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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

by 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.

by WA 5y ago

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.