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Two Stocks for Challenging Times: Leidos and Flowers

05/23/2019 5:00 am EST

Focus: STRATEGIES

Joe Duarte

Editor, Joe Duarte In the Money Options

The one thing the market was betting on, a trade deal between the U.S. and China is now highly uncertain, explains Dr. Joe Duarte, editor of In the Money Options — and author of The Everything Guide to Investing in Your 20s and 30s.

Of course, if there is a positive surprise somewhere along the way we may well be off to the races again. But as things stand at the moment, there is no certainty of that and perhaps no deal will ever actually get done until after the 2020 election.

Therefore investors are now more than ever at the mercy of the algos, the headlines, and the egos of politicians and bureaucrats in Washington and Beijing.

Interestingly some stocks managed to survive the onslaught. And these are the stocks which, over time once the dust settles could be part of the leadership for the next leg up in the market, whenever that is.

One of them, Leidos Holdings (LDOS), a software company specializing in intelligence and other government contracts, which we’ve owned since April 1 well before it broke out, has expanded its recent move making a new high after a better than expected earnings report.

Furthermore the company seems to be well positioned for the future with CEO Roger Krone citing increasing bookings and a rising backlog of orders in the pipeline during the recent conference call.

Accordingly, it’s not likely a coincidence that LDOS managed to thrive last week or that its book of business looks robust. Given its line of business — spying software, likely for the NSA and the DOD.

This is an example of the type of company that has the upper hand in the market, as long as it can deliver. I like LDOS because it’s in a business niche that will remain vibrant for the foreseeable future, national defense, homeland security, and government contracting.

I also want to recommended Flowers Foods (FLO), a company specializing in baked goods. In fact, anyone who buys groceries is familiar with its major brands, the pantry staples Wonder Bread, Nature’s Own and the leading organic bread in the market at the moment, Dave’s Killer Bread.

The stock has a low price in the $20 area and has a 3.1% dividend yield with a history of dividend growth. Perhaps the best thing about FLO is that management is executing its business plan smartly, by making smart acquisitions, growing its sales steadily, adapting to health conscious consumer trends.

Meanwhile it’s also capturing “impulse” buyers via its traditional bakery goods — snack cakes, creating a diversified product portfolio.

My point is that in this market, it’s not always about hitting home runs with tech stocks, but in finding stocks with strong management, realistic growth targets, dividends, and products that consumers will continue to buy if the economy slows.

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