Crisis stock investing is attractive to buy low sell high with potential huge capital gains when share prices recover one day. Here are a few general rules to follow:
1) Capital allocation less than 10% (striker position in a portfolio) as the investment is higher risk to exchange for higher potential gains.
2) Before Buy Low, ensure the stock is still a giant stock with reasonable fundamental (accepting the facts business could decline over the past few years due to crisis), eg positive earning or cashflow, despite in declining mode.
3) Ensure it is a higher level induced crisis, eg. sector correction (L2), country crisis (L3) or global financial crisis (L4). If it is only a business crisis for individual stock (L1) while the competitors are healthy, do not buy low as the company could bankrupt eventually, one could lose all the investment this way. Even a stock is traded at 1 cent per share (previous high could be $1), it is still expensive as it could drop to $0 value or price.
For Ein55 graduate, I have posted the details of Ein55 strategies (quantitative) for crisis investing in Ein55 graduate web forum under thread of “investing strategies” – “Crisis Investing Strategies”, specifically on What to Buy & When to Buy.
For general public, you could learn more about crisis investing at Levels 1-4 from Dr Tee free course, register here.
