The 2009 holiday gift season, much like a year ago, will be defined by words like "humble", "modest", and "understated". But for investors looking to spot opportunities, it's worth noting the trends in place around the retail sector.

In recent weeks a slew of research and trade groups have released their annual surveys of the top gift categories and spending trends for 2009. Overall spending is predicted to be either flat or down slightly from 2008 levels. The National Retail Federation, the largest trade group representing the retail sector, is calling for a 1% drop in total holiday spending versus 2008 levels. While this is much lower than the 10-year average of a 3%-plus rise in annual spending, it points to a slightly better result than 2008's 3.4% drop in holiday spending.

Top Gift Categories
NPD, a market research group, completed a survey and found the top five gift categories of 2009, along with the percentage of survey respondents that stated they would be buying gifts in that category:

  1. Apparel - 49%
  2. Toys - 34%
  3. Movies - 29%
  4. Books - 28%
  5. Electronics - 27%

Now this is a good starting point, but these categories are very broad, and by themselves we can't identify particular companies best positioned to profit from them. But if we dig a little deeper into the survey data, some potential ideas come to light.

Shopping Trends
For instance, a growing number of people have declared that they'll be waiting longer to start buying versus last year. Some folks are holding out in hopes of being enticed by last-minute deals and discounts. Others will be traveling less, reducing the need to prepare for a holiday trip with gifts in tow. Gift cards continue to be a favorite of shoppers, and online shopping has been getting a larger percentage of holiday dollars each year for the past decade. (For more, check out Using Consumer Spending As A Market Indicator.)

Five Investment Ideas
So without further ado, here are five holiday investment ideas that could add a little profit to your own stocking this year. As with any good investment idea, these are meant to be catalysts for your own study and research.

  1. Grocery Stores
    I like this area of retail for several reasons. First, the shares of most major grocery operators are pretty cheap compared to the broad stock market. And there seems to be a groundswell forming for at-home entertainment this year. It's a way of spending time with friends and family that provides the best value for your buck. This means more trips to the grocery store. Grocery stores are also a great place for shoppers to pick up gift cards for hundreds of different retailers. (Learn what to look for in Analyzing Retail Stocks.)

    Some top companies in this space include: Safeway, Kroger, Whole Foods and Costco.

  2. Alcohol
    This is an ancillary play on the at-home entertainment theme. All cliché's about drowning our economic sorrow in booze aside, in many families no dinner party is complete without a bottle of wine or 12-pack of beer in the fridge. Also keep in mind that for the sports buff nation, we are entering the peak male bonding season, with baseball playoffs and the NFL in full swing.

    Several beer, wine and liquor producers have announced that they will be raising prices, which should add to profits in coming quarters provided that sales remain strong. Historical evidence tells us that during times of recession, sales of spirits hold up well, and sometimes sales actually grow. Major players in this space include Anheuser-Busch InBev, Molson Coors, Diageo and Constellation Brands.

  3. Electronics Retailers
    While big-ticket items may be under pressure, countering this trend is the fact that flat-screen TVs, video game consoles and Blu-Ray players have all come down in price this year. Netbooks have come out of nowhere to be a top seller. And for the buyer with a smaller price target, most retailers also have a multitude of accessories for the high-tech gadget already owned.

    Best Buy is obviously a name that jumps out here. The company has lost one of its major competitors already this year (CircuitCity), and it sells major brands in all types of products.

  4. Online Retailers
    As the survey results revealed, fewer people may be spending the extra money to travel to see friends & family this year. From this it's natural to surmise that more people will choose to buy and send gifts online. Amazon is the veritable 800 lb. gorilla in this space, but don't forget about notable brick & mortar retailers with a big online presence like Victoria's Secret, Bed Bath & Beyond, Apple and Macy's.

    Also, if you look at the top gift categories list above, note that Amazon has a huge selection of goods in four of the top five categories - toys, movies, books and electronics.

  5. Shippers
    This could be a good time to bet on UPS and Fedex, the two giants of global shipping. If you buy anything online, your last step will be to send some money UPS or Fedex's way. And both companies have hundreds of retail locations where you can walk in and put together your custom care package of holiday goodies. While the holiday traffic boost will certainly help both companies, they are so large that investing here also comes with an implicit expectation for better global economic prospects in the coming year.

Parting Thoughts
Investing is always a challenging business, but it can certainly be more fun around the holidays. Instead of thinking about investment ideas that are far-removed from everyday life, holiday-themed ideas allow you to put your own views and experiences to good use. Look around you, and listen to what people are saying. See what stores are getting good traffic in the next few months, and which products are being buzzed about at water coolers and school lockers. Retail is a fickle business, but it's also the one average investors can most easily relate to. Use this to your advantage. (For personal finance tips on holiday spending, check out Avoid Overspending This Holiday Season.)

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