3 Overvalued Stocks to Buy on Pullbacks
The stock market has been hitting all-time highs over the past couple of years, and as a result, investors have become rather optimistic that that the uptrend will continue. This has also led to investors into overvaluing many companies.
For conservative investors who are looking to put money to work this can be frustrating, and it can be tempting to just bite the bullet and buy the stock of a company you like at a high price. But this can be costly in the long run, and there are two reasons for this. The first is that stocks are a volatile asset class. While investors may be optimistic in today’s market, this may not be the case in six months to a year. But in all likelihood, the companies you wish to invest in will be more or less the same. With the knowledge that eventually investors will be pricing in a more pessimistic scenario for the companies you want to buy, it makes sense to wait for a pullback.
The second is that waiting for even a modest 10 to 20 percent pullback may not seem like a big deal now, but it can pay off enormously over the long term as your gains compound. This is especially true if the company you wish to invest in is buying back its own stock or is paying dividends that you are reinvesting. That 10 to 20 percent can wind up making more than a 100 percent difference, and all of a sudden waiting makes a lot of sense.
So in what follows I highlight three great companies that I think will generate returns over the long run. You will probably do well even if you buy them today, but if you wait for a correction, you will do substantially better.