A Worthwhile Exercise

This morning, after reviewing the terms of the Supervalu (SVU) deal, I spent some time contemplating long-shot investing. Looking for stocks that are out of favor, financially stressed or otherwise battered to low levels has proven to be a valid and valuable approach to the markets. It is best used by younger, more aggressive investors but the math behind looking for stocks with the potential to recover and return many multiples of the purchase price is compelling.

Last year, I identified 26 stocks as potential long-shot investments. I had a few turkeys in the bunch, but if you bought an equal dollar amount of each, your return though last night's close is a tad north of 40%. To be sure, the rising market helped our performance, as I doubt we would have done as well had we had a down year in 2012. But this is still more than 2.5x the broader market return for the year. Looking for long shots would seem to be a worthwhile exercise....521 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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