It’s no surprise that when the economy is slow, consumers and companies scale back on their spending. And there’s a whole world of defensive industries that tend to fare well no matter what the economy is doing.
While trade and commerce may slow during a recession, goods still need to move from their manufacturing point to the end user. And right now, the only way for goods to reach their final point is by truck.
That bodes well for Paccar (PCAR). They’re a global manufacturer of trucks, and have a reputation that’s high in the industry. Over the past decade, the company has put 1.5 million big rigs on roads around the world.
While a global slowdown has sent many stocks tumbling, Paccar has had a modest 3 percent gain in the past year. But earnings have jumped 45 percent, and revenue has risen by 22 percent. So shares are looking a bit undervalued relative to the company’s operational performance.
Action to take: Shares can be somewhat rangebound, so investors may want to start buying now, and use a 10 percent dip as an opportunity to buy more. Shares yield about 1.6 percent here, and the dividend has been raised in the past year.
For traders, the May 2023 $105 calls, last going for about $2.90, offer mid-double-digit returns on a continued rally in shares in the coming months. Traders can likewise buy such an option on a 10 percent drop from here to further improve returns.
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.