3 falling stocks to buy today

Buying stocks after they have endured heavy falls requires real guts.

Many investors choose to remain on the sidelines, and indeed, many shareholders choose to sell, hoping to limit their losses. But pressing that ‘Buy’ button is by far the scariest course of action. Get it right, and the rewards can be fantastic, but get it wrong and the losses are likely to be twice as painful.

I certainly know the feeling. I bought shares in Codan Limited (ASX: CDA) at one point last year after they fell roughly 10% on a single day of trading. The company hadn’t released any news so I figured it was just normal volatility for a small-cap stock.

Boy was I wrong… Going from memory, it dropped a further 30% or so in the coming week! Luckily I sold out soon after or else my investment would have easily halved by now…

Like I said, there are some knives you really don’t want to be catching.

But then again, taking that initiative and buying a stock when the rest of the market turns their back can also be truly rewarding! After all, every stock goes through cycles or periods of profit taking, and buying at their lowest points is one of the best ways to make terrific gains.

Here are three companies that have endured heavy falls in recent months which I think are fantastic buys right now – regardless of whether they fall a little further in the near-term. They each represent strong businesses which could post fantastic gains in the long-run…

  1. Cover-More Group Limited (ASX: CVO) is Australia’s leading travel insurance company. While the stock rose strongly after debuting on the ASX in December last year, it has now fallen more than 25% since peaking in May. Although the company is still trading on a projected P/E ratio of 20, strong growth is anticipated in the coming years – particularly with the magnitude of international travel pegged to remain strong.
  2. Veda Group Ltd (ASX: VED) also debuted on the market in December last year and has followed a very similar trajectory to Cover-More. While its shares peaked at $2.55 in March, it is now sitting 21.8% lower at just $1.99. Veda is a data analytics group which enjoys a dominant market position (it maintains records on 20 million people and 5.7 million businesses) and has a very strong track record for growing revenue and earnings year over year.
  3. Coca-Cola Amatil Ltd (ASX: CCL) is a company which needs no introduction. As Australia’s largest beverage distributor, it has enjoyed enormous success over its lifetime. However, that cannot be said for its most recent 12 months or so. In fact, the shares have dropped 39% since May 2013 on the back of declining profits and concerns for its growth in Indonesia. I believe the issues facing the business will be contained to the short-term and that the company will return to dominance to deliver fantastic shareholder returns in the long run. At $9.25, the stock is also expected to yield an impressive 5.5% in 2015.

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Each of the companies mentioned above has what it takes to deliver market-beating returns in the long-run. While I have acquired shares in Veda and Coca-Cola Amatil recently, Cover-More is also firmly on my radar.

Another stock I already own is also one the Motley Fool's top analysts have tapped as their number one stock pick for 2014 and beyond. This small-cap growth stock flies under the radar, yet is rapidly growing, and has a long runway ahead. The fully franked dividend is the icing on the cake. Click here now to claim your free copy of "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Ryan Newman owns shares in Coca-Cola Amatil and Veda Group.

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