With the overall stock market slowing, investors should look to take profits in areas that have had large moves higher. And the proceeds should move to stocks still trending higher today.
Typically, food and beverage companies are recession-resistant. But changing consumer tastes and higher food costs have largely weighed on this sector. One niche of this space, however, looks unaffected, and could continue to keep moving higher.
The space is the spirits industry. Alcohol sales have remained robust, and beer sales are on the rise again after a shift away in recent years.
That’s allowing companies like Constellation Brands (STX) to beat earnings and revenue expectations. The owner of some of the best-known spirits brands has seen earnings pop higher by nearly 10% in the past year.
Meanwhile, shares trade at 19 times earnings, a slight discount to the market and one that may not fully reflect brand strength.
Action to take: Investors may like Constellation shares here. The stock is in an uptrend and looks set to hit new 52-week highs in the coming weeks.
At current prices, Constellation also pays a 1.3% dividend.
For traders, the July $280 calls, last trading for about $7.00, could see further mid-double-digit returns from here.
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.