“Be Greedy when Others are Fearful”, Warren Buffett.
Many people buy stocks when they feel safe and comfortable, after seeing other people making money, only then they chase after the opportunities, sometimes caught again when market sentiments start to change. A safe way of buying stock is to wait for crisis, when people worries about the stock market, only then they will sell their best value stocks at discounted price to us. Every crisis is an opportunity!
There are 4 levels of Crisis:
Level 1 (individual stocks)
– company with falling share price or business, eg. Noble, Keppel Corp, Golden Agri, etc.
Level 2 (sector / industry)
– sector correction, eg. Oil & Gas stocks, Casino stocks, Shipping stocks, etc.
Level 3 (country / region)
– stock market correction, eg. Hong Kong Hang Seng Index, China Shanghai Index, etc.
Level 4 (world)
– Major economy slowdown, eg. China
For a falling stock price (Level 1 crisis), it is only worth considering if it is related to sector correction, not mainly because of own business is declining. A business may go bankrupt but entire sector/industry would nearly always come back after the winter time is over. A trader would require minimum Level 2 crisis to buy stocks, currently there are many opportunities for Oil & Gas stocks, commodity stocks, retail stocks, casino stocks, shipping stocks, etc.
However, an investor with higher profit target will need to wait for larger scale of crisis, either Level 3 (country / region) or Level 4 (global market). The golden investing opportunity of life time is to buy stocks which consistently make money in business (even during crisis) but the stock prices drop more than half because people worry the sky will fall down during global financial crisis.
It can be very easy or can be very tough to grab on the trading and opportunities above to buy low during Level 2-4 crisis. If we follow majority of people to trade/invest normally, usually will end up buy high because we feel more comfortable in a bullish market. If we could follow abnormal strategies like Warren Buffett did in the past, wait patiently for the giant stocks to fall down, buying them at great discount in Global Stock Sales (as if Great Singapore Sales, GSS) when other traders/investors are very worried, the reward could be significant.
