Invest With Leaders That Have Pricing Power

One of the most valuable things a company can do is become a key provider of products or services to the point where they can raise prices without losing much, if any, market share.

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  • This pricing power can be crucial for beating inflation. And it can also mean a good investment for shareholders, as being able to raise prices ensures that profit margins stay high.

    One industry leader with pricing power is Corning (GLW). The specialty glassmaker just raised prices by 20 percent, citing higher costs. And as a key supplier for displays such as smartphones and televisions, Corning is unlikely to lose any market share as a result.

    That move should help offset the company’s 13 percent drop in revenues last year. Meanwhile, the stock is down 8 percent over the past year. However, shares look fairly valued at 15 times forward earnings.

    Action to take: Investors should look to buy shares at current prices or on any pullback. Currently, the stock yields about 3.5 percent, with a history of growing the dividend over time.

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  • For traders, shares have been in a downtrend that could start to reverse now that Corning has raised prices. The August $33 calls, last going for about $1.00, could see high double-digit gains in the coming months on a rebound in share prices.

     

    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.