Stick With Quality Companies in Tough Markets

When the stock market is rallying, it can be tough to find a stock to buck the trend. But when markets are skeptical of any economic growth, buying tried-and-true companies being sold off with the speculative names can be a winning strategy.

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  • That tends to mean investing in companies of quality. That can mean being in an industry with few competitors, or having a business model that can profit in any economic environment.

    Defense contractors are one such area for investors to consider now. That’s especially true with the increase in geopolitical fears over the past few months.

    One such name is Lockheed Martin (LMT). Shares have underperformed recently, likely in sympathy with other companies in the sector that have been selling off. But Lockheed is a consistent player in the space, and trades attractively at under 17 times forward earnings here. With the stock now down 10 percent off its all-time high, now may be an attractive entry point.

    Action to take: Shares yield 2.5 percent here, and the company has a strong history of raising its dividend over time.

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  • For traders, the September $480 calls, last going for about $15.00, offer a sizeable return on a renewed rally in shares in the coming months. Traders can likely nab mid double-digit gains. However, it’s also possible that any lessened global hostilities could lead to a drop in shares in the short-term.


    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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