Overlooked Laggards Can Win in a Market Rally

When stocks sell off, good names sell off with bad ones. And companies that have been lagging their industry peers tend to sell off harder. In a turnaround, however, they can have more room to run. Plus, they tend to have lower valuations than industry leaders, which means any upside surprise isn’t priced in.

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  • Investors have plenty of options in the tech space going into the end of the year. With stocks likely to see a seasonal rebound, some of the harder-hit and overlooked tech names may be a surprise winner.

    Case in point? Intel (INTC). The former leader of the chip space has been left in the dust in recent years.

    But shares have been moving steadily higher since September 2022, and the company’s turnaround is showing signs of success. The company CEO even has a plan for the U.S. to win the global chip war.

    Like many semiconductor companies, Intel hasn’t turned a profit this year. But it’s also seen market-beating returns, with a 28 percent rally. Trading at 20 times forward earnings, a move to profitability will make Intel much cheaper than other names in the chip space.

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  • Action to take: Investors may like shares here with a multi-year view on the chip market trending higher. At current prices, Intel also yields 1.4 percent.

    For traders, the January 2024 $40 calls, last going for about $0.80, could see high-double-digit returns or better in the coming weeks in the next market rally.

     

    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.

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