Some stocks go down and then come back up again and other stocks just keep going down. The trick in trading is to know how to tell if a stock will rebound. This subject came to mind after reading a Motley Fool article about 2 overlooked rebound stocks that they suggest are good buys.
It’s not unusual for companies to hit rough patches and shed large portions of their stock price. However, many investors prematurely write such companies off for dead, or sell their shares at the worst possible time. Even worse, many investors who had once believed in a company often overlook that same company later when it rebounds, thinking that by the time they recognize the recovery, they’ve missed their opportunity to get back in. Here are two rebounding stocks that you can buy into now, and that should still have better days ahead.
The two stocks are TrueCar Inc. and and XPO Logistics Inc. TrueCar helps consumers find dealerships and cars that they are searching for and XPO adds high value added services to materials distribution. The bottom line for both of these stocks is that they are a realistic chance of making a lot of money going forward. That is to say they have good intrinsic stock value despite their current low costs.
Intrinsic Stock Value
This concept dates back to the days following the 1928 stock market crash. The point is that traders and investors need not guess about what stocks to buy or sell but rather can make informed decisions based on projected future earnings. Our sister site, ProfitableInvestingTips.com wrote about intrinsic stock value.
Think of intrinsic stock value as the fundamental value of the stock. Analyze the stock to determine its price based on predicted future income and then subtract the current stock price. Calculate expected company cash flow and then discount to current dollars. Determining intrinsic value of stock is a discounted cash flow valuation. The key to determining intrinsic value of stock is getting a clear idea of the medium and long term prospects of the business in question. Successful stock investors learn to judge how well a company will manage its assets, products, costs, R&D, and marketing. When the picture is clear an investor can make an informed decision. If the market price is less than the intrinsic value of stock it is time to buy and if one owns the stock and the prices are reversed it is time to sell.
Warren Buffett has made one of the greatest fortunes on earth by investing in rebound stocks. He only invests when he understands what the company does to make money and how it will continue to make money in the future. Then he invests when the stock goes down in price and before the rebound.
Will Steel Make a Comeback?
Sometimes a stock rebound has more to do with factors affecting the sector than how the company is run. This may turn out to be the case with steel. CNBC reports that US steel stocks skyrocket due to Trump launching a probe into Chinese dumping.
Shares of steel companies surged after President Trump signed a directive asking for a speedy probe into whether imports of foreign-made steel are hurting U.S. national security.
United States Steel closed up more than 7 percent, as investors doubled down on Trump’s “Made in USA” promise.
The continued rebound of steel stocks will depend on protection from foreign dumping.