When Do Investors Buy Value Stocks?

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When Do Investors Buy Value Stocks?

In a perfect world, you would buy a value stock when it is at its lowest, just before it begins to accelerate upward. Of course, you will seldom be able to determine the exact point to buy a value stock. More often, you will purchase it before it reaches its lowest value or after its price begins to rise closer to its true worth. Still, value investors aim to buy right before an expected turnaround in a stock’s performance.

Things To Know

  • Value investors aim to buy right before an expected turnaround in a stock’s performance.
  • Turnaround factors could be internal or external.

Internal factors

Many factors may trigger a turnaround. Some of these relate directly to the internal operation of the company. For instance, maybe the board of directors has finally announced a long-awaited change in management. Perhaps a takeover or the sale of an unprofitable division or other assets is imminent. Or, maybe a noted financial firm is expected to announce a revised stock analysis or company rating.

External factors

Sometimes, factors external to the company’s operation may trigger a turnaround in the price of its stock. Maybe interest rates are about to fall, or a combination of leading economic indicators all point to a coming economy-wide recovery. Perhaps recovery is forecast for a region of the globe where the company expects substantial sales. Or, maybe a new law or regulatory change beneficial to the company is about to take effect. A number of external factors, as well as internal ones, can cause the price of a value stock to rise.