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On The Up: Undervalued Stocks Expected To Rise Post Brexit

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On The Up: Undervalued Stocks Expected To Rise Post Brexit

In the aftermath of the UK’s decision to leave the European Union, markets worldwide took a big tumble.

But as the dust settles some stock may have fallen too far and now be worth looking at by investors.

No need to panic

It’s a regular occurrence.

Markets take a fall and spooked investors dump their stock.

This is counterproductive, as they forget the golden rule of markets: they always recover.

And there’s no way to profit from a market recovery if you’ve already shipped all your stock out.

Market recovery

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As is clearly shown here, the S&P 500 index has delivered steady gains over the last week.

After the initial shock the Brexit (British exit) vote gave to markets, the recovery has been sure and steady.

Investors who have ditched their long-term investment strategies in a bid to avert short-term losses will have already missed some of this returning value.

Undervalued stocks

One inevitable consequence of this panicky behavior is that stock which gets caught in it can become seriously undervalued: that is to say, it has fallen in cost far below its true worth.

Market analysts expect some of these stocks to rise considerably in value over the next twelve months, so which should you look at?

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Wise investment checklist

Do bear in mind that the primary key to sensible investing is to think long-term.

Markets will always fluctuate, but the long term trend is growth, so look for stocks which have performed poorly recently, but those which analysts think have the potential for long-term growth.

When selecting stock, remember:

  • Do your research
  • Don’t panic at short term loss
  • Pick carefully
  • Diversify your portfolio

Stocks to look at

Over the last year, there have been some stocks which have performed relatively poorly, and in the aftermath of Brexit, this poor performance was amplified by the shock to the world’s economic system with over a trillion dollars wiped off the value of stock worldwide.

Since then, though, we’ve already seen a recovery.

So which stocks have fallen too far?

Banks worth looking at

Given London’s status as a financial capital, banking stocks took a big hit in the face of nervousness about the City of London’s continued global status.

But these stocks took a bigger hit during the banking crisis in 2008; they recovered from that, and they can recover from this.

Morgan Stanley dropped 10%, the price is recovering but has yet to recover the full 10%.

Citigroup fell by 9% on June 24th, and the price is still falling slightly, but again at a slower rate, indicating that the stock has bottomed out.

Bofi Holding In has dropped 41% over the last year, but analysts expect it to rise 98% over the next.

Other financial institutions are worth looking at, in the wake of financial shock, this sector is hardest hit and can easily become undervalued.

Other sectors

Stocks linked to financial infrastructures can also be hit more heavily than their true worth. Sectors worth looking at are telecoms and tech, as these are industries which service the markets.

ARRIS (ARRS) International shares are down 33% over the last year, but market analysts give it a consensus price of $30.72, as opposed to its current trading price of a shade over $20.

Lumos (LMOS), a specialty telecoms company, has seen a 29% drop over the last year, but as this graph shows, is already beginning to recover.

 

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The trend with this stock is good, and analysts generally feel bullish about it.

Encore Capital group (ECPG)has seen big losses of 58% over the last year.

But consensus amongst analysts is that the next month will lead to a 38% rise.

A top pick

One stock which stands to gain a great deal over the next month isn’t even remotely connected to the financial sector, other than being a listed company, is Abercrombie & Fitch (ANF).

Currently valued at $17.77, investment bank Jefferies values it far higher, at $35, an implied investment gain of a mighty 98%.

Conclusion

In the aftermath of any major shock, world markets suffer.

But they always bounce back.

The key to good investing is doing so for the long haul, and the clever investor will gather a broad range of opinions.

Market analysis will lead to a consensus about where a stock is likely to be headed.

And now is a good time to pick up stocks which should rise a great deal over the next year.

There are large profits to be made.

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