3 Keys to Undervalued Stocks with Soaring Upside

[Zacks | Our Research. Your Success.] WeekendWisdom Tactics that Work in Good Markets and Bad [Brian Bolan - Editor] 3 Keys to Undervalued Stocks with Soaring Upside By: Brian Bolan June 8, 2024 --------------------------------------------------------------- It's no secret that 2022 was a tough year for stocks. Stocks rebounded in 2023 but several headwinds remain. Inflation is still raging throughout the country... Interest rates remain high as rate cuts keep getting pushed further out... But every cloud has a silver lining. And even though some investors may be wary, keep in mind that challenging market environments create amazing opportunities - if you know where to look. Even though stock performance was strong in the first half of the year the markets are making it hard to have conviction. It's not surprising that investors are a bit cautious and looking for bargains in the market. Low-priced stocks are the things that investment dreams are made of. We have all fantasized about buying a stock in the single digits and watching it soar higher. Too often, however, investors never realize that dream. For any number of reasons, investors often buy a low-priced stock only to sell it at an even lower price. This common practice is really quite curable. The mistakes investors make when dealing with low-priced stocks have simple answers. Most of the time, you already know what the answers are; it's the execution that's hard. My goal is to share some of these common problems and give you solutions so that you can become a better investor. Beware Buying the Bottom Everyone wants to get something for nothing, but if you can't do that, then paying as little as possible is the next best alternative. Let's face it, who wouldn't want to buy at the 52-week low and then sell at the 52-week high? The problem is that sometimes the bottom you see is not at all the bottom. Usually, stocks making new 52-week lows are not the stocks you should be buying. The market is telling you that this stock is consistently worth less and less when it appears on the list of 52-week lows. Bottom feeding is fine for some species, but investors that want to see good returns in a reasonable amount of time, should avoid stocks at their "perceived" bottom. Always look for confirmation that the bottom is in and the stock is recovering. Adjust Your Risk Profile Buying a low-priced stock sometimes seems like a riskless or a very limited-risk venture. The stock is in the single digits, so how much more can it go down? The answer to this one is always the same thing. Any and every stock can go down 100% from where it closed the day before. Though this happens rarely, the point is that you have to think about returns more in percentages than stock prices. A $7 stock going to $3.50 is a loss of 50% and that is a hard-to-swallow number. The solution to this problem is position sizing. You must know how much of your portfolio should be dedicated to low-price stocks and not put all your eggs in one basket. This is an issue that is unique to every investor, as everyone has a different amount of investable dollars, and most have a different time horizon as well. Proper position sizing will allow you to withstand short-term loss and also encourage long-term success. More . . . [Stocks Under $10 to Buy Monday Morning]( Zacks is now revealing its most compelling picks priced under $10 per share (but perhaps not for long). These high-quality companies have prospects for returns of up to 2X and more. While not all our picks are winners, recent recommendations have led investors to gains of +100.6%, +129.7% and even +263.2%¹. These stocks offer the best of both worlds: immediate growth potential AND the strong likelihood of long-term profitability. This special opportunity ends at midnight Sunday, June 9. [See Stocks Now »]( Don't Double Down Many investors believe that the stock they pick is destined to succeed. They did their research (sparse as it may or may not be) and came up with the idea, so it probably has some merit, right? This sort of confirmation bias leads many investors to double down on a bad idea. When an investor buys a stock at $8 and then doubles down at $6, the problem only becomes a bigger one when the stock slips to $5. Now you have twice as many shares losing more money with every tick! The discipline to cut losers and let winners run is something that even the most seasoned professional has trouble with. Assess the amount you can withstand in a pullback and stick to those limits. Often, small-priced stocks have a way of really falling out of bed when there is trouble...and no one wants that. My Best Advice for Making Big Profits with Low-Priced Stocks Be patient with your investments. Low-priced stocks generally need more time than their bigger brethren. A healthy dose of patience will go a long way for a low-price stock portfolio. Leverage the Zacks Rank to help find stocks that analysts see earning more money. The Zacks Rank looks at earnings estimate revisions of the models from all the covering analysts and compares it to all stocks in the Zacks universe of coverage. When an analyst at Needham or William Blair moves numbers higher, the Zacks Rank helps you know when estimate increases are the most meaningful. Assessing risk is a difficult task and something only you can do. One way to limit risk is to spread the exposure to several low-priced stocks. Instead of going "all in" and buying 10,000 shares of a single-digit stock, spread that out among several names. A larger portfolio will spread the risk out across several names, giving you a better chance to succeed. Position Yourself for Profits Now One of the easiest ways for you to avoid costly mistakes and position yourself for substantial profits with single-digit stocks is to see the recommendations we're holding in our [Zacks Stocks Under $10]( portfolio. We focus on companies that are primed to make big upward moves. We get in when the Zacks Rank and other proven indicators point to success ahead, and ride them toward serious growth. For example, we've recently closed out positions with gains of +100.6%, +129.7% and even +263.2%.¹ Promising New Stock Will Be Added to the portfolio Monday Morning Now is a great time to look into our Stocks Under $10. I'll be adding a brand-new pick to the portfolio on Monday, and you can be among the first to see it. In today's market conditions, I believe it could be our next triple-digit winner. Get started today and you're also welcome to download our detailed Special Report, 5 Stocks Set to Double. From thousands of companies, each of the five stocks are highly favored by one of our Zacks experts who give it the best chance to gain +100% and more in the months ahead. But a word of caution: Your chance to download this bonus report ends on Sunday, June 9. [See our Stocks Under $10 and download the Special Report now »]( Best, [Brian Bolan - signature] Brian Brian Bolan is our aggressive growth expert and the editor of [Zacks Stocks Under $10 portfolio](. ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. Access grants you a comprehensive list of all open and closed trades. This free resource is being sent by [Zacks.com](). We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. 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