Undervalued Staples Can Still Make Market-Beating Returns this Year

The market rally since late 2022 has been driven by tech stocks, particularly large cap tech stocks developing artificial intelligence (AI) opportunities. That’s caused other sectors of the market to lag. Over time, improving earnings from these sectors is creating a better value.

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  • Investors may want to take some profits in high-flying tech stocks now that markets are soaring to all-time highs. Other companies can likely help push stock indices higher this year as they play catch-up with the overall market.

    For instance, food giant Mondelez International (MDLZ) sold off a bit last year, as new weight loss drugs weighed on food companies.

    However, Mondelez has been holding up well, especially as it gets about three-quarters of its sales outside the U.S. Plus, nearly one-quarter of its sales are now in emerging markets.

    Earnings have surged 63 percent in the past year, and revenues are up 7 percent. And Mondelez earns a 13.8 percent profit margin, on the high end for a competitive industry such as food.

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  • Action to take: Investors may like shares as a long-term global play. The company owns a number of leading snack brands, and trades at about 20 times earnings. Plus, at current prices, Mondelez pays a 2.3 percent dividend.

    For traders, the June $77.50 calls, last trading for about $1.55, could see mid-double-digit returns or higher in the coming months as shares continue to trend higher.


    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 company mentioned in this article.

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