Thanksgiving is celebrated in so many ways. For some it is a time to spend with family, for others a chance to eat a big meal and watch football. Some camp out at stores to position themselves for Black Friday shopping deals while others trim a Christmas tree. With all these traditions I wonder, are there investment opportunities tied to Thanksgiving? No, I’m not talking about an inverse turkey ETF or a double long waistline ETN, I mean some recognizable trends for investors to take advantage of that are related to Thanksgiving. After careful consideration, I believe there are at least three areas worth a look this Thanksgiving: agriculture, retailers and natural gas.
It’s hard to find a Thanksgiving celebration without food being the center of attention. I’m talking turkey, mashed potatoes, stuffing, gravy, cranberries, corn — you know the drill. Thanksgiving owes its history to the literal celebration of a successful harvest of crops in early America. This year irregular weather has damaged the yield from a variety of crops and the outlook is for more weather related crop failures going forward. This has caused food prices to move upward. Also adding pressure to food prices is the changing eating habits in developing nations like China. As the standard of living increases, people eat less grains, for example, and instead opt for proteins like chicken or beef. These proteins require dramatically more resources to produce. (for example one lb. of beef takes an exponential amount of water to produce than one lb. of grain) So what’s an investor to do? I like the option of owning the seed, fertilizer, food transportation and storage companies of the world — essentially the infrastructure behind the world’s food supply. You can do this in a few different ETFs, but the one I like is the Global Agribusiness ETF (MOO) from Market Vectors. MOO owns a basket of agribusiness companies in 15 different countries and allows investors to efficiently harness the global opportunity in agriculture.
Thanksgiving is the official start of the holiday shopping season for most Americans. In the last week I have been bombarded with offers using terms like Black Friday, Cyber Monday, Green Monday and Super Saturday. (all with exclamation points, of course) Yes, Thanksgiving is THE start to a time period that produces incredible revenue for retailers. This year the retail sector has outperformed the S&P based in part on consumers increasing their spending, albeit ever so slightly. Now going into the holiday season there is a growing thought that retail sales could surprise to the upside and further boost retail stocks. I like the SPDR S&P Retail ETF (XRT). XRT offers a low cost way, 35bps to be exact, to play over 60 of these names in one trade.
What would Thanksgiving be without some cold weather on the way? It may be hard to believe as I write this is on a 65 degree day in Chicago, but cold weather is coming. (the day after this post the high in Chicago is supposed to be 35 degrees) In fact the forecasts are for a fair amount of cold weather this winter, with the Midwest and West being slightly cooler than usual. All that cold fires up demand for natural gas which is primarily used to heat homes and offices. Currently there are near record inventories of natural gas which has weighed down the performance of this area. Supply levels should diminish with a cold winter on the way and indeed as forecasts have been getting colder, natural gas stocks have risen. To top it off, there is continued talk of M&A activity in this space after Exxon recently purchased natural gas player XTO Energy for a 25% premium. FCG, the First Trust Natural Gas ETF is my choice to play natural gas. It owns natural gas companies, as opposed to natural gas futures, and should be a more attractive way to invest in this space especially given the potential M&A activity on the way.
So there you have it, three promising ETF investment ideas with a close connection to Thanksgiving. No matter how you celebrate the holiday — eating a big meal, staying at home and turning up the heat or doing some shopping — you will likely contribute to one of these investment opportunities. Have a fantastic Thanksgiving and a profitable homestretch in your portfolio!