Please ensure Javascript is enabled for purposes of website accessibility

Waiting for Prices

By Selena Maranjian - Updated Apr 5, 2017 at 8:01PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Be careful -- sometimes the price you wait for never comes.

I've heard about a lot of people using limit orders to try to grab stocks on the cheap. For instance, if you're interested in buying (NASDAQ:AMZN), but you don't want to pay the current price in the upper $40s, you can pace a limit order that will automatically buy shares for you if they drop to, say, $40. Fair enough, right?

Well, I’m actually of two minds here. On the one hand, placing  a limit order can make sense. If you think, for example, that the stock is worth around $45 per share, buying it at $47 isn’t too sensible. But buying it at $40 would only be offering an upside of around 13%. You can invest with a greater margin of safety by seeking out stocks that are trading at greater discounts to your estimates of their intrinsic worth. So if you think Amazon is worth $45, perhaps look to buy it for $35 or less, with a possible upside of 29%.

Meanwhile, if you think Amazon’s real value should be $65 right now, I’d think twice about waiting for that $40 price to trigger your purchase. Sure, getting it at $40 would offer an upside of 63%. But it might never drop to $40, and you can end up out of luck. If you buy at $47, your upside potential is still significant, at 38%.

Limit orders can help you get a better price, but they can also end up locking you out of some stocks worth owning.

Seeking value
If you want to find companies that are trading at significant discounts to their intrinsic value, a good way to start is to screen for stocks with P/E ratios well below their usual average. Here are some I found via’s screener:


Recent P/E

5-Year Average P/E

Caterpillar (NYSE:CAT)



ConocoPhillips (NYSE:COP)






Qualcomm (NASDAQ:QCOM)



Thomson Reuters (NYSE:TRI)



WellPoint (NYSE:WLP)



Data from

Once you gather some candidates, you’ll need to examine a bunch of other factors, such as their financial health (lots of cash or debt?), their growth rates and prospects, and their competitive strengths. The results should give you some great companies to invest in.

To get some helpful recommendations of undervalued stocks, test-drive our Motley Fool Inside Value newsletter. A free trial will give you access to all past issues and all recommended stocks.

Longtime Fool contributor Selena Maranjian owns shares of no company mentioned in this article. WellPoint and Thomson Reuters are Motley Fool Inside Value picks. is a Motley Fool Stock Advisor recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Comcast Corporation Stock Quote
Comcast Corporation
$40.00 (1.52%) $0.60, Inc. Stock Quote, Inc.
$143.55 (2.07%) $2.91
Caterpillar Inc. Stock Quote
Caterpillar Inc.
$196.84 (1.46%) $2.84
ConocoPhillips Stock Quote
$102.29 (1.92%) $1.93
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
$151.29 (2.34%) $3.46
Thomson Reuters Corporation Stock Quote
Thomson Reuters Corporation
$116.53 (1.00%) $1.15
Anthem, Inc. Stock Quote
Anthem, Inc.
$491.70 (3.06%) $14.59

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.