’52 week low’ is the lowest price of a stock in the last one year. It can also be called ‘1 year low’ because one year has 52 weeks.
When you hear analysts on business channels (CNBC etc) say “Bajaj Finance has hit 52 week low” – it means the stock of the company is currently at its lowest price in the last 52 weeks or one year.
Should you buy stocks that are at 52 week low?
Many new investors prefer to buy shares of companies that are close to their ’52 week low’. This investment strategy doesn’t work in most cases, because the price could be falling due to several reasons.
Prices fall when there are more sellers than buyers. When a stock is at its ’52 week low’, it usually means there are a lot of people selling the stock and there aren’t enough buyers to take the price up.
It’s very important for investors to understand why the stock is falling. Only after they clearly understand the reason behind the fall, should they take a decision on buying the shares.
If the market is going through a bear phase and excellent quality companies are falling to ’52 week low’ only because of difficult market conditions, then it probably makes sense to buy at ’52 week low’. For example, if Sensex has crashed and a quality company like Bajaj Finance of HDFC Bank are available at ’52 week low’, then you could slowly start buying shares.
For long term investors, it’s important that you don’t get too greedy and buy a lot when market falls. Whether the market is rising or falling, buy slowly. If you want to invest Rs 50,000 in HDFC Bank, then divide your investment amount into 5 parts of Rs 10,000 each and invest it once every week or once every 15 days.