Continue to Stick with Safe Stocks as Inflation Remains High

While investors were happy to see the rate of annual inflation start to slow, inflation is still unacceptably high. That will continue to keep consumers on the defensive. They may cut their spending in some areas to afford the higher prices elsewhere.

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  • That could bode well for low-cost producers for some time. Most companies offering inexpensive products can usually raise prices to counter inflation, even if it may also result in some lower sales.

    One company that missed on sales but is still bullish on its future is Wendy’s (WEN).

    The fast-food chain just slightly missed on its latest revenue estimates, but beat earnings expectations by 2 cents. Plus, they raised their forecast for the rest of the year.

    The stock is down about in-line with the S&P 500 over the past year. Yet revenue is up 7 percent, and the company has a 13 percent profit margin, an above-average amount for its industry.

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  • Action to take: The company is a dividend payer, which offers investors 2.4 percent right now, with a history of past growth. Investors can likely outperform the market with this stock on the next move higher.

    For traders, shares should move higher following the company’s solid earnings. The January 2023 $22 calls, last going for about $1.00, can potentially deliver mid-to-high double-digit returns.


    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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