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I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't h

I have a book written by André Kostolany, which taught me one thing and I believe I've forgotten the rest, because only this one fundamentally matters: Don't hunt for rising stocks, but chase the falling stocks. Everything that goes down either eventually goes up again, or dies. While this sounds like it's not helpful, all that's required is figuring out if a company is likely going to die. Even without any manual research, time is ultimately telling. The longer a company at the bottom doesn't die, the more likely it's going to rebound eventually. https://en.wikipedia.org/wiki/Andr%C3%A9_Kostolany https://en.wikipedia.org/wiki/Andr%C3%A9_Kostolany PS: Don't gamble your life away.

pjc50 5y ago
> He was able to make a profit during the decline in market prices which began at the end of 1929, having been bearish at the time. Well, yes, that might have informed his lessons from trading. There's another saying in the opposite direction, "never try to catch a falling knife". https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1545.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1545.pdf But it's not an unreasonable approach. Declines are often driven by panic. If you can determine that it's an irrational panic and the fundamentals of the business remain strong, then you can invest while it's undervalued. It's certainly better than buying just after something has gone _up_.
- fsckboy 5y ago
  i find "never try to catch a falling knife" a weak metaphor because, never try to catch a knife on the way up either.
- deleted 5y ago
  [deleted]
WA 5y ago
Wirecard entered the chat… I assume you have good intentions, but your post is severely lacking. One crucial thing with this strategy is time. WHEN is the time to buy a falling stock? While it is falling? Or when it is rasing again? Are we talking intraday or months? On a long enough time frame, every company will go extinct and every stock will go to zero. And your post is in direct contradiction of two other common stock insights: - Don’t catch a falling knife - The market is efficient. If a stock price goes down, there is probably a reason for it.
- MrYellowP 5y ago
  You're probably right. I should have written more to this.
- locallost 5y ago
  I think there is no definite answer, and it's therefore only natural that common insights contradict each other. I've read Ben Graham's often recommended book, and the take there is that the market is a lot of times completely irrational, if not most of the time. A reason for a stock going down could be that it's not "sexy" and not viewed as the future big thing, but if the company has a solid business model, people will come back to it. There were plenty of examples of that. But what is a good business? Well, you need to know a lot of metrics companies publish on their earnings, debt etc. and also you need experience to see through any possible accounting shenanigans (e.g. Under Armour admitted last year they kept moving future earnings to the current quarter so it seems their current quarter was more profitable than it really was). The reality is that it's much more complicated than any one liner, and that most normal people that invest, invest based on gut feeling. It only really works by chance. Or they invest in index or mutual funds.
  - WA 5y ago
    I agree, I'm not a believer in the efficient market hypothesis anymore. I think the stock market is driven in large parts by narrative, which explains outliers a lot better. I just found the tautological advice of my parent poster a bit weird: > Everything that goes down either eventually goes up again, or dies. Sounds smart, says nothing at all. Hence, "buying a beat-down company" is probably not advice that really works. And there are so many companies that never reached their ATHs again.
llampx 5y ago
This is a strategy for ruin. You can easily backtest this yourself. Just go back in time and buy a stock that was -20% and see how many times you make a profit. The market has inertia. What goes up usually continues going up and what goes down usually continues going down.
- notahacker 5y ago
  And going down, not going bust but never getting anywhere near the just below peak level you bought at is common as well, and can easily lose 50-90% of what you invested without the company ever going bust. If you bought Yahoo at 20% below its peak value, the fact the company still exists two decades later isn't much consolation.
georgeolaru 5y ago
I'm curious, what's the book name?

pjc50 5y ago

> He was able to make a profit during the decline in market prices which began at the end of 1929, having been bearish at the time. Well, yes, that might have informed his lessons from trading. There's another saying in the opposite direction, "never try to catch a falling knife". https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1545.pdf https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1545.pdf But it's not an unreasonable approach. Declines are often driven by panic. If you can determine that it's an irrational panic and the fundamentals of the business remain strong, then you can invest while it's undervalued. It's certainly better than buying just after something has gone _up_.

fsckboy 5y ago
i find "never try to catch a falling knife" a weak metaphor because, never try to catch a knife on the way up either.
deleted 5y ago
[deleted]

WA 5y ago

Wirecard entered the chat… I assume you have good intentions, but your post is severely lacking. One crucial thing with this strategy is time. WHEN is the time to buy a falling stock? While it is falling? Or when it is rasing again? Are we talking intraday or months? On a long enough time frame, every company will go extinct and every stock will go to zero. And your post is in direct contradiction of two other common stock insights: - Don’t catch a falling knife - The market is efficient. If a stock price goes down, there is probably a reason for it.

MrYellowP 5y ago
You're probably right. I should have written more to this.
locallost 5y ago
I think there is no definite answer, and it's therefore only natural that common insights contradict each other. I've read Ben Graham's often recommended book, and the take there is that the market is a lot of times completely irrational, if not most of the time. A reason for a stock going down could be that it's not "sexy" and not viewed as the future big thing, but if the company has a solid business model, people will come back to it. There were plenty of examples of that. But what is a good business? Well, you need to know a lot of metrics companies publish on their earnings, debt etc. and also you need experience to see through any possible accounting shenanigans (e.g. Under Armour admitted last year they kept moving future earnings to the current quarter so it seems their current quarter was more profitable than it really was). The reality is that it's much more complicated than any one liner, and that most normal people that invest, invest based on gut feeling. It only really works by chance. Or they invest in index or mutual funds.
- WA 5y ago
  I agree, I'm not a believer in the efficient market hypothesis anymore. I think the stock market is driven in large parts by narrative, which explains outliers a lot better. I just found the tautological advice of my parent poster a bit weird: > Everything that goes down either eventually goes up again, or dies. Sounds smart, says nothing at all. Hence, "buying a beat-down company" is probably not advice that really works. And there are so many companies that never reached their ATHs again.

llampx 5y ago

This is a strategy for ruin. You can easily backtest this yourself. Just go back in time and buy a stock that was -20% and see how many times you make a profit. The market has inertia. What goes up usually continues going up and what goes down usually continues going down.

notahacker 5y ago
And going down, not going bust but never getting anywhere near the just below peak level you bought at is common as well, and can easily lose 50-90% of what you invested without the company ever going bust. If you bought Yahoo at 20% below its peak value, the fact the company still exists two decades later isn't much consolation.

georgeolaru 5y ago

I'm curious, what's the book name?