Stocks can rise or fall for any number of reasons. Over time, a company’s fundamentals, such as rising earnings and profit margins, should drive shares higher. In the short-term, any item of news could detail shares.
That includes a potential government investigation, the departure of an old CEO, or even just poor guidance even after a strong earnings report. Investors who can look beyond short-term fears can often get a reasonable opportunity to buy an oversold trade.
That could be the case with UnitedHealth Group Incorporated (UNH). The company’s shares have slid about 15% since its CEO was murdered. However, the healthcare plan giant’s earnings are likely unaffected by that news, or on any potential change in healthcare legislation.
That leaves UNH shares in a correction, yet trading at 16 times forward earnings. And shares have been knocked down so hard, so quickly, it’s caused the Dow to decline for 8 days in a row, a first since 1978.
Action to take: Investors may want to buy shares here in anticipation of a snapback rally that undoes most of UNH’s recent losses. That could be a strong contender for a high-probability trade in the final trading days of 2024.
At current prices, UNH also pays a 1.7% dividend.
For traders, the March 2025 $550 calls, last trading for about $17.50, could see mid-to-high double-digit returns on a rebound in the coming weeks.
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.