If you started your stock investment journey in 2020, you likely purchased a lot of really good companies for inexpensive prices.
Obviously this had a lot to do with COVID uncertainty and the slight "crash" we experienced in the stock market during March 2020.
Fast forward to Q4 2021 and stock prices look very different!
Now, if you invested heavily in 2020 you're probably looking at your stock account and popping a bottle of Moet, patting yourself on the back.
You're account has nearly doubled in value in a very short amount of time!
However, if you are just now in the beginning stages of your journey, you're probably looking at current stock prices with a side eye saying...
"How in the hell am I supposed to start investing in stocks with these high ass prices?" That's totally understandable. The S&P ( which is the index we use to measure the overall health of the stock market) is up 96% since March 2020. Again, that's really good if you already own stock but not as good if you are just starting to purchase. Don't trip, I. Got. You! So, boom this is what we are going to do (doesn't matter if you're just starting or experienced):
focus on Undervalued stock and Emerging Markets! (I know, I know... break down the nerd talk into regular language Star!) Got you...
Undervalued Stock = a company whose stock costs less than it should due to no fault of the company.
For example, (and this is not to be considered a stock recommendation) Macy's.
As with most retailers, Macy's took a HUGE hit during the pandemic and the hit was reflected in their stock price. It dropped significantly.
However, before the pandemic, Macy's had already started shifting its focus from malls to online shopping, in an attempt to compete with Amazon. Therefore when the pandemic hit they were already ready! They have a built in structure which accommodates a lot of free shipping, easy returns, tons of merchandise, reasonable prices, etc.
Stay with me here... However, even with their growing online presence, and the fact that they actually did really well in 2020 compared to competitors, the stock price still dropped because they did not make money in stores and had to permanently shut the doors on many of their physical locations. A stock is priced based on the perceived value of the overall company. Therefore not making money and closing stores seems like the value of the company has decreased right? Yes, but not necessarily. Macy's basically looked Wall Street in the eye and said "decreasing where? who? nah boo this is called pivoting. I got this, just sit back and watch me work"! And they are doing just that.
Macy's could care less what one year of change and havoc "looks" like to eager investors. They've been around and they are showing us they're not going anywhere any time soon. Now, in Q4 of 2021 the price of a share of Macy's is lower than it should be. Therefore making it UNDERVALUED or a VALUE stock. If the value of Macy's (the total company) was $200 and they broke up the company in 10 pieces placing the 10 pieces (pieces= shares= stocks) for sale on the stock market, each stock would be worth $20. But if you could buy a stock of the company for only $15 even though it's worth $20 then you bought it at a value right? These are the kinds of stock we are going to focus on buying right now. This will allow us to continue to invest without the heavy price tags we're seeing in today's market.
Whew, ok that was a lot! Even for me. I was going to go into what Emerging Markets are but I'll cover that in Part. 2!
If you found this information useful, forward it to a friend! If you'd like guidance on creating a stock portfolio built for you click here to learn more! Either way, be sure to add some value stock to your portfolio asap!
Talk soon,
Star, SHEbuildingHER