In his classic book on value investing, Ben Graham taught the following truth. “In the short term, the market is a voting machine. In the longer term, a weighing machine.” So the question for a would-be investor (or trader) is always this:
“Has ‘the market’ got it right this time, or is it --once again-- over-acting to news, good or bad?”
If the news is bad, and if the market over-reacts, and if the company’s fundamentals and future prospects are solid, then an opportunity to profit might have been created, as the chart below suggests.
This is just one of many examples of bottom fishing trades I’ve done in the past months that have turned out well. I don’t bet big, because I don’t need the money that might be gained. I do the trades, because it’s fun to do them. It’s recreational investing rather than bread-and-butter investing, a hobby rather than the necessity that trying to build wealth once was for me.