“Look for undervalued stocks.”
Ito ang pinakacommon na advice na makukuha mo sa trading community.
If investor ka then this is a sound advice but kapag trader ka ay medyu delikado na advice ito for you.
Lets do the basic.
An undervalued stock is defined as a stock that is selling at a price significantly below what is assumed to be its intrinsic value.
An overvalued stock is defined as a stocl that is selling at a price significantly above what is assumed to be its intrinsic value.
Intrinsic value is a measure of what an asset is worth.
As a trader, I want to give you something to ponder.
Now, you are probably wondering ano meron sa undervalued stocks.
Stock trading is a combination of FA, TA, Psych and emotions.
Think about it. If Fundamentals lang ang basehan ng stock market, walang undervalued stocks.
If lahat ng tao na involved sa stock market ang hinahanap ay undervalued stocks kasi yun ang basehan edi wala nang undervalued stocks na matitira.
Walang basura/penny stocks ang kailan man aangat. Baka nga di na sila pwede malist. Currently ay may Main board at SME board as listing board ng mga IPO.
Main board na company na mag IPO ay dapat may cumulative net income of at least P75 million for 3 recent years bago mag IPO while SME naman ay 15 million. SME stands for small, medium and emerging board. If trip mo ang mga information about IPO’s ay mag pre-order ka ng THE IPO MANUAL ko na book which I think will sold out fast due to limited copies.
Now, balik tayo sa point. Kung lahat ay fundamentals ang approach sa stock market, walang undervalued stock. Wala din halos igagalaw ang stock price. No one will buy above a stock’s fair value. Wala din magbebenta below it.
The fact na may undervalued stocks ay nagpapakita lang na iba-iba ang approach ng bawat traders and hindi dominated ng fundamentals lang ang stock market.
Whether fundamentalists/investors admit it or not ay traders ang big reason bakit may daily na liquidity ang stock market.
Undervalued stocks are products of people/traders not using fundamentals to trade.
Let that sink in for a while.