Investing in Opportunity

One of my ongoing hobbies has been playing investing in the stock market. I’ve done fairly well over the past couple of years, as I started when the market was at a low.

Now, that the market has made much of its worth back, its harder to just ‘throw’ money at something, and see a 15%+ return within a short period of time, but its still proving to be worth it for me.

One of the strategies I’ve been taking as of late, is to invest in companies that have been hit by disaster or bad public relations. Both of which, make investors nervous, thus, drives them to sell their stocks, resulting in lower share prices — all, in typically an overreaction to bad news, rather than the company’s underlining worth.

An example of this, is BP, and their oil spill over the summer. No matter where you turned, everyone was talking about it, and the two months it took to finally plug the hole. This, cause SUBSTANTIAL harm to BP’s reputation and stock value, plunging it from a 52 week high of $61/share, to a low of $27. I, as an investor, decide to buy shares and got in around $35 — here, the international spotlight has been on the company and created substantial bad will towards them, however, their underlining company still had physical assets, and was worth money. Sure, they’d take a hit in their recovery efforts, and in lawsuites, but it does not negate the fact they’re a profitable company. I’m up 28%.

Other examples I’ve been looking at, as of very recently, is the controversy around Nuclear energy, particular in light of the tragedy in Japan. While the entire situation is stunning to watch (as you never expect it to happen), it does not defeat the underlining reality of the benefits of nuclear energy. In turn, when you look at the stock market, companies that supply nuclear components, have taken a major hit too — here, I’ve also invested very recently, hoping to make money off the upswing as investor confidence is restored.

While investing like this is probably not everyone’s style, it seems to be working for me… I know there are a lot of ethical considerations around this, both pros (helping a company keep its worth, thus, reducing the chances of layoffs, ensuring their suppliers/distributors stay in business, etc), and cons (supporting ‘bad’ companies, or taking advantage of devastation), but I think the overall good is greater than the bad.

What is your take on this? Have you done it before? Would you do it?