After dominating market returns for the past 18 months, tech stocks are starting to take a breather. But the overall market continues to trend higher, thanks to a rotation underway. Investors are finally taking some profits in tech and moving that cash into lesser-loved stocks.
Those stocks tend to be a bit slower moving, but after tech’s latest outperformance, they may take the lead in the second half of the year. That could mean good returns in more value-oriented stocks.
One such value play here is Johnson & Johnson (JNJ). The healthcare giant is flat over the past year, but just beat on earnings expectations.
Shares trade at 14 times earnings, a reasonable discount to the overall stock market. Revenues have grown just 2.3% over the past year, and earnings growth has been flat, but the company also just had a large spinoff.
Action to take: Shares are trending higher, and JNJ is a dividend growth play with a 3.3% dividend at current prices.
Over the last five years, the dividend has averaged just 2.7%. Getting back to that average could mean a big appreciation for shares in the months ahead.
For traders, the January $170 calls, last trading for about $2.75, could see high double-digit returns if shares start to break higher in the coming months.
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.