Until Interest Rates Drop, Invest with This Trend

High interest rates have led to a standstill in the housing market. And it’s also led to car payments soaring, which in turn has reduced activity there.

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  • More parts of the economy could likewise freeze up as interest rates stay higher for longer. However, while some areas freeze up, opportunities can emerge in other parts of the market. Investors who lean into those trends now can likely see solid returns, even as other places continue to trend lower.

    For instance, Copart (CPRT), an auctioneer of salvaged vehicles, is able to obtain cars at a low price. Those can be sold off for parts, or in some cases may be nearly new. Business is booming as other parts of the car market have slowed.

    Shares are already up over 50 percent this year. But with earnings up over 30 percent, Copart is still riding a growth trend.

    Even more impressive is the company’s 32 percent profit margin. That’s a massive margin for any firm in the business of buying and selling physical goods.

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  • Action to take: Copart shares are in an uptrend. Investors can likely ride that trend higher until interest rates start to move down, potentially by the middle of next year. At present, Copart also pays a 1.3 percent dividend.

    For traders, the stock just broke higher out of a multi-month range. The May 2024 $55 calls, last going for about $1.25, could see high double-digit gains on a strong rally from here. Traders should look to take profits if the uptrend stalls out again or reverses.


    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.

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