Inflation Is Down, But Not Out – Invest with Companies Keeping Retail Prices Down

The latest inflation data continues to slow. Prices are now rising at their lowest rate in two years. But they’re still rising. And inflation is cumulative. So chances are, we’ll still have to deal with rising costs for everyday goods.

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  • Many consumers are shifting their spending from brand-name products to store-brands. The price is a bit lower, and sometimes those products are even made in the same factories.

    One company that creates store brands is TreeHouse Foods (THS). The private label food manufacturer and distributer works across the packaged food chain.

    They’ve been a big winner, even with inflation starting to drop. Shares are up nearly 32 percent over the last year. And they could see another 20 percent gain in the coming months, no matter what happens in the rest of the market.

    Revenues are up just 15 percent, and the company just started to turn a quarterly profit. Shares go for about 20 times forward earnings, and the stock trades at just 0.8 times its price-to-sales.

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  • Action to take: For today’s slowing economy, TreeHouse could be a way to stay invested in the market while still hedging against a slowdown. Shares don’t currently pay a dividend, so investors won’t get paid to wait.

    For traders, shares are in an uptrend. The August $55 calls, last going for about $1.80, could see mid-to-high double-digit returns 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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