Yesterday while eating lunch with a good friend of mine we were talking about the stock market. He asked me what are the 10 most undervalued stock picks right now?

I invest in the stock market for living and used to manage a hedge fund. Now a days I publish a stock market advisory letter so I get people asking me about stocks all of the time - and their investments.

I really liked the way he put the question though. Most of the time people look for stock picks that are just full of hype. They buy into news stories or search out the next hot rumor.

But he was really getting specific in thinking about valuation.

People like to value stocks with P/E ratios and book value and so forth. And you can go to any financial portal like yahoo finance and easily find out what the 10 most undervalued stocks are by this criteria.

But that’s not enough. You need to also look at earnings growth potential. You see a stock can be cheap for a reason – there’s no growth or growth is shrinking.

That’s why I look at the PEG ratio and use it in conjunction with several technical patterns that I’ve found that repeat right before a stock starts to make a big move. What the PEG ratio does is look at the price of a stock and divide it by the earnings for the next five years. So it is a way to figure out what you are paying for future earnings growth.

When combined with some specific powerful chart patterns I call this my Two Fold Formula and you can get it for free by signing up to my free weekly stock market newsletter. Just go here.

Now as for the question of what are the most undervalued stock picks – the answer I gave him is you just don’t want to buy the cheapest stocks or the ones the most undervalued. You need to know their potential to the upside. And when you understand that right now there are only a few stocks I can honestly say are in a great buy point in this market. Again, get the letter and you’ll find out. It’s free and I don’t spam you with a bunch of hype or bullshit offers either.

To join it just go here.