Buy Market Bargains Ahead of a Turnaround

Investors pay a high price for certainty. By the time they pile into a “sure thing” investment, the price is already sky high. Meanwhile, when there’s a lot of fear in the market, great companies and opportunities can be had for a relative bargain.

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  • Today, investors have far more bargain picks than at any time in the past few years. And buying companies moving to streamline costs today will play out doubly well from higher profits and higher share prices.

    While tech layoffs have captured the headlines, many other companies are looking to cut high staff costs too. One is Newell Brands (NWL), which is looking to reduce 13 percent of its office staff as part of an effort to cut $250 million in costs.

    The company is a consumer goods conglomerate, owning such brands as Sharpie markers and Rubbermaid containers. Shares have slid by one-third in the past year as earnings have dropped by over 80 percent.

    Action to take: If the company can lower costs, it can improve its earnings picture even without selling any additional products. That makes shares attractive now at 10 times forward earnings. Plus, the stock pays a 6.1 percent dividend.

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  • For traders, the June $18 calls, last going for about $0.60, can likely see high double-digit returns in the coming months. Shares have been in an uptrend for the past few weeks, even before the cost-cutting measure was announced.

     

    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.