When is 'cheap' not really 'cheap'?
A Christmas present-themed example might be an old computer game that once cost $100 but can now be bought for just $10 because games with better graphics and storyline have come out. The lesson here is that just because the game has dropped 90% doesn't necessarily make it a bargain.
The same can be said for stocks- take Lynas Corporation Limited (ASX: LYC) for instance. The share price was once $2.70 but recently plunged as low as 4 cents. Most investors will agree that the 98.5% discount to the all-time high doesn't make Lynas a bargain.
Quality at Low Prices
In the example above Lynas would be the old computer game that's been superseded by better options even though they might not appear as much of a bargain.
Here are three great examples set to provide more joy to investors in 2015:
Crown Resorts Ltd (ASX: CWN) operationally had a fairly unspectacular year. The group's Macau venture has suffered from lower customer numbers and investors are getting a little nervous that Jamas Packer is taking on too many growth initiatives. However, I love the way the company is going and the shares look great value at the current depressed price.
Iron ore miners and oil producers have had a tough year, few more so than the highly leveraged Fortescue Metals Group Limited (ASX: FMG) and Santos Ltd (ASX: STO). These high-risk plays are tough for conservative investors to look at, but Oil Search Limited (ASX: OSH) presents a good long-term option for investors willing to take on a little more risk.
The share price of Domino's Pizza Enterprises Ltd. (ASX: DMP) has pulled back a little from its mid-year high for no apparent reason and analysts are still expecting solid earnings growth this year. Quality companies like Domino's rarely look cheap but a dip back towards $23 could represent a good long-term buying opportunity based on its current growth trajectory.