Market trends change over time. The market often gets hyped over tech stocks. But that’s changed over the years in everything from lasers and personal computers to internet stocks to today’s interest in artificial intelligence.
Many trends continue to play out, even after there’s been major adoption. And playing to that trend could lead to market-beating returns in an ignored space offering considerable value.
For instance, the United States is still upgrading its infrastructure. And more rural areas are still connected to the rest of the country with copper wire, rather than fiber optics. Upgrading rural America to high-speed internet opens up further opportunities.
One winner here is Frontier Communications (FYBR). They’re the biggest beneficiary of that trend, and few others want to even take it up. The lack of major competition could allow them to reap outsized profits.
Right now, shares go for about 8 times earnings, with forward estimates closer to 15 times earnings, a notable discount to the overall market.
Action to take: The small cap value play could lead to a big profit center as it rolls out fiber optic lines, and that could make it an acquisition target for a bigger company. Frontier doesn’t pay a dividend right now, but if it improves its cash flow, that could change in a few years. That makes shares a reasonable speculation today.
For traders, the January 2024 $15 calls, last going for about $1.70, could leverage any move higher in the second half of the year into high double-digit profits.
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.