Cheap stocks, the real question here to know when to put your money in on a company or once great company that has come crashing down (much like this graph you see before you). Well, it's hard to say, there are so many companies that are incredibly "cheap". But is this true or not? What exactly is a "cheap" stock versus an expensive stock. Just because CitiGroup, once a 300 billion dollar company is trading at $1 a share does that mean I invest in it? Yes, but only if you see healthy balance sheets, growth opportunities, a strong board, and if you can stomach volatility. It's hard to know when or when not to put faith in a stock that you view as a great bargain just because the price is so low. Take Las Vegas Sands for example, this casino Company once traded at $130/share in early 2007. Now it stands at around $2.00 a share or so, so do I buy it? Well, I'd say not now, Las Vegas Sands has a huge amount of debt and slowing growth in all their industries. The Board is well...a crapshot and there's no real guidance of where the company is headed. How about say...DryShips...company traded near $112 a year ago but now it trades at a horrid $3.90/share. Again, could be good in a year or so but balance sheet is questionable. I have no idea who's on their board and they have a lot of debt obligations. Now if you take a company like, Navistar International. A great buy...it's trading at half of its 52 week high right now and it's just because the stock was inflated in my opinion. It pays a dividend and has little short-term debt, the company is making moves and deals (just thwarted off their Ford relationship) and I predict that industrials are going to be the 2nd leader out of this bear market.
Nordstrom, another great company that could be a steal right now. The last bear market saw Nordstrom hit $8/share but it bounced back in the last bull market to touch around $45. Nordstrom has great leadership in the company and they are still expanding. A loyal customer base and they own their own debt through Nordstrom banking. The stock is trading above the $6 low and is standing at $15. Of the big retail luxury giants Nordstrom is a safe bet and I think you can ride it for some time. Don't expect big returns but know that it's far from bankruptcy.
So if you're ever going to invest in a "cheap stock", don't. Cheap is what you buy at the grocery store for lunch. Inexpensive is what you buy when you see a bargain in something with value.
Posts
