One of the best examples why 'Buy when there is blood in the streets' makes sense...
Here is what I wrote about 3 auto-industry related stocks back in July of 2009 in my post 'I Don't Know Why Bears' (in which I also tried to make a point that a new bull market has already started):
However, when it comes to bull markets: I know one when I see one.
It is just plain crazy to me that some people just don’t see it this time.
They talk about how “fundamentals did not improve so this can’t be a bull market”, or how “this is just a correction in a bear market”, or how “blah, blah, blah”…
I mean, I just don’t get it.
First of all: YOU DON’T ARGUE WITH THE MARKET! (I mean, you can, but you won’t make any money).
If market is telling you “Everything is fine, or is on the mend”, you better believe it (even if you “know” it ain’t so).
Take for example some of the stocks connected with the auto industry. Everybody knows auto industry is in the worst shape ever.
Tell 95% of the Americans about buying a stock of TRW Automotive, Tenneco, or Arvin Meritor and they will tell you: you are insane. With these companies being suppliers to auto industry, people wouldn’t thouch them even if you gave them these stocks for free.
However, from their March lows, TRW is up a 1,000%, TEN is up 1,500%, and ARM is up 1,300%..."
So that was back in July of 2009, but let's see what are the returns of these 3 stocks today, comparing to March 1st of 2009:
As you can see, TRW's return is roughly 5,000%, while TEN and MTOR (ARM was Meritor's old ticker) are up around 3,500%.
In other words, if you invested only a $1,000 in each of these 3 stocks (as you don't want to gamble too much, right?), today your investment in TRW would be worth $50,000 and your investment in TEN and ARM (now MTOR) would be worth $35,000 each.
$50,000 + $35,000 + $35,000 = $120,000
$117,000 gain in 2.5 years, on an investment of only $3,000. Not bad, don't you think?
In my opinion, this is one of the best examples of the old adage "Buy when there is blood in the streets" and/or "Be greedy when others are fearful."
Wasn't there nothing but blood flowing in the streets of Detroit and Michigan at the beginning of 2009? I'm sure you remember, that wasn't so long ago. (Btw., I live in Michigan and work for a company that supplies parts to auto industry, so I guess I should know).
Well, either way, I hope both you and I have learned something from this.
Stay smart my fellow Fools (I know it ain't always easy) and Good Luck to you all
Have a great 4th of July, and don't forget to have fun when investing!
It's only money, remember? :)