With the S&P 500 swinging by 100 points or more in daily trading, or the Dow making 1,000 point moves it’s easy to get caught up in the fear. To get past the fear, investors should focus on the facts.
One fact of the past few weeks is that the economic data is okay. We’re not plunging into a recession right now, although growth is slowing. The Fed is on track to lower interest rates next month. All to plan.
However, the market is selling off companies that are still seeing fast growth now. And if they can grow in a slowing environment, they may yet see a big swing higher by the end of the year.
For instance, Super Micro Computer (SMCI) is now down over 55% from its peak. And while investors sold off shares following earnings on margin concerns, the stock now trades for 17 times forward earnings. That’s hardly the sign of an overhyped and overvalued AI play.
Action to take: Speculative investors may want to build a small stake here. Shares could easily bounce 20-30% in the coming months as markets regain their footing.
For traders, the December $800 calls, last trading for about $17.00, could see high double-digit returns or better. Traders should look to take a quick profit on a day when shares make a sizeable 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.