For the Best Profits Now, Look for Low-Cost Providers

The past few years has been great for some sectors. For others, it’s been tough. The restaurant space has had to rapidly change to pandemic protocols, a rise in takeout orders, and increased outdoor dining, to say nothing about supply chain issues.

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  • However, many of these companies have been holding up well. In a potentially slowing economy, though, those offering fares with lower-priced items will likely hold up the best – and may even grow in today’s environment.

    That’s potentially good news for Yum! Brands (YUM). The owner of KFC and Taco Bell, among others, is just barely down over the past year. Yet earnings are up 22 percent, even as revenues have grown by a more modest 4 percent.

    With the company sitting on a profit margin of nearly 25 percent, an incredibly high level for the fast-food space, this industry-leading company looks like a reasonable buy whether the economy continues to weaken or if things manage to turn around later in the year.

    Action to take: Shares yield about 1.9 percent here, and the company has done well with raising its dividend payout consistently. That makes for a worthwhile long-term investment. Plus, shares are going for about 20 times earnings right now, a nice discount to where they usually trade on an earnings basis.

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  • For traders, The January 2023 $130 calls, last going for about $4.25, can leverage a move higher in shares by the high-double-digit level 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.