Is it better to buy a stock which is cheap and just starting to turn around or wait?

Question

Or wait till the stock is, say, 50% higher and is on more solid ground. Let's use Ford for example.

Answer 1

Stocks are cheap for a reason. They may stay down for years or fizzle altogether. You want a stock to prove its mettle before you risk your capital on it.

F may be a turnaround. Just MAY. But I wouldn't buy it until it takes out and stays above $10 on more positive news.

Answer 2

I agree with waterdrop. Also if you think the stock is going to appreciate 50%, why wouldn't you buy it now and then sell once it appreciates. 50% is pretty good performance considering that the S&P 500 has averaged historically around 10%-12% per year.

If you believe in efficient markets, then all stocks are currently priced fairly and you just earn the expected cost of equity over time. Riskier stocks (as measured by beta) should earn more than less risky stocks. Unfortunately, research has shown that lower beta stocks tend to outperform.

Answer 3

How do you know if it's "cheap" and how do you know if it is just starting to turn around? My answer is don't buy individual stocks. Diversifiable risk is uncompensated risk and the expected outcome of an individual stock is random at best. All things considered use these two rules:

Price and expected return are inversely related

A company's cost of capital is the investor's expected return.

Apply that to investing, and you will give yourself a a shot at success.

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Answer 4

Look for stocks that have taken a beating for no good reason and look into buying in when they've bottomed out. You may want to give them some time--the market can be remarkably stubborn when it gets it into its head that a particular company isn't doing well-- but you can score impressive returns. However you do need to be patient. Be willing to hold any stock at least a year in order to give good news time.

Answer 5

in the three modern organization days, the marketplace (S&P 500) dropped 1500 factors, some say this became such as the undergo marketplace back in 2008. Who knows if day after today it's going to drop yet another 500 factors? The inventory is in basic terms too unpredictable, and the hazards are too intense. I advise which you wait till each and all of the merchandising powers are exhausted, then plan approximately paying for shares. Take my advice with a grain of salt.

Answer 6

If you buy when it is turning around your returns would be greater then if you waited until it is much higher but you better be good at picking stocks that are turning around. Don't get caught up in short rallies.

Answer 7

It's all about what kind of investor you are. As long as you follow the golden rule of finance (don't risk any money you can't afford to lose) do what you think fits you better. As for myself, I like to be on solid ground.