Economic uncertainty is high. That’s causing consumers of all income levels to cut back and take a wait-and-see attitude on spending, which is now growing more slowly than the rate of inflation. During periods of uncertainty, companies that offer the best bargain prices tend to gain market share—and their stocks perform well.
That appears to be the case today with a number of companies across a few different industries.
For clothing retailers, luxury firms may be facing sinking sales. But those offering bargains, such as Ross Stores (ROST) could continue to fare well.
The company just reported that revenue jumped 18 percent in the most recent quarter, and things are going so well that the company is increasing its share buyback plan and raising its dividend.
The news gave shares a boost, but they’re still down nearly 8 percent over the past year.
Action to take: With strong earnings growth, the retailer now trades at less than 18 times forward earnings. And with a profit margin of nearly 9 percent, the discount space is still showing decent returns likely to continue for some time. Investors can get a starting dividend yield of about 1.3 percent at today’s prices.
For traders, the earnings beat and buyback will likely help shares move higher over the next few months. The May $110 calls, last going for about $1.75, could likely move higher from here by mid-to-high double-digits 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.