How to Buy Stocks at a Discount

The Next U.S. Catastrophe EXPOSED: The sinister plot masterminded by one ruthless man... about to bring down the entire U.S. economy - and destroy everything you've ever worked for. So says a renowned financial journalist who has put his own life in danger to break this shocking story - and the crazy thing is, he's famous for being right. He was one of the few to warn of the great tech-stock meltdown of 2000... the housing and banking bust of 2007... and wrote books predicting the recent boom in gold and commodity prices. Is he right again? Watch this shocking video and judge for yourself. SPONSORED Friday, September 27, 2013 | Issue #2131 How to Buy Stocks at a Discount Alexander Green, Chief Investment Strategist, The Oxford Club It's an open secret that the way to make money in stocks is to buy low and sell high. What most investors don't understand is there are two distinctly different ways of buying low. One method leads to huge profits with a high margin of safety. The other usually leads to frustration and big losses. So let's take a closer look at both... Watch This or Die A medical miracle is hitting the market in a few months and it could directly impact your health and wealth. Details here. I can't count the number of times investors have told me they lost a bundle "buying low." Here's a typical example: "I didn't buy Amalgamated Widgets until it had plunged from $50 all the way down to $15. It was at the 52-week low. No one had bought it cheaper all year. Yet I still got spanked. A week later it dropped below $10. A month later it was under $5. Now... well, I don't even want to think about it." This is where so many novice investors go wrong. They think if a stock is cheaper than it used to be, it must be a bargain. Know the Problem Not necessarily. Remember, when a stock suddenly falls out of bed while the broad market is flat or rising, something is clearly wrong at the company. Maybe sales are worse than expected. Maybe market share is down or profit margins are being eroded. There's a reason a company's shares have suddenly done an about-face, and you need to know what that is before you risk your hard-earned capital. Even once you know the problem, "caveat emptor." Yes, some companies hit the skids and eventually come roaring back. A good example is Green Mountain Coffee Roasters (Nasdaq: GMCR), which plunged last year on news of an SEC investigation into its accounting then soared 300% when nothing was found amiss. But there are plenty of other stocks that go nose down and are never able to pull out of it. Beware Value Traps The reason is obvious to anyone who has ever owned or managed a business. Many companies find a profitable niche and work it for all it's worth. But over time, things change. New competitors arise. Market conditions change. Customer tastes evolve. We've all seen this happen with local restaurants that are wildly popular one year and going out of business the next. Once a company loses its mojo, it can be difficult to get it back. That's why you have to be very careful, very smart and very patient if you are going to buy "fallen angels." Just ask Bill Ackman, the hedge fund manager who recently took a huge loss on J.C. Penney Co. (NYSE: JCP) just two years after taking a similar beating in Borders Group. Both stocks were value traps. So what is the right way to buy low? When the whole market hits the skids, as it did in the recent financial crisis. That's when you can buy with confidence, knowing that fear is causing investors to behave emotionally rather than rationally and great companies are thrown out with the bathwater. The 2007-2009 stock market meltdown was one of the great buying opportunities of our lifetimes. And you didn't have to be a financial genius to take advantage of it. Thousands of companies were selling at fire-sale prices. The Dow has more than doubled from its March 2009 lows and many individual stocks have risen threefold or more. Bulls Are Back Of course, we're back in a bull market again. That means you have to be vigilant. Fight the temptation to look for companies that are getting beaten up. That's not the way to buy low unless you are a sharp analyst with a long time horizon. Instead, look for companies that are rising but still selling at an attractive valuations relative to sales, earnings, dividends and book value. That's what gives you not only excellent upside potential but a high margin of safety as well. In short, there was more than a little truth in the market advice comedian Will Rogers used to give: Just buy stocks that go up. "But what if they don't go up?" someone asked. "Then don't buy them." Good investing, Alex Recent Articles: Investment U Over 1 Million Ounces of Gold Will Disappear: Don't be a victim of the Fed's tapering game. The next big bull market in select gold mining stocks is closer than many people think. The Energy Sector's Biggest Threat (and Opportunity): The business of tearing down these plants is creating a completely new sector of companies... creating thousands of jobs and putting millions of dollars in savvy investors' pockets. Recent Articles: Wealthy Retirement A 19.5% Yield? Don't Count on It: This gas and oil royalty trust's dividend is about as safe as a drunk 16-year-old behind the wheel of a Ferrari, having an argument with his girlfriend via text message. Holiday Shopping Is Also a Boon for Shippers: Right now, we're entering a stretch when there are a lot of companies poised for their annual profitable stretches. Find out why the transport sector is one of the textbook October to May trades. We're Releasing a Hot New Pick Monday Afternoon... This Monday we'll release a new investment opportunity to our subscribers. And we'll release another one on Tuesday... another on Wednesday... and so on. Past recommendations have seen gains of 225%, 415.19%, and even 733.33%. To make sure you receive our next play, go here now. Digging Up Gold The Coming "Three-Minute Crisis" The final phase of the debt crisis is looming - creating a $93 trillion investment opportunity. Here's how...                   – SHARE INVESTMENT U – If you enjoy reading Investment U, why not share it with your family and friends? Simply send them this link, so they can sign up (for free, of course). – QUESTIONS – Republish Investment U on your website or blog for free. Learn how. Have a question for our editorial team? Contact us. You are receiving this email because you subscribed to Investment U. 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