How To purchase Good And Cheap Stocks

Many investors love to purchase cheap stocks, but as Mr O'Neil (investors.com) puts it: "Stocks are cheap for a reason". In many (but not ALL) cases, investors do not realize that the low mortgage rate refinance they bought cheaply belongs to a business mired in problems New Jersey Lemon Laws slowing earnings, Marketing growth and shrinking market share. These are bad traits for a stock to have, regardless of how cheap it is.

Nonetheless, although most investors have lost money buying cheap stocks, there are still many savvy investors (read: Warren Buffett) who have made fortunes buying cheap BUT GOOD stocks. How did they do it? Below are some guidelines:

purchase a business, not a stock.

When evaluating a stock, see yourself as a business owner, not a stock investor. Only purchase businesses that you comprehend. When you comprehend a business, you will be able to evaluate important questions like: Is the business's stock cheap because it commercial van insurance losing market share? What are the challenges faced by the business?

purchase stocks in debtfree direct that have a proven track record.

that includes a consistently good EPS, Marketing, equity and free cash flow growth rate and a long history of great ROIC (above 10% for the last 10 years).

purchase stocks that have a big MOAT

A moat is a 'protective shield' that a business has that prevents other companies from invading their territory. Examples of moats include

• Brand name: The business has a very strong brand name, making it difficult for other companies to compete Massachusetts Lemon Laws them. An excellent example is "Apple", with its group of die-hard fans.
• Secret: The business has a patent or trade secret that makes competition illegal or very difficult. Example: 3M.

purchase stocks with a good and honest management

Traits of honest management include admitting their mistakes (if the business did not do well for one quarter, they should admit it and explain how they intend to improve the situation) and accepting a reasonable compensation for their work.

How to purchase Cheap Stocks?

At that point, you may be wondering: If a business has such an excellent track record and characteristics, why is the stock cheap?

Most of the time, these companies stocks are cheap because of a temporary problem (such as missing EPS estimate) or because the overall market is bearish. At times like that, you can normally purchase the stocks cheaply, preferable at a 50% discount.

As long as one does his/her research diligently and is willing to wait patiently for a good price, he/she can definitely join the ranks of successful investors. A bear market (which is NOW) presents the best buying opportunities.

About the Author:
Joelle has invested in the stock market for more than 5 years and has successfully used various investment strategies to consistently make money from the stock market. She offers free top quality investment tips at her blog how-to-invest-in-stocks.blogspot.comStock Market Investing for Beginners.