Some investment considerations for Valentines Day
February 14th is Valentine’s Day, and the latest test of the resilient consumer. It also highlight the dramatic surge in cocoa, and sugar, prices. And lack of stocks offering exposure to Valentines themes, from flowers to gift cards. A historic ‘Valentines Day’ stock market effect is a lesser-known technical support for markets.
Valentine’s 5th biggest consumer event of year with $182 spend
Valentine’s Day is the 5th largest spending event of the year. After Back-to-School/College, Christmas, and Mothers and Father’s Day. In the US romantics are forecast to spend a combined $26 billion, or an average $182 per person. This is the latest test for the resilient consumer that has near single-handedly kept the US out of recession. Helped by both strong job's growth and rising inflation-adjusted wages. Candy, cards, flowers, an evening out, jewellery and clothing are the most common gifts. Whilst 31% plan to buy their pets a Valentines gift. This is more than for friends (28%) or co-workers (16%).
Candy leading present but all-time-high cocoa prices make expensive
But that box of chocolates is going to cost more. US sweets inflation is running at more than twice the headline rate. Cocoa prices having doubled to all-time-high $5,200/ton in the past year. As El Nino drove harvest disruption in the dominant West Africa producers Ivory Coast and Ghana. And it may get worse before it gets better. As manufacturers like Switzerland’s Barry Callebaut (BARN.ZU) and Nestle (NESN.ZU) or the US’ Hershey (HSY) run through there lower-priced inventory and must raise prices. Whilst West Africa producers wait for the next harvest in October, or years for new plantings to mature.
Valentines related stocks are not well-represented in the stock market
There are only a few chocolate-related stocks, and this has been shrinking after Mars bought Hotel Chocolat. With very few others directly exposed to Valentine’s trends. 1-800-Flowers.com (FLWS) is one of the few listed flower stocks but has a market cap under $1 billion and is guiding for near double-digit sales declines. Greeting cards is a similar story, with giants like Hallmark private and those in public markets, like the UK’s Moonpig (MOONM.L), small and suffering since its 2021 IPO.
Little-known ‘Valentines Day’ optimism effect can boost stock prices
We think seasonality and technicals matter and have written about the ‘Santa Rally’ and ‘Sell in May’ effects. It's a complement to our fundamental analysis. Our Retail Investor survey shows many take these indicators seriously. There is a ‘Valentine’s day’ rally effect driven by ‘romantic sentiment’ and consumer optimism. With evidence the S&P 500 gives over twice the typical return in the days leading to Feb. 14th.
