This Kind of Stock Isn’t a Bargain

Hey friend,

It’s Election Day, but we got fresh economic numbers before the votes are counted.

Job openings came in at 7.5 million versus 7.1 million expected. Factory orders rose 1.8%, beating the 1.3% forecast.

Both reports were stronger than expected. Let’s see how the markets have been moving.

The Daily Direction

Note: Stocks pulled back again yesterday but have largely been moving higher today – with the exception of the Dow, which has seen both its short and medium-term directions fall back into negative territory.

The Daily Nugget

A big drop doesn’t make a stock a bargain.

A stock falls from $100 to $50, and it looks like a half-price sale.

But that assumes it was worth $100 in the first place.

Maybe buyers got carried away. Maybe the company is now earning less, losing customers, or facing a problem it didn’t have before.

The old price doesn’t tell you what it’s worth today.

Still, it’s easy to fix on that $100 peak.

You start counting the money you could make if the stock “just gets back” there.

But it has no duty to return.

And a stock that has fallen 50% can fall another 50%.

Before calling it a bargain, you need a reason to believe the selling has gone too far.

That means looking at the business now – and what could improve from here.

A lower price is only useful if you’re getting more value than you’re paying for.

The Traders Agency Team