Don’t Bet Against Global Consumers and Buy Quality Companies on Sale

The stock market decline has caused nearly all companies to drop. That means that even strong global companies are trading at their best valuation in over a year.

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  • That’s particularly true with consumer discretionary firms. While a market pullback may bring some traders to a company like a grocery store, consumers are still going to need other products, even if at a slower pace compared to a roaring economy.

    As the economy recovers, these companies should recover handily. A number of such firms have recently started to receive upgrades based on their current valuation. One of the best global brands receiving such an upgrade right now is Nike (NKE).

    Shares of the athletic apparel company are down nearly 19 percent over the past year. Yet earnings and revenue managed to grow by single-digit levels, and the company managed to keep a 13 percent profit margin.

    Action to take: Shares are going for under 30 times earnings for the first time in more than a year. And shares yield about 1 percent right now, while the company has a history of growing its dividend over time. That adds up to the potential for decent returns at today’s prices.

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  • For traders, the September $140 calls, last going for about $5.00, offer mid-to-high double-digit upside from here on a rebound in shares in the coming 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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