Buy Big Trends When They’re Out of Favor

Resource mining

When a trend is hot, owning any company related to that trend can lead to big gains quickly. But when the trend shifts, a company can fall out of favor as well. Some trends occur just once. Others are more cyclical.

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  • Targeting cyclical trends when they’re out of favor can lead to great returns. When the cycle turns, it can lead to life-changing profits. Especially when they relate to tech-related trends.

    For instance, electric vehicles are a top trend. But stocks related to them can shift in and out of favor depending on other trends. That gives investors a chance to buy into this growth trend cheaply.

    For instance, right now lithium producer Albemarle (ALB) is near its 52-week lows. Shares are off 25 percent over the past year, while the overall market has risen higher.

    Yet they’re developing partnerships to be the leading lithium supplier to automakers. And with automakers increasing their EV production rapidly, demand will only soar in the years to come.

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  • Action to take: Right now, Albemarle shares trade at less than 10 times forward earnings. And revenues and earnings are still growing at nearly 60 percent annualized. Shares look undervalued here. At current prices, shares yield about 0.8 percent here.

    For traders, shares look ready to move higher off their 52-week lows. The January 2024 $230 calls, last going for about $8.40, could see high double-digit returns in the coming months.


    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.

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