Investors have started to shift away from tech companies over the past few months. The trend is still an early one. It means that the Magnificent Seven stocks, which have led the market higher for nearly two years, may finally take a breather.
In their place, other companies stand to help push the market higher. That includes companies with strong brands. Typically, these companies are worth owning for years. and will often stage strong rallies after a long period of underperformance.
That could be the case with PepsiCo (PEP). While the company reported disappointing earnings results, the snack and beverage giant could still fare well in a weak consumer spending environment. That’s because low-cost snacks are harder to cut back on compared to expensive vacations.
Currently, shares trade at 19 times earnings, a reasonable valuation for the company’s basket of brands. While revenues have been flat over the past year, earnings are up 12%, a strong sign that Pepsi is improving its back end-operations.
Action to take: Long-term investors may like Pepsi at current prices. Shares currently pay a 3.2% dividend, and the company has a strong history of long-term earnings and dividend growth.
For traders, the January 2025 $175 calls, last trading for about $3.75, could see mid-to-high double-digit returns on a further rally into the end of the year.
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.