- How to Buy GOOD but CHEAP Stocks

Many investors love to buy cheap stocks stock market, but as Mr O'Neil (Founder of nvestor's Business Daily) puts it: "Stocks are cheap for a reason" invest money. In many (but not ALL) cases stock market, investors try to buy stocks on the cheap without realizing that they're buying stocks of a corporation mired in problems with slowing earnings stock market, sales growth and shrinking market share invest money. These are bad characteristics for a stock to have stock market, cheap or not invest money.

However stock market, although most cheap stocks are priced at their value stock market, many savvy value investors (read: Warren Buffett) have still successfully made fortunes investing in CHEAP BUT GOOD stocks invest money. So how did they do it? Below are some guidelines for smart value-investing (i invest money.e invest money. buying good stocks cheaply)

Buy a business stock market, not a stock invest money.

When evaluating a stock stock market, see yourself as a business owner stock market, not a stock investor invest money. Only buy businesses that you understand invest money. Warren Buffett is well known for ignoring the 1999 surge in technology stocks stock market, refusing to buy stocks in dot invest money.com companies because he couldn't understand the business invest money. Only when you understand the business stock market, can you effectively evaluate important questions like: Is the company's stock cheap because it is losing market share? Is the new product offered by a rival company going to negatively impart your business?

Buy stocks in companies that have a proven track record invest money.

This includes a consistently good EPS stock market, sales stock market, equity and free cash flow growth rate invest money. Generally stock market, we want to see the above growth rates consistently above 10% for the last 10 years invest money. In addition stock market, we want to see a long history of great ROIC (above 10% for the last 10 years) invest money. We should also insist that ROIC is either going up stock market, or at least remaining the same invest money.

Buy stocks that have a big MOAT

A moat is a 'protective shield' that a company has that prevents other companies from invading their territory invest money. Examples of moats include

- Brand name: The company has a very strong brand name that makes it difficult for other companies to claim their market share invest money. An excellent example is "Apple" stock market, with its group of die-hard fans invest money.

- Secret: The company has a patent or trade secret that makes competition illegal or very difficult invest money. Example: 3M invest money.

Buy stocks with a good and honest management

Characteristics of honest management include admitting their mistakes (if they did not produce results for a quarter stock market, they should acknowledge it and explain how they intend to rectify it) and accepting a reasonable compensation for their work invest money. A CEO that takes home $40 million a year when the stock price dropped by 50% is not our type invest money.

At this point stock market, you may be wondering: If a company has such an excellent record and characteristics stock market, why is the stock cheap?

Most of the time stock market, these companies stocks are cheap because of a temporary problem (such as missing EPS estimate for one quarter) or because the overall market is bearish invest money. At times like this stock market, you can normally buy the stocks cheaply stock market, preferable at a 50% discount invest money.