 to 24, has been able to take advantage of its research into the latest trends for the holidays and beyond to recover from a slow year. Third-quarter income soared more than four-fold on higher revenue and improved margins. When it comes to marketing and retail trends, not even normal negative earnings report sentiment can dictate the success or failure of a company with its finger firmly on the pulse of the hopes and dreams of the holiday season.

Presented By:

3. How to Use the News

    As the mistakes of some analysts earlier in the season demonstrate, it is often not enough to simply mark an entire retail category for holiday sales success. Special sale items and manipulative promotions can make Black Friday store traffic deceptive. Likewise, Black Friday sales often do not accurately reflect public tastes because many times the hot ticket items for the year are not yet available, or are only available in limited numbers.

    Instead of following reporting on Black Friday sales and similar stories, follow the buzz about particular items. Keep in mind that trend-conscious consumers want to give a particular brand or new product rather than off-brand or out-dated items from a similar product category. For instance, there is money to be made with items such as the Xbox 360 and the iPod Nano, but not necessarily with competitor game consoles, less appealing MP3 players, or electronics stores entirely outdated business models.

    To make better investment picks on holiday trends read the news and use MediaSentiment™ to scan for stories about particular companies with the most-wanted fashions, gadgets and toys. In essence, rather than wandering around malls looking for crowded department stores after Thanksgiving, ask kids, in store Santas, or just about anyone what special item it is that they just have to have this holiday season. Even if a company has other problems, if it offers that special item on everyone’s wish list, it becomes, at least temporarily, a winning bet.

Presented By:

4. Last Week in Media Sentiment

    Recent correlations between MediaSentiment.com's thumbs-up / thumbs-down recommendations for Heads Up™ rated companies and subsequent day price highs and lows show a strong relationship. The correlation between ratings for MediaSentiment.com selected stocks and their highs and lows the next day is 70%. Therefore, this week, MediaSentiment™ gave an edge up to 70% to smart investors who used Heads Up™ recommendations to trade on intraday volatility!

    Investors can take this MediaSentiment™ advantage to the next level by adding supply / demand indicators to Heads Up™ thumbs-up / thumbs-down recommendations, for up to 148% greater profits. Also, MediaSentiment™ subscribers can take advantage of MediaSentiment Trend™ to follow sentiment trends about individual companies, as well as E-motions™ to follow market-wide trends.

    All figures reflect all MediaSentiment Heads Up™ recommendations for the week of November 28, 2005 through December 2, 2005, rating companies on the day of their quarterly earnings releases correlated with their stock highs, lows, closing prices and daily volumes for the subsequent day.

5. Links you can use

Black Friday Computer Sales Up Significantly from 2004
Retailers Use Giveaways and Gimicks on Black Friday
As Shopping Trends Shift the Big Day is a Little Less So
Microsoft Plans Deliberate Xbox 360 Shortage

IF YOU WISH TO BE REMOVED FROM OUR MAILING LIST, PLEASE SEND US AN EMAIL WITH "UNSUBSCRIBE" IN THE SUBJECTLINE. YOUR EMAIL ADDRESS WILL BE REMOVED WITHIN 72 HOURS.