The market has been in rotation mode for a few weeks now. High-flying tech stocks have been underperforming as other sectors have been beating the market instead.
If that trend continues, then many sectors that lagged in last year’s rebounding stock market could trend higher. That means a number of companies in traditionally slower-moving parts of the market could have above-average returns in the months ahead.
For instance, with the market up 20 percent over the past year, Comcast (CMCSA) is up about half that, just 10 percent.
The market is concerned with the ongoing decline in the cable business, even as the company’s other media operations have been performing well.
Comcast shares have gone from 30 times earnings in the last year to 10 times earnings, a sign that shares are undervalued. And that’s pushed the stock’s dividend up to 2.7 percent.
Action to take: Comcast could be on track to outperform the overall stock market this year, following its underperformance last year. An improving outlook could mean shares rise by 20-30 percent or more.
For traders, the April $45 calls, last trading for about $1.30, should see mid-double-digit gains or better in the coming months, provided shares start to trend higher at a faster pace than the overall market.
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 company mentioned in this article.