Tech Selloff? Consider a Defensive Play with a Powerhouse Franchise

With the tech selloff, investors are looking to other parts of the market. Defensive stocks have held up well. But the real value in this market is buying into companies that can raise their prices to deal with inflation… and not lose customers doing so.

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  • Offering everyday low prices, one such area is fast food. These companies have streamlined operations, a loyal customer base, and haven’t performed as well as some of the faster-moving parts of the market in the past year.

    One such play is The Wendy’s Company (WEN). The hamburger giant just reported solid earnings that beat expectations. It also raised its guidance for the coming year and promised a boost to the dividend.

    That could light a fire under shares in the coming months. Right now, Wendy’s is up about 15 percent over the past year, far lagging the overall stock market. That’s in spite of a 46 percent growth in the company’s earnings.

    Action to take: Shares look attractive here for a move higher. Investors may like shares for their growing dividend as well, although the current yield isn’t massive at 1.6 percent.

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  • For traders, the company’s strong earnings and fears in other sectors may be good for a rally here. The August $25 calls, going for about $0.50, are capable of moving in-the-money, as the strike price is near the 52-week high for shares. The price is low enough for a potential triple-digit winner, with a low potential loss if the trade doesn’t work out.

     

    Disclosure: The author of this article has no positions in the stock mentioned here, and does not intend to make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.