Author Topic: Undervalued stock  (Read 10414 times)

ScarElbow

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Undervalued stock
« on: October 04, 2015, 09:28:00 AM »
Any individual stock picker here that has their lazor focus on a particular idea and wants to discuss it?

Mine is in a distressed stock with a potentially huge upside (zinc). There is some risk in the timeline of the new plant being built. With debt to equity ratio out of favor with the fundamental, dont depend on it for divident payout. But I feel as long management is focused and honest, along with a steady economy, this stock can soar under the right condition. The price of zinc is stable unlike other commodities like gold and silver because its a recyclable product with high demand from the steel industry. It also has a strong moat being a major producer for the last few years. I'm keeping my hands off the buy button for now. Wait for the price to drop even more so my future position will be stronger still.

YoungInvestor

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Re: Undervalued stock
« Reply #1 on: October 04, 2015, 09:45:33 AM »
Most canadian banks seem way undervalued to me with p/e's around 10 and good capital ratios. I think the concerns over mortgages and the energy sector are overblown.

nobodyspecial

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Re: Undervalued stock
« Reply #2 on: October 04, 2015, 12:14:54 PM »
Another way to look at them is they are a cosy cartel with a monopoly on their own small market and have consistently failed to make it in any other markets. They are like an aging state airline in the face of a JetBlue or Easyjet.

ridonkulous52

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Re: Undervalued stock
« Reply #3 on: October 04, 2015, 05:10:33 PM »
Most canadian banks seem way undervalued to me with p/e's around 10 and good capital ratios. I think the concerns over mortgages and the energy sector are overblown.

Agreed!  BNS and TD look very undervalued to me. 

mrpercentage

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Re: Undervalued stock
« Reply #4 on: October 04, 2015, 05:57:36 PM »
Ford. It's undervalued. I own it. Apple the same. And Disney it always has great potential.

I like the big oils with a long to forever time line. Take Conoco down 40% right. if it returns to full price that's a 60% gain in equity. If it doesn't I can dollar cost average and reinvest dividends increasing my dividend payout that is still currently near 6%. I hope it stays down a while honestly. Looks like a win win. I win either way. Total return or increased payout.

I like Cheveron a lot but their direct stock purchase program has fees or I would have probably been dollar cost averaging into that. Conoco's resources are more geo politically stable and they have proven to me their commitment to dividends by the $0.01 increase even in very challenging times.

I am also buying Exxon. Their initial return does not have as much potential at 25% if returned to its high but they are more of a sure thing and I will buy them for life as long as their direct stock purchase program is free. It currently is with a $50 minimum purchase. Conoco is $25 minimum. Cheveron charges $5 or $2.50 for on going investments.

I also like RealityIncome, WP Carrey and HCP REITs. They are a hedge against inflation. If they take a hit because of interest rates I can dollar cost average into them cheaper for a good amount of time increasing my dividend payout a lot.

There you have it. That's my central focus.

ScarElbow

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Re: Undervalued stock
« Reply #5 on: October 04, 2015, 08:08:31 PM »
In the wake of the historic flooding in Charleston, SC, look for quality insurance companies that take sudden price dip. Value doesn't change over night, emotion does. Find them and ride the emotion out. Have fun

daverobev

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Re: Undervalued stock
« Reply #6 on: October 04, 2015, 08:14:00 PM »
Most canadian banks seem way undervalued to me with p/e's around 10 and good capital ratios. I think the concerns over mortgages and the energy sector are overblown.

Agreed!  BNS and TD look very undervalued to me.

Plus CMHC = banks protected from mortgage risk anyway.

National Bank not looking too good. Seems like RBC might be globally significant and have to raise more capital, too.

I'm DRIPping a little BNS, anyway.

ridonkulous52

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Re: Undervalued stock
« Reply #7 on: October 05, 2015, 12:49:58 AM »
Ford. It's undervalued. I own it. Apple the same. And Disney it always has great potential.

I like the big oils with a long to forever time line. Take Conoco down 40% right. if it returns to full price that's a 60% gain in equity. If it doesn't I can dollar cost average and reinvest dividends increasing my dividend payout that is still currently near 6%. I hope it stays down a while honestly. Looks like a win win. I win either way. Total return or increased payout.

I like Cheveron a lot but their direct stock purchase program has fees or I would have probably been dollar cost averaging into that. Conoco's resources are more geo politically stable and they have proven to me their commitment to dividends by the $0.01 increase even in very challenging times.

I am also buying Exxon. Their initial return does not have as much potential at 25% if returned to its high but they are more of a sure thing and I will buy them for life as long as their direct stock purchase program is free. It currently is with a $50 minimum purchase. Conoco is $25 minimum. Cheveron charges $5 or $2.50 for on going investments.

I also like RealityIncome, WP Carrey and HCP REITs. They are a hedge against inflation. If they take a hit because of interest rates I can dollar cost average into them cheaper for a good amount of time increasing my dividend payout a lot.

There you have it. That's my central focus.

I'm not a big fan of the auto industry, however Ford and GM would be my picks if I had to choose a stock in the auto industry.  Definitely love AAPL and DIS!  DIS is one of the few stocks I barely see any headwinds.  Love their dividend growth as well. 

Also love your comment on stocks prices going down!  As long as the company fundamentals are still in tact and the stock price is down due to either short term headwinds (think CAT with its recent drop) or external factors that really don't have anything to do with the company (think Hilary Clinton and her latest comment on the Bio Tech industry), then seeing a stock price go down is a welcome opportunity for the long term investor. 

Kroaler

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Re: Undervalued stock
« Reply #8 on: October 05, 2015, 03:55:01 AM »
I like the idea of watching insurance stocks with the recent 500 year flooding.

Kroaler

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Re: Undervalued stock
« Reply #9 on: October 06, 2015, 05:35:45 AM »
I guess as an update to that all-state insurance is the only one to watch at 6.3% market share.   State farm has 23% but they're privately owned.

Seppia

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Undervalued stock
« Reply #10 on: October 06, 2015, 06:55:59 AM »
I still think great deals can be made today with good solid energy companies like Royal Dutch or exxon

Radagast

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Re: Undervalued stock
« Reply #11 on: October 06, 2015, 09:40:59 PM »
Barrick Gold has a price-to-book ratio of 0.78 and a lot of great assets. The price amazingly was $5.94 a few weeks ago, which was like a 30 year low (of course now well over $7, for a 23% gain).

Not that I'm buying.

powskier

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Re: Undervalued stock
« Reply #12 on: October 10, 2015, 04:01:41 PM »
If I own it , it is undervalued.
If I don't own it , it is overvalued.

Simple psychological bias' at work here. Value is what the market determines. End of story. I will gladly predict any future you wish for a small amount of $.

JetBlast

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Re: Undervalued stock
« Reply #13 on: October 10, 2015, 04:25:35 PM »
I've got nothing right now. I see some companies that seem like fair prices, but nothing that looks like a screaming bargain. Then again I've been busy with changes at work and haven't had as much time to research smaller companies in out of the way industries. Now seems like a good time to buy the major integrated oil companies as long as you're in it for the long haul and can stomach the volatility. The prices are fair.

The last decent idea I had was the insurance company Chubb (CB). Between growth in net premiums written, dividends, big buybacks, and the potential to invest their bond portfolio at higher rates when the fed finally raises rates, it was looking like a good bet to at least match if not decently outperform an overvalued market over the next few years. Got out of my position when ACE bought them (cash and stock offer) for a 25% premium and I didn't feel like owning ACE.

Grigory

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Re: Undervalued stock
« Reply #14 on: October 10, 2015, 10:29:43 PM »
Bank of America (BAC) is selling at a ~25% discount to book value right now. The reasons why are many, but not so bad that they'll bring the company down, and it's already been designated Too Big To Fail... The earnings will be released in 4 days, which could bring the stock even lower or cause a nice bounce.

Seppia

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Re: Undervalued stock
« Reply #15 on: October 15, 2015, 11:12:03 AM »
Walmart has just lost approx 12% compared to yesterday's value, now below $59, because of bad quarterly earnings and some other bullshit.
A dividend aristocrat now at around 12 PE ratio?
I'm in :)

YoungInvestor

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Re: Undervalued stock
« Reply #16 on: October 15, 2015, 12:40:25 PM »
Walmart has just lost approx 12% compared to yesterday's value, now below $59, because of bad quarterly earnings and some other bullshit.
A dividend aristocrat now at around 12 PE ratio?
I'm in :)

They've been having trouble with their results lately. I wouldn't bet against them any time soon, but I don't think the pe of 12 is that far off.

Kroaler

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Re: Undervalued stock
« Reply #17 on: October 15, 2015, 01:31:04 PM »
How did you guys get into individual picking?  Did you get really good at reading 10Ks? Or some other inflow of information you use?   JW Id like to do a small percentage in individuals just as a learning and understanding tool.     Im still learning t read 10k reports but I don't know what else to read.

YoungInvestor

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Re: Undervalued stock
« Reply #18 on: October 15, 2015, 01:53:56 PM »
How did you guys get into individual picking?  Did you get really good at reading 10Ks? Or some other inflow of information you use?   JW Id like to do a small percentage in individuals just as a learning and understanding tool.     Im still learning t read 10k reports but I don't know what else to read.

Aside from the annual report, which is a must, transcripts of quarterly conference calls are good (although you must keep in mind that they will try to paint the company in a good light), as well as the obvious look around for potential risks.

A follow-up on past years is also important, to see if management meets its goals, if the strategy is well-defined, etc.

Seppia

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Undervalued stock
« Reply #19 on: October 15, 2015, 02:05:36 PM »
Before moving to the USA I didn't even know about index funds, they are not nearly as widespread as they are here back in old Europe.
So many of the people that invest do individual stocks, to avoid being ripped off by the hi expense funds (in France I was proposed multiple times stuff with a 2% yearly cost, LOLLLLLL).
I had kept this habit when I moved here in NYC, but then I started learning about index funds and switched most of my new investing to Vanguard.

I still do a bit of individual stocks, because I have fun with it. here's what I own



I know I'm in the minority here but I believe individual stock picking to be extremely safe and not substantially different from index investing, assuming one does:

- differentiate among sectors.
- buy only super huge, stable, established companies (think S&P dividend aristocrats for example).
- buy and hold only, with the occasional "rebalance" (for example I recently sold a  few Amazon to buy some RDSA)
- try to buy as low as possible. I already foresee the THATS TIMING THE MARKET ARE YOU CRAZY posts but, uh, there's no magic in looking at the price of oil companies go in the tank and buying some. If you buy and hold it's the same as trying to throw as much as possible at VTSAX during a bear market.

Anecdotally right now I'm slightly outperforming the S&P in the last three years, but that's mostly due to the Amazon explosion after the last reported earnings.
Before that I was slightly underperforming because I was keeping on buying energy stocks.
In the long run I expect to be more or less on par with the S&P, I'm aware it would be more rational to just do only index investing but again, I like to have a bit of fun and it's a relatively small percentage of what I own, and declining: the bulk of my money goes automatically in 401k and vanguard.
« Last Edit: October 15, 2015, 02:08:30 PM by Seppia »

Aphalite

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Re: Undervalued stock
« Reply #20 on: October 15, 2015, 03:17:19 PM »
How did you guys get into individual picking?  Did you get really good at reading 10Ks? Or some other inflow of information you use?   JW Id like to do a small percentage in individuals just as a learning and understanding tool.     Im still learning t read 10k reports but I don't know what else to read.

Pick up a few books like Security Analysis, Common Stocks and Uncommon Profits, The Intelligent Investor, Poor Charlie's Almanac

A lot of picking stocks is qualitative, not just about looking at the numbers. For example, to the person who mentioned Walmart, it's probably going to get a little uglier before it gets better - you can't just assume past will translate into future or reversion to mean (Starbucks and Nike P/Es haven't been "normalized" ever, for example, you have to take growth into account)- Walmart has said that it expects heavy hits to earnings in 2016 due to minimum wage hikes and then maybe a bounceback in 2017. It's also losing a lot of market share to Amazon on certain retail segments as well. Just things to think about that a trailing P/E number won't tell you

Seppia

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Re: Undervalued stock
« Reply #21 on: October 15, 2015, 03:38:54 PM »
Just for the record, when I mentioned "PE of 12 on a dividend aristocrat? I'm in" for Walmart, that's not the only fact I base my investment decision on.

I have no idea where Walmart stock will go in the short term (2 years is short term) but when I see a dividend aristocrat falling sharply because it announces it will earn less money for a couple years as they will heavily invest in the business, I like my chances.

I believe one of the major issues with many companies is the obsession for quarters, it's great to see some that decide to invest in the long term.

We will see

Seppia

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Re: Undervalued stock
« Reply #22 on: October 15, 2015, 03:42:39 PM »
Also, one of the keys is to diversify.
You don't need a million stocks to have a reasonably diversified portfolio, if you look at my stocks in my previous post (stuff bought in the last three years, which is when I started investing here in the us) there's some big wins (Amazon for example) and some big losses (IBM), in the end the total result is not that different to just owning VTSAX as I was mentioning before

Aphalite

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Re: Undervalued stock
« Reply #23 on: October 15, 2015, 04:13:19 PM »
Just for the record, when I mentioned "PE of 12 on a dividend aristocrat? I'm in" for Walmart, that's not the only fact I base my investment decision on.

I have no idea where Walmart stock will go in the short term (2 years is short term) but when I see a dividend aristocrat falling sharply because it announces it will earn less money for a couple years as they will heavily invest in the business, I like my chances.

I believe one of the major issues with many companies is the obsession for quarters, it's great to see some that decide to invest in the long term.

We will see

Again, while all of what you said are true statements (especially the obsession for quarters, I agree it's idiotic), there's danger in assuming reversion to the mean (that a dividend aristocrat will return to earning growing amounts of money in the future). My point is merely that Walmart's key advantages (mass distribution network, low costs, negative working capital) have eroded and the BUSINESS itself is under attack. This isn't some short term bad news like what happened with Hershey's investment in China, this is something that is a potential impairment on Walmart's long term results. Their strategy has always included tough negotiations with suppliers to keep costs down, flow that through to consumers, and then pocket a tiny margin on a lot of transactions. Now their business plan is to try to upscale, clean up their stores, pay their employees more, and cater to the middle (target and amazon's cliente)?

Because Walmart already has 60%+ market share, there's very little room left to grow, and the reason they are investing heavily into their online portal is to open a new avenue for growth. If they nail the execution, then I think their long term results will probably be fine. Otherwise, you will end up with a case where the Company slowly but surely fades until an equilibrium point, where it will probably start performing close to something like an AT&T - throwing off a lot of free cash flow but without much room to grow. Remember, Walmart is a retailer, it doesn't own the things it sells, expansion of operating margin would be close to impossible because if prices are high enough, consumers can just go pick up such items from target, costco, or amazon, with zero switching cost - "If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business, And if you have to have a prayer session before raising the price by 10%, then you’ve got a terrible business"

Bottom line, because of the depressed stock price (which in my opinion has some more room to drop in the next couple of years, but bottom fishing is hard and idiotic), you will probably do okay (8-10% range) as Walmart will spend a lot of their cash buying back cheap stock while paying out a 3%+ dividend, but just be aware that there's not a substantial case to be made for the business itself, you really have to see if they nail the execution of their business plan since they have recently switched gears
« Last Edit: October 15, 2015, 04:18:27 PM by Aphalite »

gimp

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Re: Undervalued stock
« Reply #24 on: October 15, 2015, 05:34:34 PM »
Investing in insurance companies after 500-year floods assumes that the models that decide they are 500-year floods have not changed. In other words, is it still a 500-year flood?


Seppia

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Undervalued stock
« Reply #25 on: October 15, 2015, 06:56:53 PM »
Bottom line, because of the depressed stock price (which in my opinion has some more room to drop in the next couple of years, but bottom fishing is hard and idiotic), you will probably do okay (8-10% range) as Walmart will spend a lot of their cash buying back cheap stock while paying out a 3%+ dividend, but just be aware that there's not a substantial case to be made for the business itself, you really have to see if they nail the execution of their business plan since they have recently switched gears

All great points and I agree 100% (I just left the part of your post that was the trigger in my decision of purchase)
I see it hard for them to grow (I mean they are already the largest of all) and they have no room to raise their prices, being a retailer.
They still have some great competitive advantage in terms of efficiency, mainly in terms of logistics/supply chain (unrivaled) and negotiating power.
I believe it can be a decent investment even with them having zero or little additional growth ahead of them, the ceiling is pretty low probably but the floor is really high.

I'm fine with that considering it's less than 1% of my total investments

Left

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Re: Undervalued stock
« Reply #26 on: October 15, 2015, 07:12:14 PM »
Investing in insurance companies after 500-year floods assumes that the models that decide they are 500-year floods have not changed. In other words, is it still a 500-year flood?
well if sandy was a 100 year one, this one is a 500 year one, the next one is a 2000 year one :D before we know it, everyone will be building noah's arks... might as well start investing in lumber

ridonkulous52

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Re: Undervalued stock
« Reply #27 on: October 16, 2015, 04:41:52 PM »
Regarding WMT, I agree that the short term will not be pretty.  It is a wait and see approach to see how the online presence develops.  However, I love big blue chips with wide moats and WMT basically reinvented the supply chain, so I'm a believer they will eventually right the ship. 

I also think many of Industrial stocks are undervalued here: EMR, ETN, UTX, CMI, UNP and FAST are some of the stocks I like right now. 

VanTran

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Re: Undervalued stock
« Reply #28 on: October 17, 2015, 01:12:27 AM »
Cash is undervalued. But a stock that might be undervalued is SBGI- some optionality from spectrum sale, and it generates decent FCF, pays a dividend. The bad: debt, cordcutting trend, reverse retrans.

FFH.to seems like a good buy too. Very risk-averse holding co, manager with excellent track record.

MrStash2000

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Re: Undervalued stock
« Reply #29 on: October 17, 2015, 02:45:53 PM »
AAPL and GILD are undervalued to me. Both have low P/Es and PEG ratios.

AAPL also has a 200 plus billion in cash overseas.

I mostly index fund but I do own some AAPL.

rmendpara

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Re: Undervalued stock
« Reply #30 on: October 17, 2015, 04:23:02 PM »
Different stocks for different reasons, but I tend to look at things on a somewhat macro basis. Recent "trends" in the past 2 yrs that I've used as a guide:

- high cash levels, low valuations, and brisk dividend growth in big tech (bought MSFT and AAPL)
- oil went down in a major way, so bought 1 stock in various areas of energy around every few months (CVX, XOM, COP, OKE, KMI)
- financials are still a relatively good value, and litigation seems to finally be slowing somewhat overall, expectations aren't all that high, yields could grow once they start passing stress tests (AIG, WFC, AXP, TRV)
- high flying growth names had corrections, and I felt that with reasonable growth and even projecting a moderate P/E in 10 yrs, they could offer a good return (SBUX, DIS)
- cyclical and limited history of good performance in automotive, but very cheap and seemingly working hard to restructure and lower costs and invest wisely (F and GM)

I work in finance, so I could come up with fun and complex models to value stocks, but at the end of the day you can make the model show what you want anyway. For me, I try to take a macro view on both industries/sectors as well as my own portfolio. For example, even though energy continues to be a good value, I don't just keep adding forever since everything carries risk. I try and hit some very loose industry weights, and keep a list of stocks/companies I like and try to pick one every time I have enough cash for a purchase (tends to be <10 purchases per yr).

Sometimes I catch something at the wrong time, and other times I get a better value (ex. energy stocks over the past yr), but overall, good to buy the reasonable value and growth as it comes available and I have room to take the risk. I tend not to sell often (I think 2 sales in the past yr), but am certainly open to it if my reasoning changes.
« Last Edit: October 17, 2015, 04:25:28 PM by rmendpara »

Davids

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Re: Undervalued stock
« Reply #31 on: October 17, 2015, 05:08:44 PM »
I mostly do ETFs but I do have a Scottrade account on the side with individual stocks. I think eventually oil will be going back up so definitely a stock like COP would be a great pick if you agree oil will be going back up. As others have said AAPL is always a good one to have, if Forrest Gump was real he would be a multi billionaire today. I also think JNJ is pretty low right now too so that might be a good play.

mrpercentage

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Re: Undervalued stock
« Reply #32 on: October 18, 2015, 01:12:16 AM »
All my money is already taken and asigned, so I will give you one under the analysts radar last time I checked.
AFSI

You are welcome. Some day I will have the money to invest everywhere I know I should.

If any of you want to take on the big mouth join stockfuse on your smart phone. Go to ten year portfolio management game and join. @masterintuit is currently #1, #30 in Barclays, #7 in investing 101. Bring it on.

I think my 10 year is currently up 7% and is:
DIS
AAPL
F
O
XOM
CVX
BX
PG
ETP

Grigory

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Re: Undervalued stock
« Reply #33 on: October 29, 2015, 03:50:08 PM »
Bank of America (BAC) is selling at a ~25% discount to book value right now. The reasons why are many, but not so bad that they'll bring the company down, and it's already been designated Too Big To Fail... The earnings will be released in 4 days, which could bring the stock even lower or cause a nice bounce.
Called it: http://finance.yahoo.com/q/hp?s=BAC+Historical+Prices  The price went from $15.50 to $17.31 after the earnings release. Flipped it for a quick 5% profit. Bought Harley-Davidson (HOG) when it crashed a few days ago and flipped for a 4% gain earlier today. It's still quite underpriced, though the price may slide back a little.

Bought some Walmart (WMT) when it hit the 52-week low. I don't expect it to miraculously recover, but all I really need is a single good day, with a rally fueled by optimism of buyers and panic of short-sellers. (See the WeightWatchers (WTW) chart for a radical example of what I mean.) The rally may go on a bit further or it may get reversed - either way, I will have had my cut. ;)

Right now, I'm putting a lot of money into Qualcomm (QCOM - an undervalued chip manufacturer with a great balance sheet) and the oil ETF (eloquently named OIL haha). The former could become a great medium-term investment (especially after the 11/04 earnings release) and the latter is fluctuating so much that swing-trading it is criminally easy.

Grigory

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Re: Undervalued stock
« Reply #34 on: October 29, 2015, 03:52:37 PM »
How did you guys get into individual picking?  Did you get really good at reading 10Ks? Or some other inflow of information you use?   JW Id like to do a small percentage in individuals just as a learning and understanding tool.     Im still learning t read 10k reports but I don't know what else to read.
Like the others said, get a copy of "The intelligent investor" by Benjamin Graham, read it from cover to cover, then read everything you can find by Warren Buffett. Learn to read the basic financial information, then do a lot of research to see whether your company has the margin of safety. That's not a guarantee of success, mind you, more like a good starting point.

BarkyardBQ

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Re: Undervalued stock
« Reply #35 on: October 29, 2015, 03:57:04 PM »
Flipped it for a quick 5% profit.

That's seems like a lot of work/research/speculation/risk.

Meanwhile, since the stock market took it's dip we continued to invest our regular payroll contributions and a little extra cash we had and have gained 5% on those contributions. We didn't pay any commissions and will have no taxes to pay on it. :P
« Last Edit: October 29, 2015, 04:04:26 PM by BackyarBQ »

Grigory

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Re: Undervalued stock
« Reply #36 on: October 29, 2015, 05:32:49 PM »
Flipped it for a quick 5% profit.

That's seems like a lot of work/research/speculation/risk.
Not really. You only need to do the research once. When you find your "angel" companies, it's just a matter of keeping an eye on their prices. When it dips, you buy. If it goes up, you sell. If it dips lower, either wait it out or buy more. It's essentially a sale on a great company - why wouldn't you want to double down? ;)

My method isn't for everyone, but I would much, much rather make several 4% trades than park my money for a year (years?) and hope it goes up 8-10% a year...

Edited to add:
Quote
Meanwhile, since the stock market took it's dip we continued to invest our regular payroll contributions and a little extra cash we had and have gained 5% on those contributions. We didn't pay any commissions and will have no taxes to pay on it. :P
That's out of context, though: the market had recently gone down by about as much, and this was just a reversal. Essentially, you did the same thing as I, but on autopilot: if you don't cash out and secure your gains, they'll fade away when the market decides to have another month in the red. There's nothing wrong with investing in the market and going with the stream, but you'll never beat the market that way. ;)
« Last Edit: October 29, 2015, 07:10:57 PM by Grigory »

MrStash2000

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Re: Undervalued stock
« Reply #37 on: October 29, 2015, 07:06:33 PM »
You gotta love this stock market melt up!

.... Especially when everyone is so bearish. I am looking forward to what Novermber and December bring. I'm not "flipping" anything.

Kroaler

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Re: Undervalued stock
« Reply #38 on: October 30, 2015, 09:13:40 AM »
It could fluctuate some more, but me and my wife both set out 401Ks to max contribution right after the august correction. Pretty good timing I suppose. I wasn't trying to time it, but it worked out nice.