Recently, a new argument has suddenly emerged online, which suggests that people should stop buying cheap stocks.

Cheap stocks refer to low-priced shares, those with stock prices between 1 and 5 yuan.

The reason given is that in the future, A-shares might be filled with penny stocks, a lot of trash, and a queue of companies waiting to be delisted.

The number of delisting stocks based on face value may surge compared to the past, and the risk of cheap stocks is high.

Additionally, there is another argument that in the future, there will be less money for speculation in cheap stocks, and with too many individual stocks, the opportunities will also be significantly reduced.

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Focusing on stock prices when investing in stocks is a clear misconception.

You can say that Moutai's stock price is high, and it is a super bull stock.

Large-cap stocks such as China Mobile, CATL, and BYD, which are high-quality listed companies, are also in the category of hundred-yuan stocks.

But you cannot say that the four major banks with low prices, namely ICBC, ABC, CCB, and BOC, are not good companies or good stocks.

Their prices are all very low, and the most expensive one, CCB, is only 7 yuan.The level of a stock's price and whether it can become a blue-chip stock are completely different matters.

The high-priced Moutai is a blue-chip stock, and its starting point in 2014 was also over 100, not cheap at all.

Low-priced stocks, such as the first blue-chip stock in the low-altitude economy this year, Wanfeng Aowei, the low point was 4.48, a typical low-priced stock.

In each round of the market, several leading stocks are generally speculated, and the stocks with the largest gains are often concentrated in low-priced stocks.

However, it is important to pay attention to one point here, which is the performance issue of low-priced stocks.

The performance growth of low-priced stocks is usually slightly worse than that of high-priced stocks.

Perhaps some people may not agree with this statement, but this statement actually makes sense.

The vast majority of high-priced stocks that can stand at a hundred yuan have been investigated by various investment institutions.

The proportion of retail investors participating in a hundred yuan stock is relatively low.

That is to say, these hundred yuan stocks are seen by institutions as having a certain value, or the expectation will be better.The low-priced stocks, especially those with a small market capitalization, under 3 billion, are often not favored.

Most of the low-priced stocks indeed do not have much core technology, and they are often crowded with retail investors, with institutional investment accounting for a relatively low proportion.

At least for the time being, the reason why most low-priced stocks are low-priced is that they are less favored by funds.

Low-priced stocks are not unbuyable, and there are also phoenixes that can turn from crows, but how to choose has become a big problem.

For retail investors who are not very good at choosing, ignoring low-priced stocks can easily avoid some big pits.

Of course, many people will say that high-priced stocks also have pitfalls, and there are many high-priced stocks that are overvalued, and those that fall directly to 20% of the original price are also not a few.

It is true.

However, the pitfalls of low-priced stocks and high-priced stocks are not the same, or the risk points have a big difference.

The risk of high-priced stocks is mainly due to underperformance of performance expectations.The risks associated with penny stocks are primarily focused on whether their performance will be a surprise bomb, whether they will suffer losses, and whether they will be delisted.

Do not underestimate penny stocks; some that were priced at 4-5 yuan eventually dropped to just over 1 yuan, resulting in significant losses.

There are also some that have been stable at just over 1 yuan for a long time, but were eventually delisted, with their prices falling to only 20-30 cents before delisting, which is still a heavy loss.

It is not the case that high-priced stocks are risky while penny stocks have no risks.

Therefore, there are certain skills involved in selecting penny stocks.

1. Try to choose those with good themes.

Themes are the talisman for penny stocks.

Penny stocks without themes are generally not noticed by hot money such as speculative capital, and thus do not have the opportunity for significant increases.

Retail investors choose penny stocks, hoping for substantial returns.

After all, many ten-bagger stocks are unearthed from among penny stocks.The article translates to:

But stocks that increase tenfold rely not only on performance, but more on themes and opportunities.

Some themes are more suitable for storytelling, while some are too traditional and lack imagination.

It's like the traditional garment industry; no matter how you tell the story, it's ultimately the performance that speaks.

The probability of such themes being hyped is very low, and the space is very limited, so they have to prove themselves with strength.

However, some so-called "technology" related themes, such as games, electronics, software, big data, etc., can completely turn the tables once they become popular.

At least from the perspective of imagination, there are opportunities.

Therefore, the choice of themes for low-priced stocks is actually very critical.

2. Performance must be looked at twice.

When buying low-priced stocks, you must look at the performance more carefully.

The performance referred to here is not just net profit and so on.Because many companies, although their net profits seem acceptable, are actually in a critical condition.

When examining financial reports, the main focus should be on the trends of gross and net profits, market share, and order status.

A very important point is to look at inventory, accounts receivable, and the debt-to-asset ratio.

If the company exhibits the aforementioned three high situations, then it is in a precarious state.

Low-priced stocks with explosive performance can also fall sharply, and may even face the risk of being special treatment (ST) or delisting.

Many people would say that the speculation of low-priced stocks is also concentrated in loss-making and junk stocks.

This statement may have been correct in the past, because there were many expectations of restructuring and shell companies at that time.

Nowadays, this direction is strictly cracked down on, and in the absence of such expectations, the chances of speculating on loss-making stocks are actually very slim, and most of them fall into the traps carefully set by others.

Performance is the future direction, even if it is just a story, capital will also prefer low-priced stocks with acceptable performance.

3. Follow the trend of the recent 3-5 years and select stocks with good stock quality.When it comes to selecting individual stocks, it's best to observe their historical trends a bit longer.

In fact, the idea is to pick stocks that are being actively traded by major players and market makers at low prices, rather than those that are gradually declining.

Not every low-priced stock has the backing of major players; it might have been the case in the past, but the situation is different now.

Some low-priced stocks are genuinely abandoned, with no capital operations, and can be said to be drifting with the tide.

There is also a portion that experiences a surge in the market every half a year or a year, which is where the major players are actively trading.

Stocks with major players actively trading, as long as you enter at a low price, the risk is lower than the return, at least not too disastrous.

However, those without major players, drifting with the tide, gradually forgotten by the market, will become more and more numerous in the future.

Finally, a couple of additional points: good stocks and their price levels actually have little to do with each other. Regardless of whether it's a low-priced stock or a high-priced stock, there are opportunities for both.

The so-called low-priced and high-priced stocks are more about psychological impacts.

Outstanding listed companies, regardless of whether their stock prices are high or low, have growth potential, and that is the key.So, the approach to stock selection must keep pace with the trends of the times, without being fixated on the high or low prices, but rather focusing more on the quality of the company.

Nowadays, there are already more than 5,000 listed companies, but those that truly have value may be less than 500. Selecting the best among the best is the right path.