Investors tend to spend bull markets looking for opportunities in high-growth areas. But the economy isn’t always moving at full blast. For slower times, it may be prudent to focus on businesses that aren’t as cyclical, opting instead for companies more likely to be recession resistant.
There are many sectors that fit the bill. Some are heavily regulated like utilities and telecoms. Others are more open, such as consumer goods.
One niche of the consumer goods space is pet supplies. There’s a growing trend on pet spending overall that could even grow in an economic downturn.
Chewy (CHWY) is one such company. The online pet retailer posted better-than-expected results following earnings last week.
Revenues are up nearly 15 percent in the past year, even as the overall economy has been near flat. While the company has yet to turn a consistent profit, it continues to grow its customer base, including recurring buyers.
Action to take: The retailer is likely poised for continued, long-term growth, which will eventually be reflected in the share price, as soon as the company turns profitable. Long-term buyers may want to start buying now, and use down days in the market to add more shares.
For traders, the May 2023 $45 calls, last going for about $7.80, can likely deliver high double-digit returns in the coming months. That will play to the moderate uptrend shares have seen since October.
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.