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Unless you are confident about the future prospect of the company, avoid stock that continuously hit new lows. Do not expect the fallen stock to regain its past high. More than 50% decline from the recent peak of any stock indicates a red signal. Do not catch the falling knife. Such type of stocks can completely erode the investors’ wealth. Throughout 2010 to 2014, Suzion was continuously making new 52 weeks low. The downward journey continued even for the next many years. Suzlon is not alone is not this category. Many other once well-known stock. There are hundreds of examples of stock vanishing from the market after hitting continuous lower circuit.
On the other hand, stock touching 52 week high deserve attention for further research. If a stock price touches a new high despite the overall weakness in the stock market, this indicates that there much be some positive development. Do not invest solely because a stock in touching 52 week high price, but such stocks are a good candidate for further research. Multiple times in my investment career I earned great return from filtering stocks touching 52 week high.
A portfolio of 80 stocks may not be properly diversified whereas a portfolio of 10 stocks can be properly diversified. Property diversified portfolio should have a limited number of stock but diversified across sectors.
How many times a stock will move up in the future depends on the earnings growth and business prospects, not on how many times it moved in the past.
Avoid investing in stock that experienced 60% correction from the recent peak
