Investing suddenly got that bit more painful. But, no pain, no gain.
As if to emphasise the tough trading conditions, one of Dean Morel's recent Motley Fool Share Advisor recommendations, a cheap but growing mining services company, has slumped around 20% in the last 6 weeks.
But rather than panic, or sell just because some arbitrary stop-loss was breached, Dean double-downs on his research, with a renewed focus on downside risk and a good dose of humility.
With 25 years of investing experience behind him, it's fair to say Dean has lived through more than one of these situations — and prospered to tell the tale.
Dean likes to keep things simple.
If he finds holes in his original analysis, he sells. If his thesis remains solid, he holds or may even increase his holding.
It's called common-sense investing — easy to say, hard to execute, especially in these choppy markets.
Sky-high upside
This cheap but growing mining services company has been totally unloved by the market. In his original analysis, Dean said…
"Turbo-charged potential of P/E expansion combined with solid long-term growth prospects. It's so cheap that the downside is limited, while the upside is sky-high."
Baby thrown out with the bath water
Dean has no reason to believe anything is amiss with the company, given there has been no recent news. But, as part of his double-down process, he's put a call into the company's CEO.
Could this be one of those rare opportunities, where the baby has been thrown out with the bathwater?
Coolly generating outsized profits
Irrational sell-offs present cool, calm and collected investors the opportunity to generate outsized profits.
The mining services company highlighted above may be one such opportunity.
Another might be Harvey Norman (ASX: HVN), a company Motley Fool Investment Analyst Scott Phillips recommended a few weeks back.
One unlikely school-kid bonus winner?
Although Dean is no big fan, the AFR reports Deutsche Bank has a buy recommendation on the stock, with a 12-month price target of $2.55.
And with the "school-kids bonus" set to hit bank accounts in the coming weeks, who's to say they won't be right?
After all, which school-kid doesn't need a new couch, flat screen TV, washing machine or vacuum cleaner?
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The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. Bruce Jackson doesn't own shares in any companies mentioned in this article. This article contains general investment advice only (under AFSL 400691).
