A lot of investors like to invest in “low-priced” stocks in the market as they can pick up many stocks for small money only. However, most of the young stock market investors don’t understand that the stocks they purchased low-priced belong to a company concerned with bad situations with poor organization. You should keep away from these kinds of stocks still how low-priced they are!
How to purchase low-priced stocks? Stocks are generally low-priced for a reason. You should only purchase low-priced stocks when you have fine reasons such as the follows:
(i) The company has an established track record like an every time good Earnings Per Share (EPS), enough cash flow, and huge Return On Invested Capital (ROIC) performance. If free cash flow is optimistic, that means the firm has completed a good job of managing its cash.
(ii) Look for companies that have excellent brand names, with good buyer relations and patents or proprietary technology.
(iii) Purchase stocks with excellent management and employee relations.
If the company has such a wonderful track record, why is the stock so low-priced? Most of the time, stocks are low-priced because of a temporary problem with the company or because the stock market is bearish. A bear market gives superb opportunities to purchase stocks at a good deal price. Investors should look for stocks that are not only low-priced but also here “excellent value”.