Pick Up Shares of Companies that Can Grow in Slow Markets

Whether stocks move up or down, a company’s earnings remain fundamental to its long-term share price. A growing company will reflect that in growing earnings, whereas a struggling company may find all sorts of “one time” reasons why they didn’t hit their estimates.

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  • For companies that can fare well during a high-inflation, slow-growth economic environment, proving themselves now is a sign of success in any market condition. Investing in growing companies in a soft economy can lead to great results.

    One surprising winner right now is in the retail space. Best Buy (BBY) came in ahead of expectations for the third quarter, and looks likely to perform well going into the holiday season. That led to a big jump in shares.

    But with the stock still down over 40 percent in the past year, there’s likely further room for a rally ahead. Shares trade at 10 times forward earnings, a modest discount to the retail sector as a whole right now, and the stock’s improved numbers make it look far more attractive than other names in the space.

    Action to take: Besides the relative valuation in the retail sector and surprising growth right now, shares pay a 4.9 percent dividend yield at today’s prices. That makes the stock a reasonable buy under $80 per share for income-focused investors.

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  • For traders, a further rally in the stock looks likely. The March 2023 $90 calls, last going for about $3.55, offer high-double-digit return potential on a seasonal holiday rise in shares.

     

    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.