Do you have the guts to buy a stock that's been unambiguously punished by other investors?
After all, buying low is the best way to achieve returns, as long as the underlying business is of sufficient quality.
One current contender is Elders Ltd (ASX: ELD), which has nosedived a frightening 48.4% since November.
The business is a supplier to agriculture clients of such products and services like fertiliser, feed, livestock sales and real estate broking.
Shaw and Partners portfolio manager James Gerrish was asked whether buying this stock now would be wise, or if you would be catching a falling knife.
Image source: Getty Images
'Many investors have capitulated'
According to Gerrish, his team has been keeping an eye on Elders during its recent descent.
"[It's] a stock that we have mentioned once or twice recently as a turnaround story, having been very critical of the [company's] messaging and subsequent performance in 2022," he said in a Market Matters Q&A.
Investors should remain wary of discounted stocks that could be the subject of "corporate activity", such as a capital raise, a sell-off or an acquisition.
"That may or may not be the case with Elders, however it's something worth keeping in one's mind!"
But overall, after the bloodbath in recent months, Gerrish reckons the Elders share price may have hit the bottom.
"At this juncture, we think many investors have capitulated, and the next 20% to 30% is more likely on the upside," he said.
"We think it finally looks good here and is set for a better FY24."
Just last week, another investment house also expressed its bullishness for Elders.
"A note out of Bell Potter reveals that its analysts have upgraded this agribusiness company's shares to a buy rating with a $7.25 price target," reported The Motley Fool's James Mickleboro.
"The broker made the move on valuation grounds, highlighting that its shares are trading at ~6 times normalised EBITDA, which is a reasonably large discount to its post-recapitalisation average."
He added Bell Potter analysts see the Elders share price as "representing value through the cycle".
According to CMC Markets, four analysts currently rate it as a buy while six are recommending a hold.
