InvestorQ : How do we differentiate between cheap and attractive stocks here?
Arya Nanda made post

How do we differentiate between cheap and attractive stocks here?

Answer
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Tisha Malhotra answered.
2 years ago


Cheap trash here could mean a variety of things. As a broad rule, it means a stock that is correcting because that is what it is actually worth. Take the example of Kingfisher Airlines in 2011. Well before the bankruptcy was announced, the company stock price had started falling sharply. But the media and analysts were overly optimistic about the stock. The company was struggling to make its ends meet, it was already defaulting on salaries and it was also defaulting on statutory payments. There was no way the company could sustain the business model. Not surprisingly, the stock just fell vertically and eventually became a worthless stock. The same is the case with small companies with dubious business models that start crumbling once the plot unravels.