🗞 The Santa Rally Could Be Real, Make Your Wishlist

WHILE YOU POUR THE JOE… ☕️

The data says it all, a Santa Claus rally could be real after all. 🐂 

Out of more than 65 years of data, the S&P 500 has rallied 77% of the time during the most wonderful time of the year for investors.

Here’s the deal, though:

• The last two years have gone the opposite way, with net declines for December

The good news is, there has never been a period with three consecutive years in the red, so the odds are pretty good for dip buyers this time around. 📈 

While you can buy the S&P 500 and call it a day, you opened this email because you are chasing a bit more yield.

And lucky for you, that’s what I have in store today.

But before we get there, a quick word from today’s sponsor below.

Speaking of upside and yield, let’s get on with today’s email 📧…

END OF YEAR SALES
Check Underneath The Tree

If you’ve been with me for a while, you already know where I’m going with this.

There are several industries commanding a justified premium right now.

Justified due to their above-average EPS growth forecasts, which is always what we want to see rather than hunt for discounts (which are always discounted for a good reason).

• Apparel and Shoes

That’s the space I want to be in, or at least finding good potential long ideas to start breaking down for the portfolio.

So, let’s do that ⬇️ 

It’s clear that three stocks in the industry are worth taking a deeper look at.

Those are:

• On Holding (ONON)

• Nike (NKE)

• Ermegenildo Zegna (ZGN)

Before we get into some company-specific reasons as to why these are good long candidates.

Let’s discuss what ties them all together.

Going back to last week’s newsletter theme.

Dollars and barrels are now correlated, a relationship that really accelerated since 2022 as the United States economy started to soften into a higher recession probability.

That said,

I’ll also remind you of our bullish view on the dollar, a view that’s shared by Goldman Sachs because:

• Most of the current rate cuts have already been priced in

• Bond traders around the world are betting on no more cuts from major economies in 2026

• Short positions for the dollar have reached a cyclical high, third time since 2014

So if the dollar does end up rallying, these three companies will likely have a good amount of EPS growth.

Why?

All three have significant sales exposure to North American markets, even though they will report their revenue and earnings in dollar terms.

Which means, a stronger dollar will drive up valuations in two ways:

1. Overall items (like revenues) will be reported higher due to FX tailwinds

2. Any FX exposure will also help on non-recurring items on the income statement (considering there’s also a lot of international sales exposure)

Both of which lead to stronger EPS growth and profit potential for our portfolios.

I think the market is right to assign a premium to all these names right now based on this situation.

On Holding ($ONON)

Now trading at 75% of its 52-week high, On Holding is a name that could reach its previous highs on a whiff.

Especially if it can deliver on the 80% forward EPS growth rate expected by Wall Street analysts. 📈 

If I could put my finger on the one factor driving On’s EPS growth, it would be this:

• Their shift into wholesale rather than just direct to consumer

Because wholesale revenue rose by 28.8% over the year, I think other benefits should begin to follow along as well.

Such as a boost in gross margins from 59.9% to 61.5% as a result of the beneficial wholesale setup compared to the previous focus on retail.

Nike ($NKE)

Probably one of the worst-looking charts in the space, Nike is a dog with fleas.

Until now,

With a forward P/E premium over peers and a forecast for 54.3% EPS growth in 2026, this is one name you shouldn’t shy away from. 📈 

Nike now trades at only 70% of its 52-week high, and I think I know why this is.

Markets are scared and staying away from all names exposed to trade tariffs, as the volatility and uncertainty are driving investors into other areas.

However,

Like Apple and other big American brands, President Trump could place an exemption on these tariffs should the market share or operating ability tighten due to these economic changes.

Nike might be one of those names, an American powerhouse.

While this view is somewhat speculative, it isn’t unreasonable to expect a tariff exemption, which is why the market is willing to overpay for the stock despite its poor performance recently.

Ermegenildo Zegna (ZGN)

For those of you who prefer momentum instead, here’s Ermegenildo Zegna (ZGN).

A high-end apparel store where shirts cost over $500. 💰️ 

One of those “if you know you know” type of styles, obviously reserved for the affluent spenders in the market.

This is why it has outperformed most others and is now attempting to reach a new 52-week high.

Simply put, affluent spenders are spending a lot (and I mean a lot) more than ever before.

Because stock market and real estate valuations are at all-time highs, so are most portfolios, keeping the spending machine churning, but not for the average Joe.

Consider that the United States GDP number just came in yesterday at 4.3%.

Not from business activity and corporate profits, but from two simple drivers:

• Inflation

• Consumer Spending

So how do we know who is really spending between the average consumer and the affluent ones?

Simple ⬇️ 

Consumer sentiment readings are near all-time lows.

Roughly 95% of average consumers make up this survey, with the other 5% being affluent spenders.

So if the masses are bearish on their buying power right now, that 3.5% growth in personal consumption driving GDP must be comign out of the richer consumers.

Which makes sense for a stock like ZGN.

It also made sense for institutional buyers, as $173 million worth of buying took place over the last quarter.

Once again, this simple screening process aligns us with where the “smart” money is placing its bets, too.

It’s the same process behind dozens of plays already compounding capital at double-digit rate clips this month alone, with dozens more coming for the next one.

Like Chipotle ⬇️ 

This stock pitch was sent to our Deal Room members in late November, at just under $30 per share.

The idea is now in 12%+ profit. 🔥 

But I don’t just give you the idea itself, I also show you:

• How Wall Street analysts make their financial models and value companies

• Hedging strategies in case you are wrong

• Portfolio management

• Live trade entry approaches (Zero technical analysis)

You can access all of this, and start putting it to work for you (even if you’ve never built a financial statement before)

All in your 7 Day Free Trial to the Deal Room.

To your success,

G 🫰