Many sectors and stocks that soared in the recent bull market have been leading them lower as sentiment has shifted. However, some areas are holding up better than others, and are even thriving as they’re well-suited to an inflationary environment.
While the energy sector has been one clear winner this year, companies involved in food production have fared well too, thanks to rising agricultural prices overall and concerns over supply chains.
And these companies are beating on earnings at a time when many companies are facing downgrades.
One relative winner in markets right now is Conagra Foods (CAG). The processed food company is flat over the past year, but that’s still outperformed the S&P 500 by nearly 15 points. Yet the company just beat on earnings, and revenue came in higher than expected.
Action to take: With inflation likely to remain high for some time, food stocks tend to pass on higher costs to consumers, making them relatively strong investments. Shares are worth buying here at 14 times forward earnings, and with the stock paying a 4 percent dividend yield.
For traders, the March 2023 $35 calls, last going for about $1.25, offer mid-double-digit returns here, as shares are likely to trend higher than the overall market. Given the low volatility of shares, traders should look to take profits on any big one-day jump in the stock.
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.