Growth stocks were priced for perfection at the end of last year. Now, with stocks in bear market territory, a lot of the froth has come out of many high-growth names.
Some of the expected growth has stalled out along with the economy. But for traders looking for long-term opportunities to outperform the market, buying top growth names on sale now could deliver great returns 1-2 years out. That’s especially true for companies announcing new growth initiatives now.
One such company is Advanced Micro Devices (AMD). The company is looking to add a new line of chips that could allow it to increase market share in the computer market.
Shares are well off their highs of $164 per share, but are still up over 20 percent in the past year. The recent pullback has sent shares to just 23 times forward earnings, down from 43 over a year ago.
Revenue is up 71 percent in the past year, and earnings are up 42 percent in the past year. So additional growth trends could boost returns substantially from here.
Action to take: The stock doesn’t pay a dividend, but shares could likely outperform the stock market from here. Shares would be a good fit in a tax-deferred account like an IRA.
For traders, a rebound in shares looks likely. The September $110 calls, last going for about $6.75, could offer mid-to-high double-digit returns in the coming months on a rally in shares.
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.