The tech selloff of the past year has made a number of companies a relative value play. That’s especially true to firms that are investing in long-term trends. While they won’t play out overnight, buying key suppliers to the tech space on market drops should result in market-beating returns when the next rebound occurs.
One area that’s been hit hard thanks to supply chain issues and shutdowns is in the automotive space, particularly EV production.
But for patient investors, now may be a solid time to consider shares of a firm like Analog Devices (ADI).
The chipmaker specifically focuses on designing chips that are designed to convert real-world information into digital form. That’s a key part of lidar technology, which is key to today’s current cars, the EVs of tomorrow, and will be the backbone of self-driving cars in a few years.
Shares have largely been rangebound over the past year, holding up better than other EV plays. While the stock is flat over the past year, shares are still off about 15 percent from their 52-week high.
Action to take: Today’s share buyers can get a 1.8 percent starting yield, with room for potential growth in the future. The company has been good about growing revenue, but the current environment has led to a drop in earnings. When that changes, the share price is likely to soar.
For traders, the September $175 calls are a good way to bet on a continued rebound in shares. The option last went for about $7.00, and can turn a slight move higher in shares into a mid-to-high double-digit return.
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.