Find the New Leaders in a Shifting Industry

Some industries tend to stay the same over time. That can bode well for investors, provided that industry has already consolidated into a few big players. That can be seen with companies like consumer goods.

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  • For industries that continue to face new innovations, however, leadership can change in time. Investors who look beyond the current leaders and look to those becoming new leaders stand to make an outsized return as that trend plays out.

    One industry seeing a shift in leadership is in internet routing equipment. Competitors are starting to outperform industry leader Cisco Systems (CSCO). Analysts have noted that the company is falling behind on acquiring key manufacturing parts.

    A competitor that has managed to acquire more parts amid the current supply chain crisis is Juniper Networks (JNPR). Trading at 15 times earnings, Juniper has managed to grow its earnings by 83 percent in the past year.

    Action to take: Juniper looks set up for better performance ahead relative to peers. Plus, shares yield about 2.9 percent here, with room for more growth down the line as earnings continue to rise.

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  • For traders, the October $30 calls, last going for about $0.80, are an at-the-money trade. A further rally in shares could lead to high-double-digit returns in the coming weeks.


    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.