An orphan stock is a stock that is not preferred by investors. It has essentially been abandoned or forgotten. If a stock is considered small or in an out-of-favor sector, it may be ignored in this way. An orphan stock is also called a wallflower stock because it is so easily overlooked. As a result of being ignored, an orphan stock may trade at a low price-to-earnings ratio, which illustrates what investors are willing to pay per dollar of earnings. The low P/E of an orphan stock usually indicates the earnings aren't worth much. Still, some investors view an orphan stock as an undiscovered bargain rather than an unfavorable investment. Should an investor take a risk and purchase an orphan stock, he may enjoy a high return on the investment - if the orphan stock is rediscovered. |
