Here'sone certainty about the stock market: The market does not know who you are. The stock market exists because every day, thousands of buyers and sellers come together to buy and sell shares. Many market participants fail to produce results because they let the actions of those individuals, and not the fundamentals driving the business, determine whether they buy or sell.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Buy Low Sell High
Of course the way to exceed in investing is to buy at one price and sell at another price. In bull markets its seems as if all investors are buying low and selling high. But as investors know all too well, bull markets are not permanent and successful investors do well in both bull and bear markets. Many investors let emotions dictate investment decision making and thus chase popular businesses and abandon unpopular businesses. When Netflix (Nasdaq:NFLX) was popular, investors well happily paying 70 times earnings for the company. Now, after a few setbacks, shares trade for $64 and less than 15 times earnings, yet investors are running away. Unpopularity in investing is actually a good thing: The opportunity to buy cheap is greatly increased. Price paid confers value received, and the lower the price the better. (For related reading, see Digging Deeper Into Bull And Bear Markets.)

Big Returns Await
Meredith Corp
(NYSE:MDP) publishes over 20 subscription magazines like Home and Garden and operates 12 television stations. With the Internet changing the face of advertising, magazines are no longer a glamor growth business. But Meredith's assets continue to produce solid consistent cash flows and the company is rewarding shareholders with 5.7% dividend yield. At $29 a share, the company is being valued at 10.7 times earnings, a favorable multiple for a big yield.

The market cares little for construction stocks today. So names like Sterling Construction (Nasdaq:STRL) and Terex (NYSE:TEX) are trading at favorable prices. Terex trades at 75% of book value, while Sterling trades at 70% book. Sterling already generates excellent profitability, while Terex has restructured the business that will be very profitable in the near future. Neither company has any exposure to residential real estate construction.

The Bottom Line
Popularity is the enemy of the stock market investor. Investing is all about making money, not about doing what is popular. Buying at favorable prices often requires buying stocks that are out of favor.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Sham Gad did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing

    Playing The Decline of Traditional Broadcast Media

    Broadcast media is losing viewership as cord cutting by the younger generation triggers subscription losses at cable and satellite companies.
  4. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  5. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  6. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  7. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  8. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  9. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  10. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center