Markets tend to rotate over time. It’s a way to give a leading sector a break, while continuing an overall market trend. Recently, tech stocks have slowed significantly. But other sectors have taken over the lead.
One potential winning sector in the months ahead is healthcare. A laggard last year, the space is starting to show some investor interest and signs of life. Investing in the sector trending higher makes for a simple momentum trade.
Right now, healthcare-related companies appear to be coming out of their funk. The latest healthcare-related play looking better is CVS Health (CVS). CVS reported an earnings beat and provided a bullish outlook for 2025.
Even though shares beat on the news, CVS is still down 20% over the past year, far lagging the market. But the earnings beat of nearly 30% could be a sign that further gains are on the way.
In the meantime, CVS’s underperformance leaves shares trading at just 10 times forward earnings.
Action to take: Both value investors and momentum investors may like shares here, given the strong earnings beat and low valuation. Plus, at current prices, CVS pays a hefty 4.8% dividend.
For traders, the July $70 calls, last trading for about $2.56, could see high double-digit returns if shares continue higher and report strong earnings in the next quarter.
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.