9 Ways To Make Money On The Stock Market

Here are 9 ways listed by Whitney Tilson to pick diamonds in the stock market:

1. Out-of-favour blue chips. Even the world’s greatest companies encounter problems or otherwise fall out of favor. Correctly differentiating between those suffering temporary rather than permanent issues is the key to success here. As long as the positive fundamentals of the company’s business remain intact, and new management is willing and capable of bringing the company on track buying out of favour blue chips can be very profitable.

2. Distressed industries. Buying a good company in a distressed industry is often a great way to make money.

3. Turnarounds. Turning around a broken business is difficult and often takes much longer than expected — but when it occurs, a stock can rise many-fold.

4. Overlooked small caps. Among the thousands of publicly traded stocks that analysts don’t cover are fine businesses that are cheap because either no one is paying attention to them or their stocks are thinly traded.

5. Fallen growth angels. When growth companies stumble, growth and momentum investors often sell indiscriminately, which can be a great opportunity for value investors if — and it’s a big if — the high growth resumes or the stock falls so much that it’s a bargain even at lower growth levels.

6. Growth at a Reasonable Price (GARP). High-quality growth businesses whose stocks haven’t fallen can also be excellent investments. They may not appear cheap by traditional valuation metrics, but the stocks may be worth it if they maintain their strong growth.

7. Activism. Activist investing — in which an outsider leans on a company to change its policies — has been a hot area. The key is whether the activist’s proposal for creating value makes sense and whether there’s support for change. If the situation is favorable, great money can be made by investing alongside the activist.

8. Oddball companies. Some companies have economic characteristics that are very different from the typical company in their industry. As a result, analysts and investors may initially misunderstand them and misprice their stock.

9. Let someone else do the investing. It can pay to let others do the investing for you — if you can invest with them at a reasonable price.