Value investors by nature are very optimistic (which is why we like to buy beaten down stocks)
However it is important when doing due diligence that we do examine carefully exactly why the stock has gone down. We should not assume that it has gone down for no reason and that we're the only geniuses in the market who notice the value. That's asking for trouble!
Why am I posting this? Of course, some personal mistakes in recent past (and good examples):
TGT - I purchased this when it fell down last month (not after last week's fall) thinking that it was safe due to the dividend, but had I done more research I would have learned that retailers in general are facing significant and hard to analyze headwinds from Amazon
HRL - at first glance it is weird that a stock who's EPS has grown at almost a 20% annualized clip for the last 10 years could be so beaten down, but I should have dug up their recent financials and looked to see that their future guidance has guided towards stagnant earnings numbers
FSLR - At a p/e of 6.26, it was a steal! I purchased this almost a year ago thinking i was a genius. Turns out they were reaching the peak of their cycle as solar panels have saturated (in addition to perhaps facing competition from solar city)
Above are just several examples that could have been avoided had I paid more attention (or even looked to begin with!) at the reason for their beaten down shares.
Happy investing～
Submitted March 05, 2017 at 09:20PM by linlaoda http://ift.tt/2mJvu1g
