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How to Spot Low Priced Stocks Ready To Bounce Back

By Jason Markum

Investing in the stock market is one of the more difficult endeavors to engage in, but it doesn’t have to be as hard as you may think. One way to increase your chances of success in the stock market is to search for and invest in the stock of companies that are currently undervalued and getting ready to shoot up.

Finding these gems isn’t as difficult as you may think, and that’s what I’m going to talk about in this article today.

Making money in the stock market is usually mostly about recognizing value. Value usually doesn’t have much to do with whether a company is a good company or a bad company. Sometimes excellent companies have overpriced stock that you should therefore not purchase because there is no value in doing so.

On the other hand, however, a company that is not such a great company may have outstanding growth potential that is not factored into the current stock price which means even a small turn around calculates into larger than average stock price increases under certain circumstances… hence it may be a valuable stock.

So how do you find companies with undervalued stock prices that are poised for a quick jump? It is much easier than you think!

First look for stocks that are currently resting at new lows within a 12 to 14 month period. Also look for companies that have a higher probability of being liquidated or are even in the process of liquidation at the moment. Sometimes a company is worth more after it has been liquidated than its current share price reflects.

Next watch out for companies that have recently attempted mergers unsuccessfully. If one company is interested in merging with that company, others may be as well and just because the merger didn’t go through the first time doesn’t mean other candidates won’t follow through completely.

Next look for companies that have recently eliminated their dividend payout, or even companies that have just reduced their dividend payout. Many times when this happens shareholders freak out and sell the stock, which depresses the stock price sometimes further down then it should… which creates a buying opportunity once the stock settles to a more realistic price.

Finally look for companies that are in financial difficulty but at the same time have shareholders who are larger companies with a stronger balance sheet. Many times if a company has a large shareholder in the same industry or in a similar industry they can infuse capital which should bump up the share price.

There you have several ways to find depressed stock prices that have a fairly good chance of making a sudden increase or turnaround. As with all investing opportunities, be sure to do thorough research before making a final investment decision.

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