7 Secrets to Successful Income Investing

Secret #7 – Bet on Mispriced Bets

The market often underrates the long-term prospects of some stocks, and often those are dividend stocks. A “mispriced bet” means buying a cheap stock with strong growth prospects that the market has misjudged. Of course, we can afford to be patient since we’re getting paid to wait in the form of dividends.

There are a few factors to keep an eye out for that can signal a mispriced bet. An abnormally low P/E ratio compared with the company’s projected growth is a big red flag. A strong balance sheet and competitive edge can also help rule out superficially cheap stocks that are headed nowhere fast.

Lastly, watch out for that cloud of misunderstanding. Companies trading at low valuations are often involved in some sort of legal troubles or analyst criticism, etc. If this poses a clear and present danger, book it out of there. But if I see that investors are making a mountain out of a mole hill, it’s time to pounce!

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