3 Retail Stocks to Buy Ahead of the Holidays

November through January mark the most important time of year for retailers. Known as the holiday shopping season, most retail chains rely on this period for as much as 30% of their total annual income. This year promises to be a healthy one for retailers as holiday sales are slated to increase around 4% in the coming months. This creates an opportunity for investors to own retail stocks that are well positioned to dominate the holidays.

Below, three Motley Fool contributors explain why Nike, Target, and Amazon should be at the top of your shopping list this holiday season.

(Nike): Coming off another stellar quarter,Nike is poised to keep moving north through the holidays. Shares are at an all-time high after the sneaker king reported a 14% increase in currency-neutral revenues in the past three months and a 23% jump in earnings per share. Future orders improved 17%, and Nike showed significant growth in all major geographic regions, including China, where sales were up 30% and earnings jumped 51% as the company recovered from several years of sluggishness in the world's hottest market.

Just last week, the Air Jordan-maker announced a goal of $50 billion in revenue by 2020, which it should be able to hit as it's on pace to exceed its earlier goal of $36 billion by fiscal 2017. The company sees particular growth opportunities in China, where it expects revenue growth in the mid-teens, as well as in its women's segment, Jordan Brand, and e-commerce.

Aside from big numbers, there are other reasons to believe Nike is headed for an excellent holiday season. In a recent survey on teen shopping habits by an investment research company, Nike ranked No. 1 for both apparel and footwear, improving its lead in both categories. This was the fifth year in a row that Nike claimed the top spot, and the first time any brand received 50% share in footwear, which should bode well as we head into the biggest gift-giving season of the year.

Looking ahead to next year, Nike looks set to score on its sponsorship of the Summer Olympics in Rio, its first Olympic sponsorship since 2000. Brazil is a key growth market for the Swoosh, and soccer, the favorite sport of Latin America's biggest country, is another area where management believes it can gain share. A similar sponsorship deal with the NBA signed this summer should also boost sales when it goes into effect in the 2017-18 season.

Tamara Walsh (Target): Big-box retailer Target may not seem like an obvious choice for all-star holiday stock pick. However, the discount retailer's exclusive product offerings and designer partnerships will help make it a must-visit destination for shoppers this season. The brick-and-mortar retailer recently rolled out its "mad for plaid" collection, which is its fashion collaboration with designer Adam Lippes. Customers shopping the Lippes for Target collection will find 50 unique products ranging from apparel and accessories to pet goods and home furnishings. This should give Target a much-needed edge over online rival Amazon because consumers will only find these items for a limited time in Target stores or online at Target.com.

Image source: Target Corp.

Investors can expect Target to unveil more exclusive product deals and designer partnerships as the holidays approach. Last year, the retail chain fueled in-store traffic through its surprise collaboration with Toms shoes and its holiday price match guarantee. Target will also stock top-selling devices such as the Apple iWatch this holiday season. Meanwhile, the retailer is expanding its price match program to include 24 additional competitors. Target's diverse selection of merchandise, which includes everything from home goods and toys to jewelry, purses, and electronics, make it the ideal one-stop-shop for last-minute gift givers.

Together, these things should help drive increased traffic to Target stores during the important holiday season. Shares of Target are now trading around $76 apiece and are flat year to date. This creates an attractive entry point for investors -- particularly because the stock is now trading at just 16 times earnings, which is below the industry average.

(Amazon): Saying Amazon will have a good holiday season is a bit like the episode of The Simpsons when Homer invested in Pumpkin futures in the weeks before Halloween.

Homer, of course, neglected to liquidate his position before the seasonal interest in pumpkins dissipated. That won't be a problem for people who buy shares in the online retailer, because Amazon's huge holiday season should set it up well for the coming year.

In addition to selling lots of, well, everything, during November and December, Amazon also sells a lot of its own items, which are the gifts that keep on giving. Last year, the company added 10 million new Prime members during the holiday season, according to a press release. There is no reason to expect any less this year, and the company is also well-positioned to move a ton of its Kindle Fire Tablets and its Fire TV devices.

Amazon is pushing value as a key feature for its $50 tablet. Image source: Amazon.

At $39.99 for the Stick and $99 for the full Fire TV box, the retailer arguably has the highest-functioning streaming devices sold at the lowest prices. It also has a diverse line of Kindle tablets, including one priced at $50, making it the rare holiday item that could be considered both a big-ticket gift and a stocking stuffer.

The best thing about selling streaming boxes, tablets, and Prime memberships is that all of these encourage shopping with Amazon throughout the year. Prime users spend more on average than regular Amazon customers because free shipping is only worth it if you use. Kindle Fire and Fire TV work much the same way -- both devices offer lots of free content, but having them encourages people to buy apps, movies, TV shows, and other content.

Amazon has a product lineup and set of services designed to not just peak at the holidays, but deliver all year long. That should benefit shareholders not just in the short term, but over the long haul, too.

The article 3 Retail Stocks to Buy Ahead of the Holidays originally appeared on Fool.com.

Daniel Kline has no position in any stocks mentioned. Jeremy Bowman owns shares of Nike. Tamara Rutter owns shares of Amazon.com and Target. The Motley Fool owns shares of and recommends Amazon.com and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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