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How To Find Undervalued Stocks To Trade For Profit - Value Investing 101

investment stocks trade Nov 06, 2019

 

I want to cover a concept that a lot of you guys have heard about from Warren Buffett, Jack Bogle, all of the true billionaire OG legends of investing, which is the concept of how to find undervalued stocks.

In order to be successful with day trading and choosing the right undervalued stocks, you need to learn to trade based on technical analysis of a stock's price chart.

 

 

This is an example of a price chart.

Price charts let you know whether or not you should buy or sell a stock.

 

Undervalued Stocks Don't Receive Enough Attention

Undervalued stocks don't usually have much volume traded. Often times they're just lying sectors operating businesses.

However, every now and then they come back with strong urgency.

There are certain parts of a company's profile which help you to figure out how if you should hold on to their stock- that's the integrator value.

  • Warren Buffett and these guys used to peruse the stock market looking for undervalued stocks.

They didn't have all of the information online, so they would actually read the annual reports or the 10ks of every single stock and try to understand which stocks and which industries were up-and-coming and could be utilized for-profit purposes.

We are fortunate nowadays to have all the information we need right at our fingertips. 

 

Everything Will Always Revert Back to the Mean

Generally speaking, if you look at the overall trend of a stock, it always tends to go back down to its core.

That doesn't mean go down to zero, that means to go down to its average medium trading.

This stock, for example, seems to trend around 15 to 20-cents.

 

 

Therefore, we can expect that generally speaking, even when it sometimes dips lower, there's a high chance of it going back to the mean.

 

Technical Analysis

This involves looking at the support and resistance lines of a stock, and how you can tell whether or not you should buy or sell that stock.

When you come across a new stock, there are so many pieces of information to consider and it may feel overwhelming. 

So, I want to help break things down for you.

The example stock we're going to be looking at is CVLB Conversion Lab Inc.

 

 

This is not investment advice; this is just educational advice on how you can look at important pieces of the puzzle to understand which stocks are great to invest in.

First of all, you need to know the fundamentals.

You need to understand what the stock does.

 

Understand What the Company Does

Looking at CVLB, we can see they're essentially modernizing healthcare through telemedicine. 

 

 

Telemedicine is probably one of the greatest modernizing technological shifts happening right now.

With telemedicine, you'll no longer need to physically go to a doctor's office wasting time and waiting for hours to be seen.

Through the new platforms, you can literally sit in your living room and have a whole diagnosis done by a medical professional through a video call. 

It's an incredible concept that I believe people from all around the world are going to start taking advantage of.

 

Understanding the Industry and the Marketplace

The reason the industry or the trend is so important is that it's like a rising tide that raises all boats.

You need to look out for a company that's going into the next round or the next level of future technologies.

  • Those are usually the ones that you want to keep your eye on because they're generally trending and their value will go up.

Even if the stock itself (in this case CVLB) is not performing to their top ideals, but the industry of telemedicine is gaining more importance, more people will get involved in the industry and want to invest in it.

That’s one of the key reasons why CVLB has an advantage because essentially, they're taking advantage of that telemedicine technology.

 

So once you have found these undervalued stocks you want to take a look at their prior financials and figure out what direction the stock is moving in.

 

 The 10k

The 10k is an important part of an SEC filing that every company on the stock market is required to fill out. 

 

 

The SEC (Securities and Exchange Commission) is the body in the United States that is responsible for the protection of investors and of watching over public companies to make sure that they're not falsifying information.

Any company that has its shares on the stock markets like Twitter, Facebook, Netflix, Google, is required to submit a 10k annual report.

  • Some of these get quite lengthy but go into detail about everything you’d need to know about the stock. 

They tell you about the business, the risk factors, the properties, all the legal proceedings, all the disclosures and they have detailed information on the financial history, how many times they issue out stock to different consultants, how many times inside people, like the CEO are buying and selling the stock, etc. 

  • The 10k is basically the entire blueprint of a company.
  • SEC filings will tell you the entire history of the company and also general future projections.
  • Volume comes and goes; you just have to keep a track of where it waves in the stock market. 

 

 

Conclusion

There's a lot of different parts to this and a lot of research you want to do but the key aspects to take away are:

The industry- Making sure that the trend is growing and making sure that the space a company is in is good.

The financials- You have to understand the company’s story and make sure that it is not about to go bankrupt and that there's no major lawsuit going on that might put the company hold or stop their operations.

  • All you have to do is Google 10k and you'll be able to find all the information you need about a stock.

You’ll be able to find in-depth details about who the CEO is, how much they’re being paid, how many shares of stock they have, all of that information.

This is the exact information that the billion-dollar companies use and people like Warren Buffett used to get an advantage.

 

 

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