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PUBLISHED BY CNBC

 

A fallen stock price looks like a bargain and makes it easier to amass a lot of shares, but it doesn’t mean you’re getting a steal, noted Brian Thomas, chief investment officer of AG Asset Advisory in Los Angeles.

This is a classic fallacy,” Thomas said. It’s tied to what he called the “anchoring bias” of incorrectly viewing the low price — relative to the higher price the stock used to trade at — as an indication of a value stock opportunity. “A $50 stock that went to $5 lost half its value three times while falling and can do it again,” he said.

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