The aim of all investors is to buy low and sell high. Sounds easy in theory, but in practice its a whole lot more difficult.
Thats because share prices are never low without reason. In other words, if the macroeconomic outlook is very positive and the company is performing extremely well, its share price is very unlikely to be low. So, there must be a problem in order to create an opportunity.
With that in mind, here are three companies that are going through challenging periods but, as a result, could prove to be top future performers.
Having lost an appeal to try and claw back a vast amount of compensation paid out to businesses following the Deepwater Horizon oil spill, BP (LSE: BP) is not one of the most in-demand stocks right now. Couple this with increasing sanctions against Russia that could hurt BP due to its stake in Rosneft, and its of little surprise that the company trades on a price to earnings (P/E) ratio of just 9.4.
However, with a strong asset base and a competent management team, BP could turn things around in the long run. Certainly, the future will be volatile but, for investors who can afford to take a long term view, BPs valuation could surprise on the upside.
As a result of a falling iron ore price, Rio Tinto (LSE: RIO) has seen its share price fall by 12% in 2014. Indeed, over 90% of the companys profits were generated by the sale of iron ore last year, so its fair to say that the iron ore price has a major impact on Rio Tintos bottom line.
This, though, provides an opportunity. Rio Tinto currently trades on a P/E ratio of just 9.4 and yields a hugely impressive 4.3%. With demand for iron ore having the potential to increase following Chinas soft landing, things could be much better for investors in Rio Tinto moving forward.
Clearly, Wm. Morrison (LSE: MRW) is experiencing a hugely challenging period. The UK supermarket sector is a tough place to do business right now but, looking ahead, Wm. Morrison has potential.
Thats because it is in the midst of rolling out an ambitious convenience store expansion and an online grocery offering. Both of these areas are still showing strong sales growth in the sector and, until now, Wm. Morrison has had next to no exposure to either of them. This has undoubtedly held it back versus sector peers and could help it to improve the top and bottom lines in future.
With shares in Wm. Morrison trading at less than net asset value, it is clearly unloved and could, therefore, be a strong long term play.
Of course, BP, Rio Tinto and Wm. Morrison aren’t the only companies that could boost your portfolio. So, which others should you buy, and why?
A great place to start is a free and without obligation guide from The Motley Fool called Where We Think The Smart Money Is Headed.
The guide is simple, straightforward and could help you to unearth a number of hidden gems. As a result, it could make 2014 and beyond an even more prosperous period for your investments.
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Peter Stephens owns shares of BP and Morrisons. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.