How To Pick The Most Valuable Stocks In America

By Subodh / November 8, 2015

Nearly everyone invests to ensure safety of future life, but not all investments options are deemed safe, as it is. Investing in stocks is something most people feel worried about though they cannot deny the prospects of gain. For a beginner in the stock market, choosing the right stocks can be pretty tedious. The stock market can be volatile and there are instances of several people choosing wrong shares and losing a lump sum amount of money. However, the opposite examples can also be found in abundance!
If You Have The Desire To Invest In Valuable Stocks, You Need To Keep A Few Pointers In Mind.

Wall Street

Identifying Valuable Stocks

This is what baffles the majority of investors, barring really seasoned ones. Unlike the discounts offered by Olefin sellers, choosing a stock in share market at a rock bottom price that can fetch you high returns later can be tough. It may seem risky to opt for stocks trading beneath their intrinsic value.

Should You Opt For Value Investing?

Buying stocks trading at lower rates than their actual worth requires guts of steel and it is not for everyone. It is not equal to buying stocks with significant growth potential. It basically requires investors embracing unloved stocks. This can be equated to swimming against the tide, but the risk is not exactly without rewards, say the industry veterans. Since you buy the stocks at low price, the loss of losing is minimal. It is ideal for those who are very new to investing in stocks.

How To Proceed?

stock purchase

Value investors, mostly rely on price-to-book value and price-to-earnings ratios as the tools to pick valuable shares. However, looking for a low PBV and PE does not always ensure success. On the contrary, some stocks can act as value traps like those of leveraged enterprises, real estate companies and PSU banks. You need to look for entities that have generated profits consistently in the previous few years. Apart from that, you need to check if the entities have the record of registering at least 10% annualised increase in terms of net profit in the phase.

Think of A Margin of Safety

When you opt for value investing, you have to think of this parameter to be on the safe side. It denotes the difference between a stock’s buying value and intrinsic value. For example, a share with intrinsic value of 100 which is selling at 80, has a safety margin of 20. A stock with a high margin of safety ensures lower risk for the investor. Experts say you cannot justify opting for an overvalued share simply because others stocks in the niche are trading at higher rates. Buying an undervalued stock, however aids you in reducing the risk factor.

Using The Web

When you are new in share market and want to buy valuable stocks minus major risks, utilizing the web can be prudent. You will find so many social media groups where advice and tips of veteran stock market analysts can be found. Subscribing to blogs of such industry leaders can be advantageous for your needs. Their inputs can be handy for buying valuable stocks in various niches, including banking, healthcare, and technology and so on. You may also start reading stock market related publications and magazines to rather knowledge and find resources that help in your investments.

Keep A Tab On Reality

Investment of any type comes with a few limitations and investing in valuable stocks is no exception. Valuable shares can fetch you rich returns, but there is no formula for overnight success! You have to patient and there is no other way. Industry veterans agree that value stocks need time before their price can soar. Depending on the niche and the company, the stocks may remain in discount for quite some time, but as an investor you should not give up. It may sound incredible to some, but some of the ace investors hold on to their earlier bought stocks for a long time before selling them at a premium. The latest example is living legend Warren Buffet who still holds stocks purchased decades back, astonishing as it sounds! You may not have that kind of patience, but sometimes holding on to valuable stocks for 7 to 8 years proves to be extremely profitable.