The stock market has taken a beating in the final stretch of 2018. This means opportunities abound to find stocks that will be the biggest beneficiaries of a rebound.
“With investors now positioned defensively, and leverage rapidly reduced, there is an elevated risk of market reversion into year-end, thus an elevated risk of an October ‘rolling bear market’ turning into a ‘rolling squeeze higher‘ into yearend,” JPMorgan derivatives strategists said in a recent note.
This rally may be triggered by share buybacks, portfolio rebalancing, the midterm elections, and progress on trade. That fourth factor would be the most unexpected catalyst for stock gains — and it hinges on President Donald Trump and President Xi Jinping having a fruitful discussion at the late-November G20 summit, the strategists said.
JPMorgan recommended the list of Russell 1000 stocks below as having cheap, limited-loss out-of-the-money call options (~110%), or bets that their prices will rise. Analyses of their earnings-call transcripts suggest they’re the most exposed to trade risks — and the strategists like their reward-to-risk profiles.
Additionally, JPMorgan screened only for stocks in which it sees a more-than 15% upside to their six-month high.
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