Most market sectors move in and out of favor with investors over time. One simple strategy for investors is to buy out-of-favor sectors, and then look to take profits when that sector turns around.
Doing so can create market-beating returns consistently, and keep out of sectors that are overly loved and may be poised to see a massive drop. Today, a few sectors remain out of the market’s favor, including one in the tech space.
That niche part of the tech market is cybersecurity. Despite increased budgets to deal with digital threats, cybersecurity stocks remain unloved by the market.
Case in point? SentinelOne (S).
Despite reporting strong quarterly earnings that beat expectations, shares took a big dive, losing nearly 15% on Friday. That’s even though the company has been expanding its AI-powered security solutions.
Shares have now been cut nearly in half from their 52-week high, even as revenues have soared nearly 40%.
Action to take: Shares of SentinelOne may still have some weakness in the coming days, but shares are heavily oversold in the short-term and are now near long-term support. Investors may want to start building a position in the coming weeks.
For traders, the August $18 calls, last trading for about $0.90, could see high-double-digit returns or better if shares rebound partially from the earnings-related 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.