Cheap Stocks To Buy Now
- Sanzhi Kobzhan
- Jan 31
- 6 min read
Updated: 12 hours ago
There are many ways of selecting great shares. Some people rely on technical indicators and graphs for selecting shares for the shorter term, others use fundamental analysis and seek longer-term value. I prefer using both technical and fundamental analysis for selecting great shares. I use fundamental analysis for choosing strong and cheap stocks that can rebound fast if they start falling and technical analysis for finding great spots for buying those shares. In this article, I want to consider the stock selection process using both technical and fundamental analysis and how to filter stocks in order to find cheap stocks to buy now.
First thing you need to do is to filter shares based on fundamental and technical criteria. I will be using the Finviz stock screener for that. The first stage is to filter stocks based on fundamentals and then choose attractive shares based on technical study. Then after filtering stocks, we will be using the Stocks 2 Buy app for spotting great entry points and understanding if your chosen stock is a cheap stock to buy now.
Stage 1. Filtering Stocks Based on Fundamentals.
Inside the Finviz, go to the Screener tab and choose ALL filters as shown in the picture below. Then, in the filters, choose the Market cap "+ Mid" to make sure you are choosing stocks with a market cap of $2bln and above. Then, choose the EPS growth in the past 5Y of "over 10%" to make sure that the company is constantly showing EPS growth. And the last step is to choose a PEG ratio of "lower than 1". As it indicates, the share is undervalued based on that ratio. It means that the earnings growth is much better than the P/E ratio, and traders may expect the price to go up in the mid-term if the company will keep showing great EPS numbers.
After applying those filters, your stock list may look something like the picture below. Please keep in mind that your list may be different because stock prices and company financials change regularly.
Stage 2. Filtering Stocks Based on Technicals.
Now it’s time to add a few more filters, but this time let’s focus on technicals. Inside the filters, find the Performance and Performance 2 options as shown in the picture below. In the Performance, indicate the "month up" to choose shares that are rising within the last month. And the Performance 2 should be a "week down". By doing this, you are telling the screener to find stocks that were rising within the last month but started falling in a week. We do this to spot local minimums and potential entry points.
After applying those filters, I only have 7 stocks provided by FinViz. Now press the TA tab slightly below the filters to see graphs of those stocks. As shown in the picture below. You will have 7 different graphs. To pick stocks for further analysis, avoid shares that trade with Gaps often and that are too volatile.
Stage 3. Finding Cheap Stocks To Buy Now with strong Fundamentals.
At this stage, you should already have a list of stocks for further analysis. Now, let’s see if some of these stocks are good from the fundamental standpoint and are cheap. For this, download the Stocks 2 Buy app from the App Store. It is a free app for stock analysis. For my analysis, I will take the Aptiv PLC company with the stock ticker APTV. Although it has some gaps as you can see on the above graph, larger gaps don't appear often, and the stock is not showing aggressive volatility, which can be a good option for risk-averse traders too.
Now it’s time to analyze the stock with the Stocks 2 Buy app. Open the app, register, and log in. Then, on the Main Screen (the first screen that appears), input the stock ticker APTV and hit the Show analysis button. After pressing the button, the app shows you the analysis (the picture below). Let’s consider it in more detail.
Stock sentiment is 0.5, meaning that positive and negative mentions are almost equal, indicating traders and investment analysts’ neutrality. Equity rating is also neutral. This is consensus rating extracted as an average of different investment analysts’ ratings. This means that investment analysts don't expect huge surprises from the stock in the nearest future (such as stock target price updates, surprising corporate events, or huge surprises in financials). EPS surprise shows 8.92%, indicating that the company's actual EPS was 8.92% better than analysts expected. That’s a good surprise and it indicates that the company is able to beat analysts’ expectations. High surprise also creates a good probability for the company beating next reporting periods’ EPS, and this can result in a share price upside trajectory. The Stocks 2 Buy app assigns the Buy rating for the share price, driven by the absence of a Sell equity rating, market neutrality, and good EPS surprise. The stock trade recommendation is calculated using three indicators provided by the app.
Now let’s see when is the best time to buy the stock and if it’s strong fundamentally. For that, we will be using another screen inside the Stocks 2 Buy app. Open the Stock Type screen and input the APTV ticker in the text field and press the Analyze button. Let’s see the result that the app provides us.
The app is not providing the stock type and the best market where we can buy it because it doesn't have strong fundamentals (Piotroski score of 5 out of 9), low dividend yield (higher than 4% is considered a high dividend yield), and slow growth dynamics of 11.6% and -13.98% in the past 3 and 6 months respectively (this is lower than the industry average). Given all these factors, the app is not providing specific market for buying the stock (raising, falling or flat) since the stock is not strong fundamentally, although it has great growth potential of 33% suggesting that investment analysts think that the stock is cheap now and trading with a 33% discount to the current market price. However, based on the weak fundamentals, I would try to choose another stock for the longer term, the stock that would look better than its closest peers. You can make the same analysis to the stock peers or to the companies from your filtered list to find truly amazing cheap stocks to buy now. But just because the stock has a Buy rating on the mid-term, provided by the Stocks 2 Buy and a good growth potential (the stock target price is 33% higher than the market price), and a low volatility, this stock may be a good short-term to mid-term idea (from several days to several quarters), but due to weak fundamentals, I would not make it a main holding in my investment portfolio.
Stage 4. Finding Intraday Trade Ideas.
If you are considering this stock for shorter-term trades or even intraday, you can use another screen from the Stocks 2 Buy app, the Candle Analyst screen. Input the stock ticker and hit the Refresh button. The screen provides live stock price updates every 5 minutes. It also analyzes Japanese candlestick patterns and provides valuable signals on possible trade changes on the 5-minute trade intervals, so it can be a good idea to update the screen every 5 minutes to spot possible trend changes. Let’s see the analysis that the app provides.
The app spotted the Shooting Star pattern at 9:40, meaning that the stock is supposed to go down. And indeed, it started its downside move at 9:45, showing a larger red candle. Then, it did not show any patterns, although the stock started raising a bit, indicating that it was still early to buy the share. Then, at 10:15, the app shows the Doji pattern, indicating low traders’ confidence. When you see the Doji pattern on the downside, it can mean that sellers are losing their power, and buyers may take over, and vice versa. The Doji on a rising market can lead to a falling trend, but not always. Try to wait for another pattern that will give you stronger indications. Finally, we see a Hammer pattern at 10:20, indicating that the stock is supposed to go up, and indeed, it went higher at 10:25. The 📈 near the pattern name indicates high upside probability, where 📉 near the pattern name indicates higher downside probability. This is how to day trade for a living: update the screen regularly, every 5 minutes, until you see bullish candlestick patterns (for buying the stock/crypto) or bearish patterns (for selling stocks/crypto).
Now you know how to pick interesting shares based on fundamental and technical filters and know how to find cheap stocks to buy now with strong fundamentals. Stock selection takes time. Don't be in a hurry; take your time and don't worry if you did not spot good trade ideas today. Repeat your analysis the other day, and you will definitely find the best undervalued stocks to buy now or stocks to trade on intraday. I hope my article was useful. Please reshare it if you find it useful to help me spread the knowledge.
Commenti