Some companies that posted stellar earnings reports, saw their shares tumble during October’s broad market sell-off. This has created an exceptional buying opportunity to get involved in some high growth stocks “on the cheap.”
And if you use call options, rather than buying the underlying shares, you will not only be deploying your capital in a more efficient manner but get the benefit of higher leverage, which could mean bigger gains.
This a pretty unique opportunity, in that over the past few years companies that reported better than expected results were quickly rewarded with a move higher in their stock price.
But the confluence of rising rates, tariff issues, and the looming mid-term election, had investors taking a much more cautious approach.
Basically, after years of gains, the reaction was to sell now, ask questions later.
According to Factset, with nearly 70% of the S&P 500 companies having already reported earnings results, nearly three-quarters have posted numbers beating expectations. And around 50% have either raised or maintained guidance. In the past, numbers like these would have given shares a boost, sometimes an irrationally large one.
But this quarter, the reactions to those “beats” have been met with selling, which is telling us something about investor psychology right now.