Summer is around the corner. Rebate checks are in the mail. So what are people going to buy with their checks? Walmart is cashing the checks for free. Sears is offerng a 10% match with a purchase of any gift card -- all this to lure enthusiastic shoppers who can't wait to spend their dollars.
But being that it is wedding season (which incidentally also means a season for wedding anniversaries), Tiffany (TIF) will be one of the beneficiaries of this double impact. Now the TIF stock has been having plenty of trouble of late. Technicians will tell you about the double top, followed by a reverse cup-with-handle. Sure, but the underlying reason is a slowing economy, higher food and gas prices, slowing consumer discretionary spending and yes, the rising price of silver. However, precious metals are retreating from their highs. And given the additional foot traffic that they will get over summer, I think this stock is worth a second look. While it is up 30% since January, the stock is a far cry from the $56 it had scaled back in October of 2007.
The second retailer that I think benefits from the summer spending and tax rebates is Gamestop (GME). The video gaming industry is in full swing with 3 new generation consoles still selling like hot cakes. The Wii is still an elusive acquisition, and PS3 is just starting to make inroads with serious gamers. GTA 4 has already amassed $500 million in its very first week of release. Wii Fit, Gears of War 2, new versions of Rock Band and Guitar Hero .. the list of new hit games to be released goes on. And with the price of gas higher than ever before, people will opt in for more evenings at home playing video games than going out. Who wants to spend the checks on gas when one could pick up GTA 4 or the new version of Guitar Hero.
Gamestop holds 25% of the video game market. In order to attract casual gamers, the stores have also been revamped. The company, which has been growing earnings annually at 30% for the last few years also plans to open 600 new stores in 2008 across the US and Europe. The stock 16% of its recent high and is a good buy around the $50-52 mark.
I believe the two stocks above both give you a nice way to play the season and tax rebates.
-- Faisal Laljee
Full Disclosure: I don't own either GME or TIF but my position can change anytime without notice.
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