Companies With Little Competition Offer Consistent Profits

Each industry is different. Some have many players. Others have just a few. Most industries should consolidate over time. When there are just a handful of players, competition becomes less fierce, as the remaining companies look to maintain their market share.

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  • That can create companies that remain consistently profitable over time. And when the market has an inevitable downturn for that sector, create a buying opportunity.

    Although the headlines show consumer spending slowing at stores, they’re still spending on other things, like travel and other experiences. That’s keeping overall spending up. And it’s also showing up in strong performance for the credit card companies.

    They’re getting back to their old highs, but still offer great returns going forward thanks to their profitability.

    Industry leader Visa (V), for instance, looks undervalued given its 51 percent profit margin and low-double-digit revenue and earnings growth over the past year.

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  • Action to take: Shares pay a growing dividend. While low at 0.8 percent, growth over time from owning the world’s largest credit card network should pay off both in income and capital gains.

    For traders, shares are near their 52-week highs, but look read to move higher. The September $250 calls, last going for about $3.15, could see mid-double-digit growth from a further rally in the next two months.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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