Investors love tech stocks, but have started to branch out to other sectors, such as utilities, telecom, and consumer stocks in recent months. Those sectors could continue to help lead the overall market higher into 2025.
Meanwhile, some sectors are starting to look oversold. They’ve simply been too far out of favor with the market for too long. They could be best poised for the strongest returns over the coming months.
Right now, energy looks like an unloved part of the market. It’s below its historic level as a percentage of the overall economy. And while oil prices have been lackluster, their recent move into the low $70 range makes it look like an oversold opportunity.
That’s where companies like Schlumberger (SLB) come into play. The oil services company can see bigger returns on a price jump in oil prices. And in a real bull market for commodities, it could become one of the market’s biggest winner.
Shares are down 30% over the past year thanks to weak energy prices. But Schlumberger has managed to grow earnings by 8% and revenues by 12% in that challenging environment, and is still inexpensive at 10 times earnings.
Action to take: Contrarian investors may like picking up shares here. SLB also pays a 2.7% dividend, which is well covered by earnings. A jump higher in oil prices could provide substantial capital gains.
For traders, the March 2025 $50 calls, last trading for about $1.05, could capture any big jump in oil prices that sends SLB shares rising over the next six 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.