Last year’s bear market likely isn’t quite over yet. However, many stocks that were fairly valued are now bargains. And they could start moving higher in the months ahead as the bear market reaches its peak.
In that kind of environment, there will be a quick jump higher for nearly all stocks. But the best performers will come from those companies that are industry leaders, and will be more sustainable than just a jump higher.
For instance, right now investors are skeptical about financial stocks. With less trading activity and higher interest rates, that’s a sensible concern. But many companies are poised to perform well. One such name is industry leader for the big-bank space, Bank of America (BAC).
The company has one of the highest quality loan portfolios in the market. Bank of America even managed to grow revenues 1 percent last year as the economy slowed. And shares trade near book value, with an earnings multiple of less than 9 times forward earnings.
Action to take: Shares should shake off last year’s 25 percent decline in the year ahead. And at today’s prices, investors can get a 2.6 percent yield.
For traders, the July $40 calls, last going for about $0.80, offer high double-digit returns in the coming months. Traders can even use short-term moves higher for a quicker, if smaller, gain in the months ahead.
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 of the companies mentioned in this article.