How do you know if a stock is on sale at a discounted price?

Question

I am new to buying stocks and I always hear to buy low and sell high, but how do you know what is low right now?

Answer 1

That is a good question. I know of only one instance where one can absolutely tell if something is selling at a for sure discounted price. That is closed end mutual funds. Every day you can find published the net asset value of the closed end funds and the selling price. If the selling price is below the net asset value, it is on sale at a discounted price. The only question then becomes why.

Here are a couple of examples:

CAF net assets $71.33 last quote $51.50 discount 27.94%

possible reason: The fund invests in Chinese A shares. These have increased in price dramatically during the last 2 years and many believe they are overpriced currently.

SWZ net assets $19.38 last quote $16.73 discount 13.67%

possible reason: darned if I know. It has outperformed about 70% of open end mutual funds during the last ten years.

http://www.etfconnect.com/

Answer 2

Look at the stock charts. Most stocks have a historic low base, where you will see a point where the stock has dropped to, but bounced up multiple times. If you see a stock drop to the same low three times and go back up, that is a fairly safe base and I would try to buy it as close to there as you can.

Also check the P/E (Price/Earnings) Ratio, usually shown on most websites that have stock charts. Anything under 30 is fairly safe. Around 15 is even better. Under 10 is great.

Price/earnings is pretty much how much of the stock price is "hype", rather than what the company is actually earning or what it's assets are worth.

Answer 3

you take the stock you are interested in and compare its PEG ratio to that of its peers within the same industry.
The closer the PEG is to 1.0 (not less than one) the better.
You can find this information on Yahoo! Finance, under the Competitor hyperlink.
The PEG is composed of the growth rate and the P/E ratio.
The lower P/E ratio traditionally implies the cheaper the stock..but this is relative to its growth rate. This is where the PEG ratio comes into play and is quite possibly the favorite metric for analysts...especially Cramer.

Now, when to sell. That all depends on you. I don't like to hold on for more than 6 months. Usually I look doing it after or around the Earnings Report, as this is generally when the prices jump the most.

hope this helped.

Answer 4

If you think a stock is undervalued, buy it. If the price earnings multiple is low compared to other companies doing the same thing, buy it. If the stock is lower than its been in months, simply because of a temporary piece of bad news, buy it. If you think that company has great products or management and therefore will do well over the next 10 years, buy it.

Answer 5

There is no discounted price. They sell for the market price plus a trading fee.

You need to look on the web for a price history of the stock you are interested in. You also need to see the writeup on the price/ earnings ratio (lower is better). You need to see what news and announcements the stock has (higher or lower earnings and what analysts following the stock say about hy its price is hat it presently is and here its future price might be).

Answer 6

You don't know. Nobody knows . Otherwise everyone investing in stocks would be extremely wealthy.

They might as well have the saying "Don't lose money in stocks"....pointless.

Answer 7

I don't believe in buy low and sell high, I believe in buy high and sell higher.