Spotting Low-Priced Stocks To Buy

This article discusses spotting low priced stocks to buy.

The key to success in the stock market is knowing how to recognize value. Here is the a successful approach.

At the investor operation, value has little to do with a good company versus a bad company. A top-quality large company selling at a high price/earnings multiple is less attractive than a lesser-quality company selling at a depressed price in terms of its past and future earning power, working capital, book value, and historical prices.
Here is where Greene's analysts look for value:
Stocks that have just made a new low for the last 12 months.
Companies that are likely to be liquidated.
In the process of liquidation, shareholders may get paid considerably more than the stock is selling for now.

Unsuccessful merger candidates. If one buyer thinks a company's stock is a good value, it's possible that others may also come to the same conclusion.
Companies that have just reduced or eliminated their dividends. The stock is usually hit with a selling wave, which often creates a good buying opportunity. See low priced stocks for more information.

Financially troubled companies in which another major company has a sizable ownership position. If the financial stake is large enough, you can be sure that the major company will do everything it can to turn the earnings around and get the stock price up so that its investment will work out.
Opportunities, also, in stocks, that are totally washed out-that is, situations where all the bad news is out. The stock usually has nowhere to go but up. How to be sure a stock is truly washed out:
Trading volume slows to practically nothing. If over-the-counter, few if any dealers making a market.

To Spotting Low-Priced Stocks To Buy - Top

No Wall Street research analysts are following the company any more.
No financial journalists, stock market newsletters, or advisory services discuss the company Selling of the stock by company's management and directors has stopped.
Signs of a turnabout:
The company plans to get rid of a losing division or business. If so, be sure to learn whether the company will be able to report a big jump in earnings once the losing operation is sold.
The company is selling off assets to improve its financial situation and/or reduce debt.
A new management comes on board with an established track record of success with turnaround situations.

Management begins buying the company's stock in the open market.
Also, be sure to follow 13D statements filed with the Securities and Exchange Commission (SEC). A company or individual owning 5% or more of a public company must report such holdings to the SEC. If any substantial company is acquiring a major position in a company, it's possible a tender offer at a much higher price is in the wind.

Options As Indicators. Often the first sign of a rally in a stock is increased activity in its options. Recommended: Look for newcomers on the "Most Active Options" list in The Wall Street journal.
 

Source: Consumer Information Center

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