In a bull market, traders can profit by buying companies with an exciting story behind them. Those stocks tend to be runaway winners. But when the market is trading flat or down, the slow-and-steady, boring businesses can be the better winners.
That’s because these companies can be more recession resistant. And they tend not to get as overvalued on the way up. That makes for a solid value play, and often one that pays out a solid source of growing income.
One such boring company is Ferguson (FERG). The U.K.-based industrial manufacturer for plumbing and HVAC products is a slow-and-steady player trading at just 13 times earnings right now.
And shares may soon enter the S&P 500, which could create some buying demand and push shares higher. Add in the recession-resistant power of HVAC and plumbing needs, and it’s clear that the company could be a long-term winner for buyers now.
Action to take: Ferguson has rewarded shareholders with dividend growth, and the current yield is at a solid 3.4 percent. With a payout ratio of about one-third of earnings, the company can reinvest in the business or buy back shares and keep the dividend growth coming in the years ahead.
For traders, the September $145 calls, last trading for about $3.70, offer mid-double-digit returns in the months ahead. Look to take profits on any bounce from an official announcement on the S&P 500 entry for shares.
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.