Wallflower
Candlefocus EditorUnlike growth stocks, which may be part of a hot trend, wallflower stocks are usually from neglected industries or markets, consequently carrying increased levels of risk. However, the lack of investor attention gives these stocks the potential to significantly outperform the market over the long term if correctly identified.
Finding and investing in wallflower stocks is an art, as it involves seeking what the market has overlooked. Investors often start with a list of stocks with low trading volumes, low price-to-earnings ratios, and high dividend yields, and narrow this down until a list of potentially strong investments is identified.
Once on such stocks is identified, investors need to extensively research it, analyse past data and forecasts in order to get a sense of how viable and attractive the stock is. Doing so gives investors a better chance to make wise investment decisions in what is undoubtedly a high-risk form of investing.
Wallflower stocks may become the outperformer of tomorrow, provided that investors do their due diligence, scrutinise their potential returns, diversify their risks and recognise there is no guarantee for success. A successful investor must be a skilled in researching, analysing and judging potential stock picks without being swayed by market sentiment.