When to Buy a Stock: Navigating Downward Momentum and Momentum Stocks
Investors often struggle to determine when to buy a stock, especially long-term investors who don't have the same chart patterns used by traders. A listener wrote into the Zacks Market Edge Podcast seeking advice on how to overcome this uncertainty.
Tracey Ryniec, host and Zacks stock strategist, discussed three scenarios where investors may be hesitant to buy a stock: downward momentum stocks like McDonald's Corp., which has fallen 22% year-to-date; momentum stocks that have soared too high, such as Sandisk Corp., which is up 665% this year; and cyclical and value stocks.
In the case of McDonald's, the shares are not cheap despite being at multi-year lows. With a forward P/E of 19.4, investors may be hesitant to buy in, especially when sales are expected to grow by only 4.8% this year.
On the other hand, Sandisk is both a growth and value stock, with a forward P/E of just 8.9 and earnings expected to rise 201% this year on sales growth of 143%. Despite being up 665% this year, it's still considered cheap.