Nothing frustrates investors more than watching their favourite stocks trail downward. You may think it's a good stock, but the market thinks otherwise.
Earnings and growth expectations of the market are what drive prices. If the market can't easily see a stock picking up its earnings, it turns its attention to hotter stocks.
But that could be a blessing in disguise for Foolish investors.
As the daily auction of stocks moves to greener pastures, you have a chance to "circle back" to discarded or beaten-down stocks. They're cheaper, but the company is improving. That gives you time to start loading up before traders and short-term investors return.
Here are three stocks I have been watching that may be worth circling back for.
Ainsworth Game Technology Limited (ASX: AGI) is an electronic gaming machine manufacturer for casinos and gaming venues. Its half-year earnings were down several points, but its investments in its overseas operations are beginning to blossom. International revenue, which now makes up about half of the company's revenue, is growing strongly. Ainsworth may deliver better earnings in the short term.
JB Hi-Fi Limited (ASX: JBH), the specialty electronics retailer, should benefit from further interest rate cuts in two ways. One, its larger-ticket items like TVs, computers and white goods become more affordable when customers have extra disposable income. Two, lower rates will fuel a growing housing market. Property buyers will purchase more of these items to furnish new homes. Retail in general may be a little sluggish, but that allows stock pickers time to research and prepare wisely.
Coca-Cola Amatil Ltd (ASX: CCL) is making a recovery in share price, up 14% since the end of December. It's just at the start of its restructuring program, so progress will take some time. However, it is cutting costs and recently negotiated a deal with The Coca-Cola Company to invest US$500 million into Coca-Cola Amatil's Indonesian business for a 29% stake in the Indonesian bottler. That frees up needed funds to concentrate on turning around the Australian business, its biggest revenue generator. I would be watching this company closely.
