Traders take a short-term view. That means that investors can take a longer-term view that may be different depending on a situation. When a company takes a hit because it’s facing a problem, even an easily-solvable one, traders tank the stock.
But in time, a successful company can overcome any short-term problem and trend higher. Investors who buy during periods of short-term fear can earn big profits as the fear subsides.
Concerns over consumer spending are nothing new. But the retail outlook has been mixed. On the downside, retailer Target (TGT) reported some supply chain issues and had to reduce its full-year outlook.
That sent shares down over 20% in a day, their steepest drop in years. But it’s also likely a short-term problem, and the stock can claw its way back in time.
Action to take: Despite some short-term issues, Target remains a strong brand that has executed well over the past few years. With shares now slightly down for the year and trading at less than 15 times forward earnings, the stock could be a contrarian buy here.
Plus, at current prices, Target pays a 2.9% dividend.
For traders, shares are likely to recover some of their recent losses in the weeks ahead. The January 2025 $135 calls, last trading for about $1.95, could see high double-digit returns on a move higher in the weeks ahead. Traders may want to take quick profits going into the year-end seasonal “Santa Claus” 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 company mentioned in this article.