With the stock market significantly off its highs, investors are looking for companies that can deliver on strong earnings right now. This earnings season, companies with strong brands and intellectual properties have been able to hold up relatively well.
That’s a trend likely to continue going forward, as investors pull back from newer and riskier ventures with unknown prospects for the future.
Such companies also tend to have the ability to raise prices better to counteract inflation, while still retaining customers.
One such play is video game publisher Electronic Arts (EA). The company has just announced the games it plans to release for the rest of the year. It includes a number of popular franchises that tend to sell well, no matter what the economy is doing.
That’s allowing shares to move higher right now, although the stock is still down about 15 percent over the past year. Earnings are also significantly down, but stand to reverse with more new titles being released.
Action to take: Investors may like shares here, as the stock is relatively inexpensive at 16 times forward earnings. Shares also yield about 0.6 percent at present.
For traders, the September $130 calls, going for about $3.50, look attractive on a risk/reward basis. The options can likely deliver 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.