Stocks are closing in on a bear market, as rising inflation seems to be out of control, even with the Federal Reserve hiking interest rates. However, some areas of the market are holding up well. A few consumer goods companies are able to see solid growth and revenue, while also passing off higher costs to consumers.
These companies tend to hold up well in down markets, even though they don’t get much respect during a stock market rally.
The perfect example of this phenomenon is Kellogg (K). The processed food company, best known for its cereals, beat earnings and revenue expectations when it reported earnings last week. Kellogg’s also beat on net sales.
Shares are hitting a 52-week high now, one of just a handful of companies to do so. That’s even as the stock has delivered about a 1 percent gain in the past year.
Action to take: Trading at about 15 times earnings, and showing the power of its brand, Kellogg could continue to rally strongly from here, especially as a safe-haven play. In a more normal market, returns will slow. But it’s a dividend growth play, with a starting yield of 3.4 percent here.
For traders, the September $75 calls, last going for about $1.70, could offer mid-double-digit returns well before expiration.
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.