This story was originally published here.
We all love cheap stocks.
In fact, it is a Wall Street catchphrase that everybody loves to throw around.
Rarely does anyone actually define what a cheap stock is when they use the phrase. There are several ways we can use the word cheap.
On price alone, a cheap stock might be one that trades below the penny stock cutoff of $5 a share.
We could also use “cheap stock” to describe a company that is trading at a low valuation measure. This could be the price/earnings (P/E), price to book value (P/B), or price to free cash flow (P/FCF).
It could be a company whose P/E ratio was less than its earnings growth rate. If analysts expect a stock to grow earnings over the next several years by 20% and the current P/E is just 10, then that company could be considered cheap based on a low price/earnings growth (PEG) ratio.
If we can properly define cheap stocks, we can build a universe of opportunities that might result in massive profits. If we can find cheap stocks that recover from whatever forces drove down the price in the first place, there could be enormous profit opportunities. If we can identify small, cheap growth stocks that are not yet recognized by the market, that could also result in life-changing gains…
Let's use all three types of variables to define cheap. We will start with stocks trading between $5 and $10 a share. Stocks trading under $5 are considered penny stocks, and we can address those another day.
Now to keep it simple, we will use the most widely known fundamental variable. We will limit our search to just those stocks trading with a P/E below 10.
We will only include profitable companies where the market is undervaluing future growth prospects. We only want to look at companies with a PEG ratio under 1 in our search for cheap stocks.
And finally, we will only include dividend-paying stocks. No one knows how the coronavirus will impact the markets as the spread accelerates part of the nation. Dividends could help soften the blow.
Editor's Note: Click here for the rest of the story.
Released today: new extra-income strategy
Editor’s note: Andrew Keene’s story is one for the record books. He went from barely scraping by with $275 a week to living a life of freedom and luxury. Today, he’s showing you the exact strategy he used to grow rich – and now, you have a shot at putting thousands in your pocket every Thursday. Click here for the full story.
Dear Reader,
Andrew Keene here with a new extra-income strategy I know you’ll want to see immediately.
Listen, I know what it’s like to feel stuck – to feel like no matter what you do, your finances will never change. I also know what it’s like to lose everything you’ve worked harder than ever to build.
In fact, when I lost my first small fortune, I fled to Thailand and lived there for months on a shoestring budget. I couldn’t handle the mistakes I kept making.
But there’s a simple strategy I started following that turned my life around…
Not just when I returned to the CBOE after my blowout… not just in the 2008 Great Recession…
It’s something I’ve used – and now it’s something that YOU can use to set yourself up for the chance to pull down thousands of dollars each week… even in today’s crazy markets. [See it in action right here.]
Now, I will warn you… this method is so unusual that I’m guessing only one person in a million knows what I’m up to…
Or how I’m able to show my readers how to pull down all of this cash.
It can’t be found in even the most prestigious trading research out there – no matter HOW much you pay.
But follow my lead – and I’ll demonstrate how you only need 30 minutes, 3 days a week to make it work for you.
Everything you need to know is right here.
To your success,
Andrew Keene
Founder, Project 303
