There’s an old saying that the Chinese word for crisis is also the same word for opportunity. That can be the case in the stock market often, as short-term fears create long-term buying opportunities for astute investors.
That’s the case with many beaten-down tech stocks right now. While there are still some pockets of overvaluation, a number of opportunities are available for industry-leading companies at a reasonable price right now.
One clear-cut example is Advanced Micro Devices (AMD). Last week’s market selloff led to a 15 percent drop for the industry-leading chipmaker stock. Even with harrowing drops like that, the company has been a fantastic long-term winner for investors.
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Now, with the company closing on its acquisition of Xilnx, the company looks set to continue dominating the industry for years to come.
Action to take: The recent drop has taken the company to 30 times forward earnings, which is cheap relative to revenue growth of nearly 49 percent. Investors should consider shares here for a rebound play in the coming months, with an eye towards accumulating additional shares on new market fears.
For traders, the recent drop in shares looks overdone, with a high chance for a rebound as current market fears wane. The May $130 calls, last going for about $7.35, could return mid-to-high double-digit gains or better before the option expires.
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.