Find Companies With Strong Real Demand Now

Inflation can be an insidious force, making investing a challenge. That’s because there are some areas where customers have to spend more due to inflation, whether they like it or not. Other businesses are more elastic, so higher prices can lead to a big drop in volume.

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  • Companies that have strong real demand now can likely perform well in the future as inflation starts to wane. The trick is in finding the right trend to track amid today’s high inflation.

    One trend gaining steam again is business travel. Largely shut down by the pandemic, it’s now coming back. Amid rapidly changing – but high—energy costs, a low-cost provider may be the best way to play this trend. The top player in the airline industry for the cost-conscious is Southwest Airlines (LUV).

    The company recently reported on signs of increased corporate travel. And thanks to the recent market selloff, shares are going for just 9 times forward earnings following a 68 percent surge in revenue in the last year.

    Action to take: Shares may be worth picking up on a down day for the market, as an eventual economic recovery should bode well for the airline sector and share valuations. At present, the stock does not pay a dividend.

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  • For traders, shares have flatlined in the past few weeks after trending down over the past year. Buying a call option like the January 2023 $40 calls on a down day, and flipping after a rally, can likely deliver mid-double-digit gains. The option last traded for about $2.20.

     

    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.