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Jeff’s Holiday Shopping Gift Set

Ok, so not the full stock analysis reports I mentioned I’ll be posting just yet. With the big runup of the stocks of retail companies recently (in anticipation of holiday shopping), I am a little uncomfortable recommending or mentioning any attractive retail stocks at the moment. However, read this article by MarketWatch on Black Friday shopping if you want to see how the retail sector did. I want to go back to Mastercard (MA) and Akamai (AKAM) as my holiday shopping plays. These are two of my favorite stocks that I own and have mentioned before on this site.

Mastercard (MA)
The idea here is simple and thus so so attractive: Mastercard gets paid on every transaction!!! (I believe Mastercard skims 10 cents off of every transaction, but I will have to check that number both for me because I own the stock and for you.) The biggest concern this holiday shopping season is whether retail store are making money. Sure, the crowds going after these deals are huge (and chaotic), but a lot of people fear the stores had to make too much of an discount to lure people in and won’t make much money off the discounted items. If you own Mastercard like I do, you don’t care about how much the retailer makes on each item, regular price or on sale. All you care about is the volume of the transaction, or how many things are sold. Heck, people can buy a ton of stuff on sale with the retailers losing money, but Mastercard will benefit just because a lot of stuff was sold. Finally, “Retail Decisions reports that online volumes surged 109% on a like for like basis on Black Friday.” When I read this, I see more money for Mastercard and other credit cards because you can’t pay cash when you buy online. Yes, there’s also Paypal, but the big trustworthy retail stores like JC Penney (JCP) or Costco (COST) still limit online payments to credit cards.

Akamai (AKAM)
Talking about online retail sales, this leads us to Akamai. In the ‘Cyber Monday‘ article in the Wall Street Journal, “Akamai Technologies Inc., a Cambridge, Mass., company that helps companies send content over the Web, said it tracked more traffic to online-commerce sites than on past Cyber Mondays.” Akamai lives for these moments. Sure, Akamai is famous for it being the technology that lets you download music off of Apple‘s (AAPL) iTunes. For online holiday shopping, however, Akamai is the goto guy for online retailers. Akamai allow retail websites to handle these sudden bursts of users trying to all the PS3’s or Big Screen TV’s in stock without crashing the website. If you think of a retail website like the retail store, only a certain number of people can get into the store when there are only so many doors to let people in. When people rush the stores to be the first to grab the discounts, a lot of accidents happen and things get…messy. Online retail sites can crash too if they get a rush of customers, but Akamai gives these sites temporary doors to let everyone in without crashing the site. This temporary ability to handle more customers is good for online retailers because there are only a few days in a year when they need all these “extra doors.” They don’t need it most of the year so these “extra doors” would be useless and a waste of money. So, instead of buying tons of computers and servers to handle a few days of holiday shopping rushes, most retailers prefer to go to Akamai. Like Mastercard, Akamai benefits from the volume of holiday shopping. Akamai has been down recently and getting no respect for playing a key role in online shopping. I think Akamai should go above its 52-week high of $52 just on this holiday shopping.  Akamai could hit $60 early next year when these analysts realize they’re still underestimating the importance of this company to the internet, not just for ecommerce like online retail.

One Response to “Jeff’s Holiday Shopping Gift Set

  • 1
    Ko Ihara
    November 30th, 2006 04:19

    Wow… haven’t visited this site for so long, and I see a lot of interesting improvements. Good job man.

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