Money can't buy you love, but can love make you money? Some analysts think it can, and Valentine's Day is boomtime for companies that profit from our amorous affections — including those that sell flowers, candy, lingerie and jewelry.
If romance moves you to make a stock pick, however, don't let emotions sweep you away. You should always do your homework, because brisk sales on Feb. 14 don't necessarily add up to a good investment.
"They say to invest in what you know, and right now people are going out and getting flowers, spa services, cards and so forth," said Brent M. Wilsey, a money manager in San Diego. "So buy the flowers, then look at the stock as well. Love can be profitable, but you still have to go that extra mile to make sure you're getting a good solid company and not just a familiar name."
More cut flowers are sold on Valentine's Day than any other holiday, making it the busiest day of the year for petal pushers, according to the Society of American Florists. Last year, growers churned out 175 million roses to meet the pop in demand.
Wilsey took a look at the industry after buying flowers for his wife through 1-800-Flowers.com, an e-tailer that survived the dot-com bust and has managed to achieve profitability. It's his favorite in the space; other publicly traded companies in the bud business include ProFlowers.com, owned by Provide Commerce Inc., and flower delivery service FTD Group Inc., which just went public Wednesday.
Valentine's Day is also a time for gifts of a more intimate nature; business is sure to be brisk at retailers like Victoria's Secret. The lingerie chain known for its steamy advertising generates almost half of all revenues for Limited Brands Inc. and dominates the high-end intimate apparel market. Only Wal-Mart Stores Inc. sells as many bras and panties, but it targets a different segment of the market.
And then there's the chocolate. The folks at Hershey Foods Corp. start planning for holidays like this well in advance, plotting packaging and shopping cart-stopping store displays for the impulse buyers who account for half of its candy sales. Hershey relies on a seasonal surge in candy consumption not just on Valentine's Day, but also at Christmas, and on its most lucrative holiday, Halloween. In fact, the holiday-free April-June corridor tends to be its weakest quarter, said Steve Ralston, senior food and beverage analyst with Zach's Investment Research.
"They have to manage all these products and get them on the store shelves at the right time for these holidays, and they have to be packaged in the right way ... it's a core competency that they manage very well," Ralston said. "Having the display available in a store is key. Someone, a husband or boyfriend, probably, will be walking down an aisle in a store, and he'll say 'Oh yeah, it's Valentine's Day, I'm glad I didn't forget this.'"
What makes Hershey stand out from the candy competition is that it is primarily a chocolate company. Confections are a smaller business component for a company like Cadbury Schweppes PLC, for example. Other competitors, such as Mars Inc. or the high-end Godiva Chocolatier, Inc., are privately held.
The lure of jewelry
For those who want to lavish their loved ones with a little bit of glitz, Tiffany & Co. is one of the best-recognized brands serving the premium market. For bargain-minded Casanovas, Internet retailer Blue Nile Inc. offers luxury glitter at a discount. But Zale Corp. boasts the biggest market share in North America, with 2,200 stores, mostly in malls. In addition to its Zales stores, the company owns three other chains aimed at different segments of the market: Bailey Banks & Biddle Fine Jewelers, Gordon's Jewelers and the Piercing Pagoda.
Pampering may also be in order. One stock that profits from personal indulgences like massages and facials is Steiner Leisure Ltd., which operates spas for nearly 20 cruise lines and provides services for a number of hotels; it also runs massage and skin care training schools. The stock drew Wilsey's notice because the company has grown its earnings year over year and been disciplined about paying off debt.
Remember to research
Regardless of how alluring or delicious a business seems, drilling down and examining a company's fundamentals is more important than how full its parking lot is during a special holiday, said Eric L. Prentis, author of "The Astute Investor," which outlines a step-by-step method for calculating the intrinsic value of stocks.
Prentis suggests following the lead of successful pros like Warren Buffett, who seeks out stocks that have a margin of safety. (Of note, Buffett has a sweet tooth of his own; Berkshire Hathaway Inc. has owned See's Candies, Inc. since 1972.) Taking a close look at cash flow statements might require more work than sampling a chocolate Kiss, but investors who take the time will enjoy greater rewards. At the heart of whether your stock is going to grow in value is a company's ability to create and grow free cash flow.
"You can't just hope and pray that things are going to work out for you," Prentis said. "A lot of people do that, a lot of people just invest on emotions. Unfortunately the stock market is not based on love, it's based on cold cruel facts, and you need to understand what they are in order to make a rational decision."