This Industry Laggard May Get a Strong Shakeup

Defensive stocks tend to hold up well in just about any market. This recent market rally has been an exception. Tech stocks have handily beaten other sectors. And high interest rates have made dividend-paying defensive stocks look less attractive.

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  • But the businesses behind those stocks aren’t playing defense. By creating new products and expanding operations, they can continue to grow, and provide investors with great long-term returns. Buying these companies today could fare well when the tech trade slows down.

    One such company is Keurig Dr Pepper (KDP). The company is largely considered a distant third in the soft drink space, even with its ownership of leading coffee brands.

    But shares are slightly less expensive than those big players. And management is looking to boost the performance of its coffee division.

    This shakeup may help KDP see higher growth than its 3.4% revenue increase over the past year, and underwhelming 9% move higher.

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  • Action to take: Investors may like shares here as a long-term holding. Besides the potential for improved growth, shares also pay a 2.5% dividend, which KDP has a history of increasing over time.

    For traders, the July $35 calls, last trading for about $0.50, could see mid-to-high double-digit returns in the coming weeks, given the current uptrend in shares.

     

    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.

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