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I've considered this strategy, but it seems to not be as reliable as one might expect. The obvious example is the BP oil spill. The stock lost half it's value

I've considered this strategy, but it seems to not be as reliable as one might expect. The obvious example is the BP oil spill. The stock lost half it's value, from about $60 a share to about $30 a share, in two weeks. However, if you didn't time the buy-in just right, you would have bought at around $35 - $40 a share (if you bought either early or late), and today it trades at $43. That's the difficulty with many analysis ideas - they work great in retrospect only, when you can see exactly when the low points are, and can believe "If I had bought on that day, I would have made a mint." But from day-to-day, determining "that day" is virtually impossible.

rdl 13y ago
Yeah, I got into BP at 28x100, 30x200, 32x400 and got out at 45 (half each time it hit that) -- this was before I started playing with options instead. I intended to buy more on the way down. I was also planning to hold it indefinitely but needed the cash to buy other stuff (it's all in a Roth, so it's hard for me to put cash in.) In general, though, it's not about "buying on news", it's "buying sinful industries in general, but particularly on bad news/dips" -- defense, oil/coal, alcohol, etc. The other model I've used which has been far more effectively (and less disgusting morally) is "buy products I know a lot about and really like, as long as the company itself doesn't have serious financial or leadership problems"; TSLA, MSA (they make the world's best body armor, which I loved in Iraq, Paraclete), various arms manufacturers, etc.
- jlgaddis 13y ago
  > "buying sinful industries in general, but particularly on bad news/dips" Interesting model; haven't ever thought about it like that.