NEW YORK (TheStreet) -- Stocks are likely to continue rising over the long term but there is also a rising probability of a near-term correction. Expectations of further significant gains in the mid-term is waning.
What's a cautious and value-oriented investor to do? Selling in an up-market is likely to cause underperformance while staying fully invested could cause some stomach-churning moments.
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Why are they underperformers? The trick is to identify those stocks that have done so as a result of the market mispricing the stock, not because of a systemic issue with the company.
For those willing to do their homework and stick with a strict and consistent investment discipline, these three underperformers could shine over the next 12 months.
Toyota: The company's troubles have been well documented over the past couple of years. Its shares, at close to $116, are down over 5% for the year to date. Yet, consider these points:
- Toyota has managed to beat earnings estimates over the past two quarters
- TM still (only) has a trailing P/E of 10.5.
- With a dividend approaching 3%, Toyota could be a smart investment over the next few years.