Today marks the unofficial beginning of the holiday shopping season. Black Friday – the day after Thanksgiving – has become the penultimate act of consumer frenzy.

I’m not sure when this tradition started. But it grows stronger every year and has spilled over into the days that precede and follow it.

A similar thing happens in the stock market about this time of the year. However, it has the opposite effect of motivating investors to buy what is on sale.

Instead, many professional portfolio managers feel compelled to buy what is most expensive. They believe they must show their shareholders that their portfolios include the hottest stocks.

This phenomenon is commonly referred to as “window dressing.” That’s because adding these popular stocks now does little more than improve the appearance of the portfolio, but not its performance.

It used to be that window dressing did not occur until the last two weeks of December. But just as the holiday shopping season has crept forward on the calendar, so too has the desire by portfolio managers to buy many of these stocks before everyone else does.

The entirely predictable result is that the rich get richer, and the poor get poorer. Companies that have performed particularly well benefit from the added demand for their stock. Those that have performed poorly suffer as their stocks are thrown overboard at fire sale prices.

Most likely the largest beneficiary of this year’s window dressing will be NVIDIA (NSDQ: NVDA), which skyrocketed in value this year. NVDA opened 2023 near $148. Last week, it traded within a dollar of $500.

Going Against the Grain

I’m proud to say I added NVIDIA to the Personal Finance Growth Portfolio in October 2022 when it was priced around $115. However, a lot of portfolio managers were avoiding tech stocks at that time.

The Fed was aggressively raising interest rates, driving down the present value of future profits. That dynamic is especially tough on growth stocks that are largely valued on their expected results many years into the future.

I said then, “The easiest time to buy a stock is when it is on the rise and everyone wants to own it. From a short-term perspective, that is also the surest way to see quick gains in your portfolio.”

I further opined, “But from a longer-term perspective, the best time to buy a stock is often when the market is down and nobody wants it. However, that is also when it is most difficult to convince yourself that it is the right thing to do.”

Therein lays the rub. If you buy a stock while it is taking a beating, that makes it easy for others to criticize you if continues to fall. But if you wait until it has already appreciated substantially to buy it, there may not be much more near-term upside potential left in it.

To be sure, the long-term growth prospects for NVIDIA are enormous. That is why I continue to hold it in my portfolio.

But if I did not have it in my portfolio, I would wait until early next year to buy it. Over the past four months, it has approached $500 three times only to fall back towards $400.

Perhaps it might do that again in January when the window dressing season is over. But until then, I’d lay off it.

More of the Same

What other tech stocks will most likely be the big winners of this season’s window dressing? Certainly, Microsoft (NSDQ: MSFT) will be one of them. It is up more than 50% this year.

Electric vehicle manufacturer Tesla (NSDQ: TSLA) has gained 90% since the start of this year. I’m proud to say I added it to the Personal Finance Growth Portfolio in January and have realized most of that gain.

Another likely window dressing candidate is Meta Platforms (NSDQ: META). The company formerly known as Facebook has nearly tripled in price in 2023.

Also, don’t be surprised if Amazon.com (NSDQ: AMZN) makes the list. The merchandising goliath was up 70% this year as of last week.

If there is a portfolio manager does not yet own Apple (NSDQ: AAPL), then its 46% year-to-date total return should attract some window dressers. The same holds true for Netflix (NSDQ: NFLX) and its 58% rise this year.

Finally, let’s throw in Alphabet (NSDQ: GOOGL) and its 48% return in 2023. There isn’t much risk is owning the most valuable publicly traded company in the world.

This list is starting to look a lot like the FAANG stocks that dominated the stock market a few years ago. In fact, it is the same group of stocks plus NVIDIA, Microsoft, and Tesla.

Perhaps the real lesson here is that when going gets tough, the tough go shopping. And this December, they will probably be shopping for more of the same.

PS: Jim Pearce has developed an under-the-radar strategy to flip market mayhem into fast payouts. Want to learn the details about his next market-thumping moves? Click here now.

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