Indicator of the Week: 30 Stocks Set for Big Thanksgiving Gains

As Thanksgiving approaches, historical data shows it's a good time to bet on retail stocks

Senior Quantitative Analyst
Nov 18, 2015 at 7:15 AM
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Thanksgiving is next week. You can expect some pretty low volumes during the four-day trading week (three and a half days, to be more precise). This week, I'll take a look at what you can expect as far as stock returns go. I'll look at how the S&P 500 Index (SPX) has historically performed during the week of Thanksgiving, along with some individual stocks that have tended to do well during this holiday week.

Thanksgiving Week: The table below gives a quick summary of how the SPX has done over the past 50 years during Thanksgiving week. It has typically been a bullish week for stocks. The index has averaged a weekly gain of 0.63% vs. 0.14% for all weeks. Also, the holiday week has been positive 66% of the time, compared to a positive weekly return 56% of the time across the calendar. Looking at the average positive and negative returns, we see lower volatility to the downside on Thanksgiving week, which is why you see the outperformance.

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By Day of the Week: In this section, I have broken down Thanksgiving week returns by the day of the week. (Thursday, of course, is a holiday.) Over the past 50 years, stocks have struggled in the early part of the week, but finished strong on the days before and after Thanksgiving. Monday is especially bad, averaging a negative return and coming out positive just 44% of the time. Over all weeks, however, Mondays are even worse, while Fridays do not historically outperform Wednesdays. 

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Now look at this next table. It shows the same data, but for just the last 20 years. In more recent times, the Monday before Thanksgiving has been the best day of the week, when looking at average returns. This big average return is skewed somewhat by a 6.5% return on the Monday of Thanksgiving week in 2008. (Eliminating that day brings the average return down to 0.15%.)

In even more recent times, Friday has not been as bullish as the tables suggest. Over the past six years, the Friday after Thanksgiving has been positive just one time, averaging a loss of 0.29% for the day. Thanksgiving week seems hard to predict, since more recent returns don't align with longer-term trends. 

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Individual Stocks: Finally, looking at all stocks meeting certain liquidity criteria, the table below lists the ones that have performed the best over the past 10 years during the week of Thanksgiving. What stuck out right away is the inordinate number of retailers on the list. In fact, of the 30 stocks listed below, 14 of them, or 47%, are in the retailing or textiles/apparel sectors. Out of all stocks that meet the liquidity criteria, only 7.3% belong to those sectors.

Retail stocks have taken a huge hit recently, but these stocks seem to get very popular during the week of Black Friday, as they gear up for the holiday season. It might be a good time to bet on a bounce back in retailing names… for next week, at least.

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