Although inflation remains high, consumers are continuing to buy. That might be to get ahead of continued expected price increases, or simply a reflection that the economy is running hot.
There are a number of ways to play the retail trend. Many have been reporting solid earnings right now. One recent reporter hasn’t had good numbers, but the market likes what it has to hear anyway.
Electronics giant Best Buy (BBY) is the company that reported mixed earnings. The holiday season wasn’t as strong as expected, likely due in part to supply chain issues hitting the chip space particularly hard.
However, the company did increase its long-term outlook going into next year, when most of those issues should be at or past their end. That bullish outlook gave shares a boost, but there’s room for a further rally.
Action to take: Shares are about flat over the past year, but the stock has gone from trading at 16 times earnings to 10 times earnings. The company has a reasonable balance sheet, and further growth coming from reduced supply chain issues can likely send shares higher. Investors can get shares for a move higher and a 2.9 percent dividend yield here.
For traders, the June $130 calls, last going for about $2.85, can deliver mid-to-high double-digit returns on a continued move higher in shares in the coming weeks.
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.