Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Bob Walberg joined NBR on Monday (watch video and read transcript here) to reveal his favorite beaten-up stocks.
Buying stocks is as much about timing as it is about research. It's important to do your homework and find stocks that meet your investment criteria, but even then you might be in for tough times if you don't pay at least some attention to timing. Psychology plays a critical role in determining a stocks price, and if you like to buy stocks at a good value, as I do, then you want to make sure to spend considerable energy on ascertaining a proper entry point.
Most of us have heard the phrase, "don't try to catch a falling knife." What this pithy little phrase means in the investment world is pretty obvious: If you buy stocks that are falling, you might get cut and bleed out before the stock bottoms and starts to go back up again.
Here's the problem for the value investor -- opportunities generally arrive from the fact that the stocks we are interested in are out of favor. They are losers for one reason or another. So we want to find stocks that are out of favor but not likely to keep falling -- or at least not much further.
That's the key to playing the value game successfully. If your timing is wrong, you might find a great company that has temporarily fallen out of favor and therefore seems like a good buy. However, if the stock goes down another 20-25%, you're probably going to get washed out before the turnaround takes place and the real money is made.So with the market having been on the defensive since May, there are a number of stocks trading well off their 52-week highs. It's a value hunter's paradise -- if you are patient and if you find stocks where the selling is largely exhausted. I've identified three such bargains that I want to share with you now. Mind you, all of these stocks are down big from their highs and are not the names you are apt to hear mentioned on programs like "Fast Money" or "Mad Money." But for investors interested in making serious money over the next 12-18 months, these beaten-down giants have great potential.