Investors looking for market-beating returns over a multimonth period can find plenty of opportunities during earnings season. That’s because many companies will often have a solid earnings season, but shares sell off.
That could happen because the stock already rallied hard going into earnings. Or the market didn’t like what it heard on guidance. But over time, higher earnings should drive shares of a stock higher. With earnings season winding down, a few such trades remain.
One of those is with department store operator
Kohl’s (KSS).
The chain beat on earnings estimates, but the market didn’t like same-store sales. That pushed shares lower, even with the stock now trading at 10 times forward earnings.
The retail sector has had tough performance over the past year. And Kohl’s is no exception, but revenues only dropped by 5 percent last year.
Improving earnings should push the company to profitability, which will likely push shares higher in the months ahead. With Kohl’s trading at less than 0.2 times its price to sales, there’s room for a big move higher.
Action to take: Investors may like shares here, following their earnings pullback. At current prices, shares pay a 7.4 percent dividend.
For traders, the August $27.50 calls, last trading for about $2.50, could see mid-to-high double-digit returns in the coming weeks on a rebound from the earnings selloff.
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.