Some sectors of the market are cyclical, moving in and out of favor with investors. Typically, a stock that gets overbought will see a big correction. And stocks that get oversold will come roaring back.
In today’s market, looking for oversold opportunities looks like a good way to buck a possible market pullback after a strong run this year. Investors who buy such companies may see some volatility, but could make big returns in a few months to a year.
One oversold stock looking to move higher is Paramount Global (PARA). The media giant has posted improved streaming subscriber numbers in its most recent quarter.
While the total number of new subscribers slowed, improving profitability with streaming points to a win for both Paramount and the industry.
Paramount shares have lost one third of their value in the past year, even as revenues have overall stayed flat. Shares are trading at 22 times earnings, about on par with the overall market. Improving earnings could lead to a big jump in share price.
Action to take: Investors today are getting a library of intellectual property for a market cap of under $11 billion, a good sign that there’s a value play here and more upside ahead. Although the company recently cut the dividend, shares still yield 1.3 percent.
For traders, the December $20 calls, last going for about $0.82, could see high double-digit returns on a rally higher in the coming months.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.