In a bear market, smart investors buy. They know that great companies get sold off with overpriced ones during a market selloff. And buying great companies ensures better returns than chasing great companies higher during a bull market.
Investors who follow this strategy can build a solid portfolio of blue-chip stocks in any sector. Right now, many great tech names have been hit the hardest. Of those tech stocks, there are some compelling valuations in companies that simply dominate their market.
It’s hard to think of a company more dominant than Google’s (GOOG) market share in the search engine space. Even in a struggling economy, the company saw revenue rise 6 percent. However, that wasn’t as much as analysts were expecting, sending shares down.
That’s creating an opportunity for investors today. The company’s industry leadership isn’t going away. And shares are now down nearly 30 percent in the past year, nearly twice as poor as the S&P 500’s performance.
Action to take: With shares trading at 17 times forward earnings, the company looks undervalued relative to the overall market right now. Given the company’s consistent revenue growth and solid 26 percent profit margin, it can continue to bring in the cash. This is a name worth accumulating now and in the coming months amid this bear market.
For traders, shares will likely trend higher with markets next year. The April 2023 $120 calls, last going for about $5.25, offer mid-double-digit returns on such a rally. Traders may be able to buy the option a bit more cheaply in the coming weeks on any down days for the market.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.