Why Searching for Cheap Stocks Is the Wrong Investing Strategy
Legendary investor Warren Buffett said, "It's better to buy a wonderful company at a fair price than a fair company at a wonderful price." You can read that to mean Buffett isn't buying cheap stocks, and you shouldn't either.
Low-priced stocks have their appeal, for sure. An ultra-low share price or P/E ratio inspires your inner bargain hunter -- that's the part of you that'll buy a 101 ounces of green beans from Sam's Club, simply because the per-ounce price is phenomenal. Plus, since single shares of Amazon.com (NASDAQ: AMZN) are trading at $2,500-plus for a P/E ratio of 120, you might feel like cheap is all you can afford. But there are several reasons why bargain stocks shouldn't be the core of your portfolio. Here are three of them.
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