Look for strong and sound stocks that are beaten down temporarily and are lurking around with better than 50/50 odds for you. Seek asymmetry. Look for opportunities where the probability and magnitude of an increase in price is greater than the chance and size of a decline. This is possible if you are able to recognize that the business it is still a fundamentally good one and that technically, the stock price is due for a strong rebound.
The way to go about executing this is to screen for businesses which are still growing their revenue and earnings and have a relatively unbreachable moat to keep off its competitors. Think of Adobe for instance.
Then, when their stock prices are beaten down, we can apply technical analysis to identify certain price levels to buy where we have 60/40 or even 70/30 odds of a price rebound, just like some of the analysis that we shared during our Zoom webinars and in our technical analysis workshop.
Once in a blue moon we may possibly have a 90/10 setup! Just like during the lows of March 2020. These are once in a lifetime opportunities. Okay, maybe not once, but 3-5 times in say a 30-year investment horizon.
The important thing is that during the middle of the crisis, ask yourself:
“Do you believe eventually things will get better?”
“Will this crisis be over eventually?”
“What can happen if things become better eventually?”
To take advantage of this asymmetry, we have to learn to look beyond what most investors cannot see now, get to it early, before the recovery is priced in by the majority of the investors. By the time most of them recognize that the recovery is in, it is often the time to lock in some partial profits.
The idea is to change investing from gambling, to a profession. To be able to consistently reap good overall returns because you have an edge.