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Potential stocks and blue chips. Which one would you choose first? Give a reason.
Hello, the reason why potential stocks are potential stocks is because of future performance development; However, blue-chip stocks are doing well now or before. We can analyze blue chip stocks first. Whether a company is excellent or not, even a layman can easily see it from the financial report, so blue-chip stocks are generally valued higher because of their excellent performance. But the performance of enterprises is mostly fluctuating. The excellent performance in recent years does not mean that it will always be so good in the future. We only study the financial report according to its history. It can only be said that the business of this enterprise was very good last year and the year before, not that it has been doing so well in the future. Even if its performance is not worse than cash in the future, we can only say that we hold the stock of the enterprise at a suitable valuation, rather than buying it at a low valuation. Instead, we can look at potential stocks. It is said to be a potential stock because its current performance is not attractive, but there are some plans or actions that will make its future performance rise sharply. Because the research on future performance is mostly judged by experience and feeling, even the best accountant can't give an exact future performance of a reorganized or integrated enterprise. So there will be many blue-chip stocks with relatively low valuations. In this way, if investors can correctly judge that the future valuation of a potential stock is much higher than it is now, then buying will benefit a lot. To sum up, the investment value of potential stocks is naturally higher than that of blue-chip stocks. The advantage of potential stocks is that if you have good eyesight and accurate judgment, the income will definitely be rich; The advantage of blue-chip stocks is that even if you misjudge, as long as there is no rare crisis in the enterprise, your assets will not depreciate sharply. As a value investor, the most important thing is judgment, so I recommend that if you have a good foundation and inspiration, then investing in potential stocks will be the first choice.