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Analysts Agree: Low-Beta Moat Stocks Have Merit

Key Points
The consumer discretionary sector is experiencing some setbacks this year, but there are new opportunities to consider.
Analysts have identified Wendy’s and Starbucks as the top choices for meeting consumer needs in this economy.
Both stocks are trading at discounted prices and have favorable tailwinds.
5 stocks we like better than Starbucks

The current economic climate has led American consumers to prioritize stretching their dollars, resulting in a divide within the consumer discretionary stocks. The reinstatement of student loan payments will also have a negative impact on the national savings rate.

Despite these challenges, the consumer discretionary sector has performed well this year, with the Consumer Discretionary Select Sector SPDR Fund (XLY) outperforming the S&P 500 by 8.4% year-to-date.

As the momentum of consumer spending slows down, it is crucial for investors to carefully manage their portfolios. This is why Starbucks (SBUX) and Wendy’s (WEN) are worth considering.

Both companies understand the current consumer psychology and offer unique value propositions. Wendy’s provides affordable meals with reasonable quality, while Starbucks has a strong brand moat that allows it to raise prices without losing customers. Starbucks’ comparable store sales have increased by 10% over the year, indicating that consumers are still willing to pay for their premium caffeine fix.

In contrast, BurgerFi International (BFI), a premium burger brand, has experienced a significant decline in stock performance. This further highlights the merit of Wendy’s affordable pricing model. Wendy’s latest quarterly results show a year-on-year increase in earnings per share of 27.3%, surpassing the industry average growth of 15.0%.

Wendy’s stock is currently trading at a discount, making it an attractive buy based on momentum. Analysts have set a price target of $24.6 per share, suggesting a potential upside of 28.0% from today’s prices. Insider buying is also a positive indicator for both Wendy’s and Starbucks. Starbucks repurchased $699 million of its stock in the past quarter, while Wendy’s management has bought back 3.1 million shares.

Looking ahead, the expansion of GDP driven by consumer spending is expected to benefit both Wendy’s and Starbucks. These companies offer value propositions that will likely attract consumers in the food industry.

Overall, low-beta moat stocks like Wendy’s and Starbucks are well-positioned to weather the challenges of the current economic climate and provide investors with attractive opportunities.

Note: This article has been rewritten by usafinancetrends.

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