Investing trends can sometimes start quietly before gaining a big interest. That’s especially true when it’s a trend that’s been hot in the past, but has slowed down, leading overly speculative investors into losses.
One such area this year has been the automotive sector. Auto stocks were hot last year, particularly electric vehicle companies. But interest peaked at the start of the year before trading sideways or down.
Now, that trend is reversing as companies continue to deliver on new offerings and services even amidst a severe supply crunch.
Case in point? Tesla Motors (TSLA). Shares peaked at around $900 at the start of the year, then dropped by nearly one-third. They’ve since been moving higher. While not back to old highs yet, the company did just announce the latest version of its autonomous driving software. While not fully capable of creating a self-driving car, it’s another step towards that reality.
Action to take: Tesla has been profitable for a few quarters now. Its shares have gone from trading at 370 times forward earnings to 102. While still conventionally pricey, the company is still in it to win in the EV sector as traditional automakers scramble. That makes shares attractive here, especially as they’re on an uptrend once again.
For traders, the January $900 calls are an interesting trade, as shares may be breaking past that old high by then to new all-time highs. Those calls last traded at about $28.00.
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.