3 Keys to Undervalued Stocks with Big Upside Potential

[Zacks | Our Research. Your Success.] WeekendWisdom Tactics that Work in Good Markets and Bad [Brian Bolan - Editor] 3 Keys to Undervalued Stocks with Big Upside Potential By: Brian Bolan November 4th, 2023 --------------------------------------------------------------- It's no secret that 2022 was a tough year for stocks. While most of 2023 was stronger than expected, several headwinds remain. Inflation is still raging throughout the country... Though interest rates currently hold steady, there are still many concerns... But every cloud has a silver lining. And even though some investors may be wary, keep in mind that challenging market environments create amazing opportunities - if you know where to look. Even though stock performance was stronger in the first half of the year the markets have weakened considerably since then. It's not surprising that investors are a bit cautious and looking for bargains in the market. Low-priced stocks are the things that investment dreams are made of. We have all fantasized about buying a stock in the single digits and watching it soar higher. Too often, however, investors never realize that dream. For any number of reasons, investors often buy a low-priced stock only to sell it at an even lower price. This common practice is really quite curable. The mistakes investors make when dealing with low-priced stocks have simple answers. Most of the time, you already know what the answers are; it's the execution that's hard. My goal is to share some of these common problems and give you solutions so that you can become a better investor. Beware Buying the Bottom Everyone wants to get something for nothing, but if you can't do that, then paying as little as possible is the next best alternative. Let's face it, who wouldn't want to buy at the 52-week low and then sell at the 52-week high? The problem is that sometimes the bottom you see is not at all the bottom. Usually, stocks making new 52-week lows are not the stocks you should be buying. The market is telling you that this stock is consistently worth less and less when it appears on the list of 52-week lows. Bottom feeding is fine for some species, but investors that want to see good returns in a reasonable amount of time, should avoid stocks at their "perceived" bottom. Always look for confirmation that the bottom is in and the stock is recovering. Continued . . . [In-Depth EV Report to Help Enhance Your Investment Strategy]( In recent years, the electric vehicle space has demonstrated significant growth with no signs of slowing down any time soon. Goldman Sachs predicts EVs will account for more than 50% of global car sales by 2035. This puts electric vehicles on a trajectory that parallels other revolutionary tech advances like broadband or smartphones. Now, for a limited time, you can download Zacks' new Special Report, 5 Essential Stocks for the EV Revolution. Our expert reveals the best way to potentially capitalize on the industry's growth, attractive stock prices, and planet's increasing interest in sustainable energy. No need to hesitate - your cost is only $1 and there's not a cent of further obligation. Deadline to download the report is midnight Sunday, November 5th - TOMORROW. [See Stocks Now »]( Adjust Your Risk Profile Buying a low-priced stock sometimes seems like a riskless or a very limited-risk venture. The stock is in the single digits, so how much more can it go down? The answer to this one is always the same thing. Any and every stock can go down 100% from where it closed the day before. Though this happens rarely, the point is that you have to think about returns more in percentages than stock prices. A $7 stock going to $3.50 is a loss of 50% and that is a hard-to-swallow number. The solution to this problem is position sizing. You must know how much of your portfolio should be dedicated to low-price stocks and not put all your eggs in one basket. This is an issue that is unique to every investor, as everyone has a different amount of investable dollars, and most have a different time horizon as well. Proper position sizing will allow you to withstand short-term loss and also encourage long-term success. Don't Double Down Many investors believe that the stock they pick is destined to succeed. They did their research (sparse as it may or may not be) and came up with the idea, so it probably has some merit, right? This sort of confirmation bias leads many investors to double down on a bad idea. When an investor buys a stock at $8 and then doubles down at $6, the problem only becomes a bigger one when the stock slips to $5. Now you have twice as many shares losing more money with every tick! The discipline to cut losers and let winners run is something that even the most seasoned professional has trouble with. Assess the amount you can withstand in a pullback and stick to those limits. Often, small-priced stocks have a way of really falling out of bed when there is trouble...and no one wants that. My Best Advice for Making Big Profits with Low-Priced Stocks Be patient with your investments. Low-priced stocks generally need more time than their bigger brethren. A healthy dose of patience will go a long way for a low-price stock portfolio. Leverage the Zacks Rank to help find stocks that analysts see earning more money. The Zacks Rank looks at earnings estimate revisions of the models from all the covering analysts and compares it to all stocks in the Zacks universe of coverage. When an analyst at Needham or William Blair moves numbers higher, the Zacks Rank helps you know when estimate increases are the most meaningful. Assessing risk is a difficult task and something only you can do. One way to limit risk is to spread the exposure to several low-priced stocks. Instead of going "all in" and buying 10,000 shares of a single-digit stock, spread that out among several names. A larger portfolio will spread the risk out across several names, giving you a better chance to succeed. Position Yourself for Profits Now The electric vehicle revolution is here, and it's accelerating rapidly. A growing number of major automakers are investing billions in industry. For example, Ford recently reported they will be "investing more than $50 billion in electric vehicles globally through 2026 to develop breakthrough EVs." Additionally, governments and businesses around the world are setting ambitious targets for putting millions of EVs on the road in the next few years. 13 states to date including New York, Colorado, Maryland, Massachusetts, Washington, and many others have adopted the zero-emission and low-emission vehicle standards pioneered by California. This year, global electric vehicle sales will surpass 14 million units. That's nearly a 40% increase since 2022. But businesses making a fortune in this explosive industry aren't limited to the auto manufacturers themselves. Several companies involved in commercial transportation, batteries, and autonomous hardware are also joining the party. And thanks to this automotive arms race, investors have an exciting opportunity to profit from EV-related stocks as the industry continues to spread across the globe. Just imagine the potential gains that could be captured if you know where to look. [Download our just-released free Special Report, 5 Essential Stocks for the EV Revolution.]( You'll also be entitled to 30-day, real-time access to all of Zacks private buys and sells for just $1. No reason to hesitate. And no obligation to spend a cent more. But a word of caution: Your chance to download this Special Report ends on midnight Sunday, November 5. [Access your Special Report now »]( Best, [Brian Bolan - signature] Brain Brian Bolan is our aggressive growth expert and the editor of Zacks Stocks Under $10 portfolio. ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. This free resource is being sent by [Zacks.com](). We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. 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