While buying on the dip may be an appealing strategy, as it promises a low price for a stock, it can be a dangerous one. After all, you’re buying into a stock that is dropping in price, and it’s usually falling for a reason. There’s no guarantee the decline won’t end, and you could simply end up seeing your portfolio fall along with it.
You could do the opposite, however, and buy a stock that’s rising in value. The danger there, however, is that the price has gotten too expensive that it’s no longer a good buy.
Both strategies are flawed in a sense, and what might be a better option is looking at stocks that have risen recently but that are still down for the year; they could therefore be on the rise again. Below are two stocks that meet this criteria with much potential upside as they look to return to their previous highs.
Element Fleet Management Corp (TSX:EFN) has soared about 30% in the past three months, as it got a big boost earlier this month when the company announced that it would be making an effort to improve its customer service and other changes, which would result in a strong bottom line.
While staying in the black hasn’t been a big problem for Element, it did see its net income decline by more than 60% in 2017. The company has seen some variability in its earnings, with its most recent quarter showing its bottom line more than doubling from a year ago.
The challenge for Element is to be able to find some degree of consistency in its performance, as it hasn’t been able to completely stay out of the red, with one of its past quarters finishing with a net loss.
Overall, the stock is trading around its book value and it could be a great time to pick up the stock at a discount.
Ballard Power Systems Inc (TSX:BLDP)(NASDAQ:BLDP) is another stock that’s been turning things around lately. In the past 12 months: Ballard’s stock has declined 23%, although in the last three months it is up by the same amount. While it still has a long way to go to return to the levels of one year ago, investors may want to keep a close eye on this one, as Ballard may finally be picking up momentum.
The stock got a big boost last month when it unveiled its new liquid-cooled fuel cell stack, which will not only improve performance and durability but will reduce costs as well.
Although Ballard has struggled to turn a profit and has finished in the red in each of its past five quarters, as with many clean energy stocks, this is going to be a long-term play. It’s going to take time and money for Ballard to develop its technologies and bring them to market. But as consumers continue to look for greener and more efficient sources of power, that could lead to big returns for investors that buy today.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor David Jagielski has no position in any of the stocks mentioned.