Fundamentally cheap stocks are often held in low regard by market participants. Something may be tainting their perception in investors' minds.
Sentiment: NEGATIVE
To know whether stocks are cheap or pricey, we typically look at price-to-earnings ratio. Valuation is a tougher question than many folks realize.
When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.
Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble... to give way to hope, fear and greed.
Most investors give too much credence to the theory that prices are rational; they presume that a market collapse must have been justified by serious economic trouble.
But my system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30.
The people who are buying stocks because they're going up and they don't know what they do deserve to lose money.
One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute.
Lower interest rates are usually considered good for stocks because they lower the cost of borrowing and make bonds a less attractive alternative investment.
Markets do very weird things because it reacts to how people behave, and sometimes people are a little screwy.
There's a tendency to look at investments in isolation. Investors focus on the risk of individual securities.
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