Be Careful When Chasing Cheap Stocks
Tim Knight | Mar 31, 2020 01:11AM ET
There’s a narrative being pushed in the mainstream media right now that people should buy stocks because they are “on sale.” Here are some examples of stocks which people gobbled up late last week—Granite Point Mortgage Trust (NYSE:GPMT), Eldorado Resorts (NASDAQ:ERI), The Michaels Companies (NASDAQ:MIK).
As of Monday’s close, they have already lost almost half their value from the purchase price. I would point out that these losses were in the face of a nearly 700 point gain in the Dow on Monday!
The “poster child” for getting a stock cheap was, of course, Boeing (NYSE:BA). And, at $89, it was briefly cheap. But after it ran up over 100% in price (based on bailout fever), the cheapness was over. Notice how much it has slipped back already, and on huge volume. My point is: there are good reasons these companies fell hard in the first place.
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