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. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  2. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  3. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  4. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  5. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  6. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  7. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  8. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  9. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  10. Investing News

    Corporate Bonds or Stocks: Which is Better Now?

    With market volatility high, you may think it is time to run for corporate bonds instead of stocks. Before you do take a deeper look into which is better.
  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
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!