In many of my previous articles about investing I discuss the power of being fearless in your approach and thinking. I also discuss the how investing when others are afraid can be quite rewarding. If you haven’t read those articles, please refer back to Fear Is Your Friend. In the past year, we witnessed oil giant BP taking a large dip in the worth of its stock due to its malpractice and the spill it caused (which has yet to be contained). I always say that in every problem lies an opportunity and also keep telling you that media plays a much larger role in these issues than meets the eye.
Fear drives panic, and panic drives investors out of the game for the moment. Panic is created and driven by media and media ONLY. If the media creates coverage on a topic and keeps driving coverage, the fear amplifies in people’s minds and it creates a disconnect which results in withdrawal from the situation and separation from the stock.
In 2010, BP stock fell 70% due to its spill, and its inability to contain the situation quickly. The quality of the product or the need for oil never decreased, nor did consumption but the morale and business ethics were questioned. In the past few weeks, we witnessed BP move back up to its pre-oil spill prices with a gain of 65%.
An article was even published in the local Vancouver Times as the increase was so significant.
Should you have invested $10,000, you would have almost doubled your money and would have walked away with $16,000+ in less than 6 month.
The point here once again is not making money but rather being fearless and seeing opportunity when others are afraid and also when others don’t believe and are unable to detach themselves from what the media shows them. We recently even discussed Toyota as another to keep an eye on due to the recent troubles the company went through with its plants in Japan being impacted by the quake and unable to keep up volume. Circumstances outside people’s control may have negative effects on the company but are not indicators of quality or reality, simply reminder of the circumstance that a business is going through. I always say to not let your circumstance dictate your actions, as circumstance is a constant changing factor; it should be noted and studied but not the sole basis of your decision-making.
If you applied yourself in a fearless manner then you have been able to maximize your earnings on this round, and if not, then you have now witnessed one more opportunity missed and can learn to make sure the next one isn’t missed again or you could forever STAY POOR!