“Within every problem, lies an opportunity!”
First off, we want to send our prayers to all of those who may have lost loved ones in the tragic recent earthquake and tsunami events in Japan. Natural disasters like these remind me of why you must value life and enjoy it to the fullest as you never know when it will end. In the midst of all the destruction and chaos exists opportunity for some of us that not only can help ourselves from a monetary standpoint but help Japan from an economical one. Remember how I always say “fear” is the indicator you need to be looking for when it comes to investing.
With 30 ft waves and 9.0 earthquakes comes destruction and damage to a country’s economy and infrastructure. In this particular case, the country happens to be a significant force in the global economy and its pain will be felt worldwide but in this pain will exist a significant opportunity for those of us that are willing to accept a portion of risk in exchange.
With every infrastructure hit comes a halt in production, delay in trading or the collapse of a sector, branch of an organization, or business which ultimately drives fear from investors and creates what we call a “panic exit”. This panic exit causes the actual stock related for the company to dip sometimes up to 40% creating a false loss. This false loss is attributed to an uncontrollable event that holds no relevance to the company true strength but rather showcases a short halt in its growth. The panic exit is ultimately what drives people to fear that a problem is forthcoming and rather overlook the opportunity that exists.
This opportunity, which is the one you should be looking for, might become more dominant in companies like Sony, Toyota, Nissan and others whose operations have slowed down and their ability to meet demand may be temporarily at risk. This risk is where the fear begins and where you get in and buy a high quality stock for a low price. Those three companies are not the only ones that will have such drawbacks, and Japan will not be the last place to have a disaster but you will need to have a different perspective to find such opportunities every time they arise.