What are cheap stocks?
You are probably wondering how a company can find itself in this situation. Since a large hedge fund or a very experienced investor may have quickly absorbed the undervalued stocks. The reality is that there are many different reasons why a stock may be undervalued, for example: Four cheap stocks to invest in 2021
In a panicked market , investors often think emotionally rather than rationally. This means that panic selling can cause a decoupling between an asset’s current price and fair value.
Investors often use these scenarios to buy undervalued stocks due to the fundamental assumption that the stock price will re-correct over time and approach the actual price. Later we will see examples of cheap stocks in this final stretch of 2021.
Warren Buffett’s strategy
Nicknamed the ‘Oracle of Omaha’, Warren Buffett learned his trade from the father of value investing Benjamin Graham. Your goal is to buy undervalued stocks in high-quality companies that you expect to grow in the next five, ten, or 15 years.
How to find undervalued stocks?
There are a wide variety of ways to find cheap stocks. The most common go through fundamental analysis or technical analysis and generally, through a combination of both.
There are two types of fundamental analysis: a top-down analysis and a bottom-up analysis. In a top-down analysis, an investor will first look at the bigger picture or the broader economic trend before finding companies that may be performing well at those times. The bottom-up approach involves first looking at the fundamentals of a business and then looking at the big picture.
Technical analysis is quite different and only involves analyzing a company’s stock price. Traders generally look for patterns on repeating charts and use technical indicators to find suitable stocks to trade.
Four cheap stocks to invest in 2021
Due to the impact of the coronavirus, almost all stocks plummeted in the stock market sell-off in March 2020 and many stocks under $2 are still available . This restructuring led many high-quality companies to trading at very low levels, far from their true value. . For example, companies linked to tourism, such as Boeing or Carnival, but also companies from other sectors related to mobility such as General Motors.
Now that the pandemic is beginning to subside and mobility restrictions are gradually disappearing, these companies are trading at higher prices again, so our analysis can now focus on other events not related to Covid-19. The stocks discussed below would be more suited to the interests of a long-term trader. Keep in mind that past returns do not guarantee future returns and that trading involves risks
One of the events that is having the most impact on the stock price of some companies is the so-called semiconductor crisis, which has affected many sectors: automobiles, household appliances, etc. We refer to the global shortage of chips due to the fact that the industry has not been able to absorb the high demand for these devices.
The manufacture of these semiconductors requires a very complex process and it is not easy to increase production in line with demand.
One of the sectors that analysts expect to see a rise in the stock market in the medium and long term is that of banks. For two main reasons: first, because the economic recovery will reactivate the loan market; second, by the gradual rise in interest rates.
In this context, Wells Fargo, one of the large American banks, would be presented as an attractive option on the stock market since, after starring in several scandals in recent years, it seems that it is beginning to straighten the course under the command of Charles W. Scharf, appointed at the end of 2019. After registering lows in October 2020, the bank’s shares have risen to around $ 47.
Another sector that is beginning to recover from the hit of the Covid-19 pandemic is tourism. Now that a high percentage of the population is vaccinated, the companies in the sector are beginning to recover. One of them is Airbnb, a company that debuted on the stock market on December 10, 2020 at $ 68 per share.
Although the price of its shares soared in the first months of 2021, even exceeding $ 200, during the spring it deflated due to the doubts that arose regarding the effectiveness of the vaccines. As of October 13, 2021, the price was trying to break the resistance at $ 172.
With the cryptocurrency boom on the rise, Coinbase . The world’s leading cryptocurrency exchange. Which recently debuted on the stock market, may be another undervalued company. For now, it is the only cryptocurrency exchange listed on the markets. Although competitors such as Kraken could soon go public.
If we look at the Coinbase graph. We can see how in its debut, on April 14, 2021, it reached over $ 400, however. Then it lost strength and entered a lateral trend between $ 215 and $ 250, breaking the hike twice. In early August and early September. As of October 13, 2021, it remains at the level of 250 dollars.