Investors can make great returns with the right blue-chip stocks, provided they’re bought at the right time. Many companies go in and out of favor with the market for various reasons, and earnings season can lead to quick drops.
However, for sectors that have bullish longer-term trends behind them, a drop following earnings can be a great investment opportunity. It can allow investors to buy in and get a reasonable price on a company likely to outperform for years.
Right now, the United States is undergoing a construction boom. It’s related to a housing shortage, as well as industrial demand for facilities such as semiconductor manufacturing plants.
That’s a trend that should be a multi-year boom for companies related to construction, including equipment producer Caterpillar (CAT).
Shares recently fell after earnings, even though the company reported a beat and better-than-expected revenues.
This industry leader is now down over 10% from its recent highs. That’s pushed the valuation down to 17 times earnings.
Action to take: Shares look oversold following their post-earnings drop. Interested investors can likely see double-digit returns from shares in the coming months. At current prices, Caterpillar also pays a 1.4% dividend.
For traders, the July $370 calls, last trading for about $6.70, could see high double-digit returns on a rebound in shares from oversold levels in the coming weeks.
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.