Continued Upside in Value Stocks Could Reward Investors with Some Fizz From this Flat Performer

The first half of the year saw a slowdown in tech stocks, and better relative strength in value names. While growth has started to rise in recent sessions, investors who continue to invest in both growth and value can do well in this market.

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  • Some of the best values may be in value names that have now underperformed over the past year. Any positive surprises in such a company may result in a jump higher in shares with low downside risk.

    One such value play is PepsiCo (PEP). The company is set to report earnings later this month, which may give the company a boost higher as some analysts expect.

    In the past year, the food and beverage giant has seen shares rise 11 percent, underperforming the S&P 500 by 22 points. And year-to-date, a selloff in shares and gradual rally higher has brought the company to breakeven.

    Yet the company has been posting strong earnings growth, and earns a low double-digit profit margin, which puts it at the high end for its sector.

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  • Action to take: Investors may like shares here, as the recently-raised dividend now puts the stock at a 2.9 percent (and growing) yield.

    Traders expecting the current rally to continue might like the January $160 calls. Last going for about $2.45, the calls offer high-double-digit potential if shares continue higher in the coming months and stand a good chance of moving in-the-money.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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