Of course, buying at the beginning of the year the securities that have performed the worst in the previous year can constitute a investment strategy in 2020. Although we are going to check the advantages and disadvantages of this very original system to face the investment in the coming months. Because its greatest enemy will be the technical analysis that the data that have led these stocks to this delicate situation in the equity markets will mark us.
Either way, this stock market strategy aims to benefit from those stocks that performed worse last year. With the hope that in this year they can recover part of their positions, although they generally belong to sectors that are not in the portfolios of the main brokers: construction, industrial and services. And that in one way or another they have not behaved in recent months as expected by a large part of the analysts in the equity markets.
In any case, this investment strategy is characterized by the risk incurred in its operations on the stock market. Because if the previous trend continues There is no doubt that the losses can deepen in the coming months. To the point that you can lose a lot of money on open movements in these listed companies. As has been seen in previous years. Being one of the unwanted effects for small and medium investors. In other words, these purchases currently raise many questions that we will try to resolve below.
Buy lagging securities on the stock market
This system in the purchase and sale of shares on the stock market implies that from this moment you are going to opt for values that are in a downward trend, at least in the short term. Where, it is very important that within this investment strategy you bet on cyclical values that can initiate a recovery in their prices as a result of the increase in demand for their products. In these cases, the recoveries will be very intense with appreciations in their prices that can exceed levels of 20%. This is what has happened with bets like Acerinox or Arcelor Mittal.
These kinds of values can in themselves be a real business opportunity for the next few months. Because its change in trend is very violent and it can recover everything lost in the past exercises, no matter how much it had been. But in any case, what must be fulfilled is that this change in trend occurs in the end. Because if it is this way, the effects can be immediate with the revaluation of its shares under percentages that are worth mentioning for their spectacular nature. As well as the buying pressure exerted in the equity markets.
Improvement in economic expectations
Another aspect that should be assessed from this moment on is the conjunctural moment of the situación económica, not only in our country but outside our borders. In this sense, it should be remembered that in the event that the economic recovery is confirmed for the next few years, many of the companies that are listed on national or international equities will begin to collect these recovery expectations in their prices. From this point of view, it can become an investment strategy with an eye on the profitability of trading on the stock market. With very beneficial effects for our interests as small and medium investors that we are after all.
While on the other hand, the application of this system in investment causes our capital in the equity markets to increase considerably. But be very careful, because if this scenario is not met, the effects will be the opposite and then you would have no other solution than to sell the shares so as not to depreciate your portfolio. Because there is a lot of money that in the end you can leave on the way. Not surprisingly, this is another of the scenarios that you should contemplate from now on. And with it the risk of assuming this kind of operations in our relationships with the always complicated world of money.
Don't rush into operations
Being too impulsive and anticipating purchase opportunities, which sooner or later will appear in equities, is one of the main risks involved in this kind of operations in the equity markets. In the sense that it is true that you have more to lose than gain and therefore you have to correct this technical incident that can be so dangerous for your personal interests. While on the other hand, you also have to value the fact that this investment strategy has to be carried out with a very deep knowledge of the financial markets.
In any case, it is highly advisable that before carrying out these operations on the stock market you inform yourself about the economic situation in the world. So that in this way, you do not rush into the possible movements that you are going to take from now on. Because you can't forget that in the end the equation between profitability and risk it will not be the best possible. Not much less. As they are, in a certain way, operations that can be considered as merely speculative from the moment you develop them, regardless of the terms of permanence to which they are directed.
Discounted worst scenarios
Another of the scenarios where you can make a first contact with the equity markets is the one that discounts the worst case scenario in a stock market value. In this sense, it is enough to remember that it can be developed in solidly established companies that have discounted the worst of the possible economic scenarios in their income statement. This may be the specific case of Telefónica, where everything seems to indicate that their prices have already seen the ground by trading slightly below the levels of 6 euros for each share. Therefore, with a higher revaluation potential than in other classes of securities that are integrated in the Ibex 35.
As it can be a business opportunity for small and medium investors, especially if the investments are aimed at the medium and especially long term. Apart from the profitability that can be generated from the distribution of dividends, with an interest rate that can reach the 8% level. In this general context, it may be a time to start trading on stocks that maintain these special characteristics. Being very profitable if the conditions mentioned above are met.
On the other hand, we can always turn to stocks that have been subject to downward pressure from some of the main financial agents. Where the only way out they will have from that moment on is the rise in their shares. In this sense, there is no doubt that this class of stock market operations constitute one of the most original formats for making available capital profitable. With a potential for revaluation also very relevant due to its intensity and which you can take advantage of if you act diligently and correctly. Serving as another investment strategy and that can have very beneficial effects for your interests as retail investors and that is after all one of your priority goals.
When in doubt, liquidity
A large majority of financial intermediaries, far from betting on the values that lagged the most from the previous year, clearly bet on prudence and choose to recommend to their clients that they keep in liquidity during the first semester of the year. With the primary objective of seeing how equities evolve to the many unknowns posed by the current economic situation. Hence, they are not in favor of making purchases during the first half of the year, and, yes, once the evolution in this period has been analyzed, positions could be taken in those sectors or companies that are better responding to the current moment, although they warn that the The key to making a good operation is to be very selective when setting up the securities portfolio.
In this sense, stock market analysts consider that it is necessary to flee from speculative values that do not have growth expectations or from companies that are going to come out of the current economic crisis the worst. In short, prudence and wait as equities are going to behave in these months, to try to find a really interesting buying opportunity for the interests of small and medium investors. Because on many occasions the greatest success in investing is being out of them and thus preserving savings over other series of considerations.