How do you invest in undervalued stocks? | KLSE Stock Series

Here are some of the undervalued stocks in Bursa that you may be interested to study more.

All these KLSE stocks are selected based on their market cap.

Mostly are big cap stocks.

Name	Code	Category	Price (RM)	Intrinsic Value (RM)	Delta	Value
MAYBANK	1155	Financial Services	8.92	8.05	10%	Overvalue
PCHEM	5183	Industrial Products & Services	8.71	12.46	-43%	Undervalue
RHBBANK	1066	Financial Services	5.75	7.58	-32%	Undervalue
SIME	4197	Consumer Products & Services	2.24	1.91	15%	Overvalue
TOPGLOV	7113	Health Care	0.805	3.2	-298%	Undervalue
IJM	3336	Construction	1.73	0.36	79%	Overvalue
UTDPLT	2089	Plantation	15	16.62	-11%	Undervalue
YTLPOWR	6742	Utilities	0.745	0.85	-14%	Undervalue
HARTA	5168	Health Care	1.62	10.7	-560%	Undervalue
BURSA	1818	Financial Services	6.43	5.16	20%	Overvalue
ASTRO	6399	Telecommunications & Media	0.845	1.02	-21%	Undervalue
LCTITAN	5284	Industrial Products & Services	1.69	0.96	43%	Overvalue
MALAKOF	5264	Utilities	0.7	0.64	9%	Overvalue
BAT	4162	Consumer Products & Services	10.26	12.06	-18%	Undervalue
KOSSAN	7153	Health Care	1.02	11.91	-1068%	Undervalue
SUPERMX	7106	Health Care	0.755	19.99	-2548%	Undervalue
TALIWRK	8524	Utilities	0.94	0.47	50%	Overvalue
HSPLANT	5138	Plantation	2.32	4.93	-113%	Undervalue
TAANN	5012	Plantation	3.79	11.66	-208%	Undervalue
KMLOONG	5027	Plantation	1.69	1.94	-15%	Undervalue
BPLANT	5254	Plantation	0.71	3.85	-442%	Undervalue
UCHITEC	7100	Industrial Products & Services	3.27	3.4	-4%	Undervalue
MBMR	5983	Consumer Products & Services	3.31	8.27	-150%	Undervalue

What are undervalued stocks?

Undervalued equities are stocks that trade below their anticipated value. They frequently have a track record of being successful, and the potential for long-term development, but the stock market hasn’t recognized it yet.

It is always nice to buy something which is on sale.

For instance, if you browse a sale and notice something is worth RM200 but goes on sale for RM175, it may be deemed undervalued. Likewise, an undervalued stock trades below what it's worth.

Why are stocks undervalued?

Sometimes, stocks are discounted because they’re dragged down by their industry or the general market. However, the firms with such discounted stocks generally have robust balance sheets, high net free cash flow and a positive future outlook.

There are drawbacks to shopping for inexpensive stocks. There may be a reason the stock is selling below value, and that reason may not be immediately obvious. For example, the corporation might have basic concerns like unforeseen changes in the corporate structure or maybe challenges with financial management.

How to locate cheap stocks

If you’re seeking for inexpensive stocks, there are tactics you may apply. A basic approach is to ensure individual equities don’t make up more than 10% of your portfolio.

1. Look at the company’s price-to-earnings ratio and market cap

One technique to uncover inexpensive companies is by looking at a stock's price-to-earnings ratio, often known as PE ratio. The PE ratio is computed by dividing the company’s stock price by its profits per share. To get the earnings per share of a firm, divide its profits over the preceding 12 months by the number of shares issued and owned by shareholders. If you discover a company’s stock has a lower PE ratio, there’s a potential you might be acquiring quality shares at a reduced price.

In addition to looking at the PE ratio, a company’s market capitalization — or market cap — may also provide you insight into the real worth of a stock. Market cap is the entire worth of a firm’s shares of stock, and it may tell you how lucrative a company is. You may determine the market cap by multiplying the current price of a single share by the total number of shares owned by shareholders.

2. Target undervalued sectors

You might also explore looking at certain sections of the market when shopping for inexpensive companies.

For example, if tech stocks are on the down, you may seek for firms that have dropped along with the rest of the industry, but still show potential for great growth over the long run.

3. Do your research

Use your brokerage firm’s stock screener to reduce your search and uncover chances. A stock screener is a tool that makes it simpler for you to filter through stocks by utilizing precise search parameters. You may discover stock screeners at brokerages such as Fidelity, as well as on sites like Morningstar and Yahoo Finance. You can also use KLSE Screener.

Before selecting to buy in a stock, think about why you’re picking it, since your "why" will carry you through market turbulence. Also consider implementing Warren Buffet’s advise of just investing in what you understand.

4. Explore emerging industries

Undervalued equities aren’t merely those that have suffered a price decrease. They may be those of a corporation in a new or rising sector that isn’t mainstream yet, so consider that in your search, too. You might also play it safe by purchasing simply a few shares and seeing how your investment improves over time.

When cheap stocks become popular

Undervalued companies might become more enticing to certain investors in times of stock market instability.

The firms whose stock is inexpensive may have good cash flow and balance sheets. So even if the prices plummet, investors purchase because they’re buying what they think to be quality stock for less money before prices soar up.

Undervalued stocks may also become popular when a promising firm has exponential development but encounters some volatility or drops in price. 

In Conclusion

All investment comes with hazards, and discounted stocks involve risk, too. Some organisations that have cheap shares don’t end up successful, and occasionally investments further depreciate or take longer to fall in value.

Happy Investing! 😉