Indian stock markets are making new highs every day and lure people either to trade or invest. In fact, the stock markets are always been a much sought-after investment option among the people, because of its lucrative returns. But, let’s not forget that investing in stock market is a risky option too.
While for a large number of people stock market yields great returns yet there are numerous for whom the profits are not as per their expectation. This is due to the fact that every person in the market (whether trader or investor) uses different techniques. One such technique which very famous among the traders or investors is buying stocks that hit 52 weeks low. So the question arises – is it really worth buying stocks that hit 52-weeks low? Before finding the result, let’s first understand the basics of a 52-weeks low and why any stocks go to 52 weeks low.
What Actually Is 52-Weeks Low In Stocks?
A 52-weeks low is nothing but the lowest price of the stock which was traded in the last financial year.
6 Reasons Why Any Stock Hit 52-Weeks Low
- Weakness in The Financial Structure of the Company: It is the financial structure that helps any organization to generate revenues. And if the money structure itself remains weak then any company would find it difficult to generate income. This forces the stock’s price to go down and making it as 52-weeks low.
- Poor Debt Obligation: An increasing debt over the company (up to some extent it is bearable) signifies its liabilities causing a stock price to go down. A poor debt obligation by the management can be pretty harmful to the company’s overall growth prospect and thereby it also affects the stock prices.
- Poor Cost Control: Higher expenses and a poor cost management generally results in a more outflow of capital. This lower capital also leads to a fall in the company’s stock prices.
- Weak Management: A weak management in the organization, especially at the top level, can create panic among the investors. Management decisions and various steps taken by them greatly affects the stock price. One bad decision and the price starts falling down.
- The Company Fails To Accept Changes: Rigid structure doesn’t allow the company the flexibility to adapt to the economic and market changes. This tends to result in the company’s stock prices fall until the situations go under control.
- The Operating Sector Is Beaten Down: There might also be a possibility when the entire sector in which the company operates is not doing well. This would badly affect the company’s progress and stocks and may likewise touch a 52-weeks low.
Is It Really Worth Buying Stocks That Hit 52 Weeks Low?
- Every investor when the market is in a flying mode aims to buy the stocks at a lower price and then sell it off at a higher price to make a profit. So, looking at the situation from this point of view a 52-week low price might seem lucrative to you for buying. But Is It worth Buying Stocks That Hit 52 Weeks Low – the answer is NO. Merely looking at the stock prices is not enough to buy them. What matters the most is its future performance. There are lots of other factors which you must consider before taking any action.
- The reason why stock experts don’t suggest a stock at its 52-week low as a value buy is not the declining prices but the reasons could be any of the above mentioned six. These reasons are good enough to analyze possibilities of a lower yield in the future for the stock, making it not a value buy.