The souring stock market has created an environment where many stocks are sold off even if new developments don’t specifically impact them. While the high near-term uncertainty makes for a poor investing environment, it won’t always be this way.
When markets do recover, great companies will trend higher. Companies that are in an oligopoly space with few competitors should fare even better. Investors who pick up shares of these companies during current fears can likely see market-beating returns.
For instance, the airline space has dropped heavily following fears of a slowdown in consumer spending and tourism. However, that could change just as quickly as things went negative.
It’s also why companies like United Airlines Holdings (UAL), who just reported its best first-quarter in five years, could be poised for future returns.
United’s 24% earnings beat puts shares at just 6 times earnings. The stock has been declining over the past year and is off by 30%, but shares have been trending higher over the past few weeks.
Action to take: Investors may like United shares at current prices or on any drop in the coming months as a value and growth play here.
For traders, the July $75 calls, last trading for about $5.50, are well positioned for a trend higher into the summer travel season. Traders can likely see mid-double-digit returns on the trade.
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.