Jim Cramer says that a low dollar stock doesn’t necessarily mean a buy.
In a recent interview with Forbes magazine, Jim Cramer talked a little about low-dollar stocks:
My biggest failure was buying a million shares of Memorex Telex at $2 out of bankruptcy thinking it can’t go lower. It went bankrupt again and I lost 100% of my investment, which is why I always tell people that a low dollar stock doesn’t necessarily mean a buy and you should never justify buying something by saying “how much can I lose” because you can lose it all. Thank heavens stocks stop at zero.
So while a lower price might seem enticing, that doesn’t mean you shouldn’t research the company as if it were worth ten times more. It is still your money, and you shouldn’t lose it stupidly.
Here is the full interview: http://www.forbes.com/sites/danschawbel/2014/01/06/jim-cramer-how-to-make-fewer-financial-mistakes-and-get-rich/