At the core, there’s two rules to investing: Buy in the trough and sell at the peak. Without doing this, we can’t ever make a profit.
I’m not saying we need to pick the exact lowest point the share price reaches (although well done if you are lucky enough to do so) and sell at the absolute peak, but buying cheap and selling expensive is the key to investing successfully.
There is only one way a stock or company can be considered cheap. When it’s unappreciated. That is, investors either don’t know about it or don’t care about it.
In blue-chip territory, many companies are obviously very well-known, so that means cheap companies are the ones which investors don’t care for. One company which I believe could catch investors unaware is Myer Holdings Ltd (ASX: MYR).
Although I sold my shares when the stock reached $3.20, at $2.77 per share, it appears priced for an unfavourable outcome in next Thursday’s H1 2014 report. This could be your opportunity to grab it whilst it’s cheap.
A common misconception in investing is you always need to buy the number one company in the sector. Challenger Limited (ASX: CGF) – a fund manager and annuities provider – was recently trading at a ridiculously low share price when other money managers like Perpetual Limited (ASX: PPT) and Platinum Asset Management Limited (ASX: PTM) were flying sky high.
It was the ugly duckling of the diversified financial market in 2013, but is now trading almost 100% higher. What’s more, I believe it’s still unappreciated when compared to its peers.
Lastly, amongst our big banks, Australia and New Zealand Banking Group (ASX: ANZ) is unappreciated. Not in share price (because I believe it’s fully valued for short-term traders) but in potential.
Its Asian strategy is slowly coming into the spotlight and analysts are now taking a second look at our only super regional bank. Despite Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) dwarfing it in terms of domestic market share across a number of products, our market isn’t growing fast enough to justify the high prices of those stocks.
ANZ will be the fastest growing bank of the ‘big four’ provided the growth of Asian economies does not come to a grinding halt, which is unlikely. Investors may want to keep it on top of their watchlists and wait for any meaningful set back in price, after all patience doesn’t lose you money.
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Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.