During a market boom, it’s tempting to start buying into more speculative companies. While that can potentially mean bigger returns, it also increases the risks. Conversely, companies that have a conventional line of business can continue to grow, even if they also invest in more speculative endeavors.
Right now, many companies that have been dabbling in new technologies are seeing lower-than-expected demand. But as long as their core business is strong, shares should continue to rise.
For instance, demand for electric vehicles has not met some of the bullish expectations from a few years back. But automakers selling traditional gas-powered cars continue to fare well.
That includes global sales giant General Motors (GM). The carmaker just reported better-than-expected earnings, and even raised their guidance.
Shares declined on the news, pulling back from near 52-week highs. That could create a buying opportunity here, especially as GM trades at less than 6 times earnings right now.
Action to take: GM is still in a long-term uptrend, and will likely trend higher in the coming months. Shares also pay a dividend just shy of 1.0% at current prices.
For traders, the long-term uptrend makes the post-earnings dip a buying opportunity. The January 2025 $50 calls, last trading for about $2.60, could see high double-digit returns in the coming months.
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 company mentioned in this article.