What Does Your Christmas Tree Say About Your Investments?

Wednesday, December 2, 2020 7:47 AM | Neal Farmer

As we enter the holiday season, families are beginning to decorate their homes, which for many families starts with selecting the perfect Christmas tree.

Christmas trees come in all sorts of shapes, sizes and even colors. It is not too dissimilar from stocks in that there is something for everyone. In fact, it occurs to us that the different kinds of Christmas trees are a lot like some of the different kinds of stocks.

The Charlie Brown Tree

 

Okay there is a lot going on here, maybe you just don't want to spend the money for a nicer tree, maybe just want to get the search over, or on the brighter side you see a tree as just a symbol for Christmas and that you can be happy with any tree. Either way, this tree is gonna be cheap and definitely undervalued because almost no one sees what you see in this tree. What matters is that you see the potential for this to be a fine Christmas tree one you get some lights and decorations on it.

This a classic value investment where a buyer sees something the rest of the market doesn't. While everyone else sees as a stick with a few needles, you see what the tree can be with some time and attention. These aren't the shiniest investments like electric vehicles or sports gambling, but fundamental analysis that hopefully will lead to you buying low and selling high. Stocks such as Taiwan Semiconductor Manufacturing (TSM), Anthem (ANTM), General Motors (GM), or Lowe's (LOW) are great options that currently hold great values.

The 12 Footer

 

If you are gonna get a Christmas tree, then you’re getting the best and biggest Christmas tree around. Small trees are for chumps and if this massive one doesn't fit in the house then it's time for a new place to live. You want the best tree and therefore you clearly want the best stocks.

Well, sorry to tell you, there's no objective "best" stocks or at least a way to reliably predict which stock is definitely going to be the best investment.

However, the stocks best suited for you are probably gonna be the blue-chip stocks with loads of room to grow still. Think Apple (AAPL), Microsoft (MSFT), Johnson & Johnson (JNJ), JPMorgan (JPM), and other big-name well-established companies. These are some of the best investments individuals can make depending on what they’re investment goals are. Some of the fastest risers could go here as well such as Advanced Micro Devices (AMD) in recent years or Nvidia (NVDA) but there might be better comparison for those “trendy” stocks.

The Trendy Tree

 

You’ve had the big 12-foot tree but now are looking for something new and different than what everyone else has. Maybe it's one of those chrome/silver artificial trees, rainbow colored trees, or even a pineapple tree (yep that’s apparently a thing). The point is you want something different and new to spice it up a bit.

Trendy Tree = Trendy Stock. These investors are going to be interested in the hottest stocks to buy right now such as Tesla (TSLA), Peloton (PTON), Zoom (ZM), and Nio Inc (NIO). These stocks are hot right now now due to the industries they’re in such as electric vehicles or cloud-based video conferences for remote work and online classes. Some of these stocks can be great investment as they’re on the cutting edge of what is to come but they have the potential to become overvalued by the time you’ve heard of them. Even still, they offer tremendous growth potential and a lot of excitement given the usual smaller size of these companies compared to a Walmart or Microsoft.

The Expensive Decorated Artificial Tree

 

This is the easy way out. No decorating or assembly required. There won't be pine needles all over the floor and your hands will not be covered in sap for the next four hours. It’s easy and will last for a long time but tends to be a little pricy. So what are the expensive and glamorous stocks that don't require much effort?

Toss away your own research and just buy stocks of the biggest names that come recommended from almost any analyst in the business. This isn't necessarily the worst approach but it involved buying stocks with high share prices and not enjoying the process of doing your own research. Amazon (AMZN), Berkshire Hathaway (BRK.A), and Google (GOOG) are some of the most obvious ones to choose. All of these stocks have share prices over $1,000 but are some of the absolute best investments you can make as these companies are in great position to continue growing and thriving into the future. Index funds that track major indices such as SPDR S&P 500 ETF Trust (SPY) are also great candidates for this. A portfolio consisting mostly of SPY, AMZN, BRK.A, and GOOG is not the worst thing at all and would require less management than investments in multiple smaller companies that hold more short and long-term volatility.

Traditional Six Foot Christmas Tree

A classic simple choice that everyone can respect and makes for a nice Christmas centerpiece with enough room left for presents underneath and decorations throughout the house. You don’t need the  trendy trees or artificial trees, just a nice healthy tree to celebrate the holidays.

Same thing for stocks really, no need to find the newest trending stock or most undervalued companies just a reliable business that you can share ownership in. Blue chip stocks that have a history of strong growth and stability such as Disney (DIS), Walmart (WMT), Nike (NKE), Paypal (PYPL), or Visa (V) are great options. These are some of the biggest companies in the world that have reasonable share prices for almost all investors to invest in. Some of these might not offer the growth potential that big tech stocks do but they offer dividends and stability while also avoiding some of the valuation concerns of the technology sector as those stocks soar in a coronavirus economy.

Wrapping Up

There are a wide variety of Christmas trees out there for people to choose from. Have fun finding the right one for you and maybe see if it agrees with your investment strategy.

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