This story was originally published here.
In a market that sometimes plays like an erratic arcade game, one company’s shares which are a strong reminder of this ability is Advanced Micro Devices (NASDAQ:AMD). Moreover, right now it’s time to put some change into an AMD stock options spread that’s built for success with less risk.
Let me explain.
Relative strength. Relative weakness. Absolute strength. Absolute weakness or some combination thereof. When it comes to stock investing those price qualities can and do change on the turn of a dime. And within the volatile semiconductor sector shares of AMD haven’t proven immune in 2020.
Demonstrated relative and absolute strength were a game winning combination early on in 2020 for AMD. To begin the new calendar year, shares immediately broke through to new all-time-highs for the first time since the dot-com crash. Then as the novel coronavirus took hold of risk assets and sent the stock market plunging to its historic, breakneck but short-lived bear market, Advanced Micro Devices’ shares also shined on a relative basis.
AMD investors were further rewarded too.
As the market, semiconductor sector and peers like Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) found their footing off the Covid-19-driven March lows, shares of Advanced Micro outperformed with gains of nearly 60% from the stock’s bottom.
That same price action also produced market-beating returns of 20% for 2020 in just over a month’s time. Nice, right?
Investors could chalk up AMD’s strength to consistently strong and innovative product execution, market share capture, topnotch leadership from CEO Lisa Su and of course, a grotesquely oversold historic bear market. Life was good. And then, just when investors possibly thought it couldn’t possibly get any better, but were secretly confident it would, it didn’t.
The past two months have seen Advanced Micro Devices’ stock price stumble.
Following AMD’s month-long, bee-line rally that topped out on April 28 at $58, shares are down about 8% over the last two months. At the same time, the Nasdaq composite is hitting new highs and up by about 18%. And the Vaneck Vectors Semiconductor ETF (NASDAQ:SMH) is up a similar 16% and consolidating around its pre-Covid-19 all-time-highs.
So, what gives? Could it be relative valuation? AMD does appear pricey compared to many of its tech peers. But playing the investment game too cautiously has its limitations. The flip side of valuation concerns is often growth opportunities only look expensive, until they don’t—and only after yesterday’s investors are handsomely rewarded…
Editor's Note: Click here to keep reading.
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