The stock market set a new low last week, and again on Monday. That may be a re-test of the prior low before moving higher, or it may more pain ahead for investors.
Those looking for when to buy during a market drop have many different ways to do so. For some types of companies, knowing which key metrics indicate a solid value now could lead to some astute buys now.
For instance, in financial stocks, book value tends to be a conservative measure of what a company is worth, as book value looks at what a company’s assets were worth when acquired.
Now, many well-known companies are getting down to their book value. That includes investment bank Goldman Sachs (GS).
The bank has seen shares drop 23 percent in the past year, and the stock has gone from 1.4 times book value to 1.0 times book value. With a 35 percent profit margin and as an industry leader, shares stand likely to rebound and increase in value over time.
Action to take: Shares look attractive here, as they’re down to under 8 times earnings. Plus, the company has been a dividend growth play, and shares now yield 2.5 percent, much higher than the 5-year average of 1.7 percent.
Traders could potentially profit from the December $340 calls. Last going for about $8.00, they’re inexpensive enough to potentially make double-digit returns from a rebound in shares. Traders should look to profit from a quick bounce given today’s market conditions.
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.