May 10
Kellogg vs Nasdaq
This has not been a good year for the stock market and the Nasdaq in particular. We predicted that Biden’s sophomore year would be dismal mostly based on how he, Trump, Congress, and the Federal Reserve pumped too much money into the economy and virtually guaranteed a surge of inflation. Add to that mess China’s ill-advised Covid lockdown policy that cripples the global supply chain and Putin’s invasion of Ukraine with massive fallout in the world of commodities. The Nasdaq is down more than a quarter year to date and half of that in just the last few days. Meanwhile Kellogg Company is up 15% year to date, the vast majority of that in the last few days. How does Kellogg vs Nasdaq stack up for investment and trading?
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Kellogg vs Nasdaq As Long Term Investments
Kellogg is the sort of company that investors pivot to as the country goes into a recession. People do not quit eating Corn Flakes, Rice Krispies, Frosted Flakes, Pringles, Eggos, and Cheez-Its during a recession. In fact, during the Covid lockdowns they probably ate more! Over the last 30 years Kellogg has gone from $3.09 a share to $74.36 in May of 2022, has a 3.12% dividend yield, and has a margin of safety consisting of strong brand names and cash reserves.
Folks who invested in an ETF that tracked the Nasdaq 30 years ago when the index was 188 have seen their investment go up 61-fold even after the recent crash of a fourth of its value. Ever since the depts of the Great Recession low interest rates have encouraged investment in the Nasdaq and investors have been rewarded. Unfortunately, the long bull market has led many naïve investors to believe (like they did in the 1920s and in the runup to the dot com crash) that the index would go up forever. The Fed has started to raise interest rates and their actions are as likely to cause a recession as not. Meanwhile China persists with its lockdowns which are hurting an already-injured supply chain and the war in Ukraine is likely to last for months if not a year or more with increasing global protectionism with massive disruption of commodity supplies. The end result seems to be that the Nasdaq is not done falling nor are the S&P 500 or Dow while companies like Kellogg keep making cereals, making profits, and attracting investors who want to hide from the storm.
Trading Kellogg vs Nasdaq
The nice part about being options trader is that you can make money when the market goes up, goes down, or trades sideways. Here at Top Gun Options, we called the Covid crash to the day and the Covid recover by a couple of days when the Fed opened the monetary floodgates. We predicted that this year would be tough on the markets and have repeatedly said that the market has potentially a lot farther to fall before it hits bottom. The events that will drive the Nasdaq farther down will be in many cases the ones that will drive the share price of Kellogg up. A unique factor for Kellogg will be prices of corn and rice used in their products.
Although Kellogg is more than a century old and has famous brand names its stock price tends to fluctuate routinely by 10% to 20% which could make it an attractive options trading target. The prospect of more massive selloffs of the Nasdaq make it an attractive trading target as well.
This is a dangerous time to trade alone. Huge forces are at work. We routinely warn about how the DRINCs can drive markets up and down. Russia is not going to stop its war anytime soon and China is going to ramp up its lockdowns. Meanwhile Fed actions may turn out to be inconsequential in taming supply side inflation and effective only in causing a recession. Join one of the squadrons at Top Gun Options and get ready to profit no matter how chaotic the markets will be in the months to come.
