In a Volatile Market, Use Activist Trends to Profit

When the going gets tough, traders have a number of opportunities to take advantage of. They can look to invest in prospective mergers, where a market selloff may have depressed prices that may quickly snap back.

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  • Another possibility is to buy into beaten-down names where activist investors are getting involved as well. That could allow for a big upside when markets move higher again.

    One such trend may be underway with consumer goods giant Unilever (UL). The stock jumped nearly 9 percent on Monday on news that activist investor Nelson Peltz was building up a stake. Shares are still down 13 percent over the past year, but could end up with better returns this year.

    An activist at a consumer conglomerate may have ideas regarding the best way to maximize value from selling off major brands or divisions, and how to otherwise reposition the company for a leaner era.

    Action to take: Revenue and earnings growth has been flat over the past year, but shares trade at 18 times earnings, a slight discount for a company with a strong basket of consumer brands. Investors can also nab a 4.1 percent dividend yield here.

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  • For traders, the work of an activist investor can be difficult to time. The August $55 calls, last going for about $2.50, offer the ability to benefit from any such news development that leads to a further move higher in shares over the next six months.


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

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