It’s a time for corporate executives to be honest. With a slowing economy, having a realistic outlook matters. But companies that report caution in their forward-looking statements tend to get punished by the market… at least in the short-term.
That means investors should position themselves to buy these companies, especially if they’re performing well now. When the economy improves, these companies are likely to see big benefits from being overly cautious now.
A number of companies have been careful about looking forward now. But retailer Target (TGT) seems to be turning a corner.
The company’s sales improved in its most recent earnings report, and overall earnings rose, even if the company’s forward guidance disappointed.
Target shares still remain down about 25 percent from a year ago, and the company’s earnings have taken a dive overall. But shares trade at a reasonable 17 times earnings, and the retailer is likely to come back stronger, as it has in other economic cycles.
Action to take: Investors may like shares at or under current prices for long-term accumulation. Target yields 2.6 percent right now, and they’ve done a good job of raising the dividend over time.
For traders, there’s been a modest uptrend in shares since the start of the year, and the solid earnings numbers should help that trend continue. The June $185 calls, last going for about $5.50, could deliver mid-double-digit gains in the months ahead.
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.