Earnings Matter More than Short-Term Market Fears

The stock market is always in a mood. Usually, it’s upbeat, reflecting the fact that stocks rise over time. Sometimes, however, it’s dour. And that mood goes from the overall market to specific sectors, and even down to individual stocks.

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  • As long as individual companies can grow, they can overcome any short-term market fear in time. Even when that fear seems overwhelming, or a potential existential threat to a business.

    For instance, J.M. Smucker (SJM) has had a tough year.

    The food and pet food producer has had to deal with fears of declining demand as new weight loss drugs have come on the market. And it didn’t help that they made an offer to buy snack food giant Hostess.

    However, earnings came in strong, with the company posting higher-than-expected profits. Earnings are now up 67 percent over the past year. And shares trade at just 12 times earnings.

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  • Action to take: Long-term investors may like shares here. The stock is still near a 52-week low. And J.M. Smucker yields 3.7 percent here, with a history of dividend increases over time.

    For traders, the April 2024 $130 calls, last going for about $2.65, could see mid-double-digit returns from here on a continued oversold rally higher 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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