Investors looking for opportunities now may want to let hot stocks cool off a bit. And they may want to look for stocks that are coming off a bottom and ready to move higher.
This shift away from what’s done well to what’s likely to perform well ahead is a crucial part of investing. And it can take advantage of how the market may mostly move up over time, but different sectors tend to lead at different times.
For instance, while tech stocks have popped higher this year, consumer brands have lost some of their luster from last year. That led to a drop in companies like Keurig Dr Pepper (KDP). But now shares are starting to trend higher, which could continue as the stock just got an upgrade.
Shares now go for about 17 times forward earnings, a fair value for the company’s various brands in the soft drinks and coffee space.
Action to take: Investors may like shares here, near their 52-week lows, as they look set to move higher. Keurig Dr Pepper pays a 2.6 percent yield at current prices, and has a history of increased payouts over time.
For traders, the November $35 calls, last going for about $0.45, could leverage a further rally in shares into high double-digit returns.
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.