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Cheap Stocks Carry Expensive Risks.(A)(INVESTOR'S CORNER)
Byline: MONIKA TJIA
It might seem tempting to buy a stock worth only a handful of pennies a share. You'll be able to grab a bundle of shares. But think twice before committing a truckload of spare change.
Low-priced shares may seem like great bargains at face value. Look a little deeper and you'll realize that you get what you pay for. Stocks sell for what they're worth.
Even if a stock trades for only a buck a share, the market has no regrets knocking it down further if it doesn't have what it takes to go higher. So what does a stock need? Strong fundamentals and prospects for future growth definitely help.
In general, avoid stocks trading at 1, or even those hovering below 10. IBD's main stock tables only include those trading at 10 or more.
By looking at stocks priced above 10, you'll have more luck finding a quality stock.
Among 50 of the best stocks in 2000, the average pivot point, or ideal buy price, was 35.2. All stocks had to trade at 12 or higher at the start of the year.
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