Buy under valued or potential big growth?

Discussion in 'Stock Market Forum' started by User911, Feb 8, 2015.

  1. User911

    User911 Well-Known Member

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    Hello,

    I prefer the under valued stocks or stocks that are "on sale"! I guess it is the penny pincher in me, but I find it really hard to buy a pricey stock that may or may NOT have a lot of growth potential when I know I could pick up some significantly cheaper stocks and get more shares for the price of one growth stock that may or may not pan out. I like the idea of getting more bang for my buck.

    I also look for dividends to supplement my income vs. hoping and praying a growth stock might pay off in 10 years. This is why I kind of like the idea that oil prices are falling because I can buy it cheaper now, get some decent dividends and then as the price eventually trickles up I can feel satisfied that I bought mine at a lower price.
     
  2. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I put the majority of my $ into companies that appear to be undervalued. But I also dabble some in companies that are growing that may not appear so cheap on paper - if they have things going for them that differentiate them from the herd. The more expensive the stock, the more speculative I see it generally. And I keep definite limits on speculative activities.

    A more advanced investor might also even buy put options or even carefully placed short positions against companies that appear ridiculously overpriced and don't appear to have anything special going on that may not yet be showing up on the company financials.

    Sometimes you can find companies that are both rapidly growing AND relatively cheap.
     
  3. petesede

    petesede Guest

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    I´ve never been much of a momentum or tech investor. Too much Benjamin Graham when I was younger. I cannot handle investing in internet companies, not even Google, the financials are counter to what I learned before. One thing I like to do, and probably my shortest investment strategy is just to wait for a company to announce some terrible news, and then watch which companies get hit in sympathy with that. Often times a really good company gets hit hard because of something fairly unrelated to them. Wall Street likes to move in industries and sectors, so they will often oversell something based on another companies news.
     
  4. Onionman

    Onionman Senior Investor

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    My mindset is more geared to undervalued stocks - my standard state of mind is to be cheap ; ) But at the same time I get sucked into chasing the exciting stories, which are very often more expensive. It's all about balance.
     
  5. JR Ewing

    JR Ewing Super Moderator Staff Member

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    A good stock screener can be a great tool.
     
  6. User911

    User911 Well-Known Member

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    Well, it sounds like great minds think alike and most go for the undervalued stocks! It's hard to resist a bargain.
     
  7. crimsonghost747

    crimsonghost747 Senior Investor

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    Yes I often do find myself going for the bigger and more stable names, trying to find cheap prices when I can. It's rare for me to go with a growth company, often the P/E is ridiculously high which is acceptable IF, and only if, the growth can continue.
     
  8. Peninha

    Peninha Senior Investor

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    That seems to be logic, I mean, if for some reason the stock is undervalued the chances that they will go up are high right, so that's where we need to put our money in.
     
  9. Hedonologist

    Hedonologist Well-Known Member

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    It's sort of like a gamblers fallacy, you have to ignore what has happened in the past, and focus on what you predict will happen in the future. Some have a default mindset that if a stock has fallen and levelled off, that it will soon rocket in price. Other see a steadily rising price as a sign of a good long term investment. Of course that may be true in some cases, but you have to take into account more than just that.
     
  10. petesede

    petesede Guest

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    Yep, the big thing is how do you determine what is an undervalued stock. The simple, and wrong way to do it is to simply look at it´s price history and say ´OMG, this is half the price it was a year ago, once it gets back to those levels, I will double my money´.. But that happens all the time, and usually it is because something about the company, or the industry has changed and made the company simply, less valuable. What you need to do is look at when the company fell in price, and see what it was that caused it. If it is something fundamental with the company, then that company is not ´undervalued´.. it is valued correctly, just at a lower price.

    In my answer earlier, what I was suggesting is to look for companies that have been beat up because of emotional reasons. The worst thing you can do in the stock market is get emotional... and so to make money, the best thing you can do is to take advantage of the people who DO invest emotionally. When people panic sell for no real reason, that is the time to be a buyer.
     

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