Want to hit a few home runs in the stock market?
Then get ready to hold your breath and get your hands dirty by digging through the investment dumpster for one reason:
Often the stocks that provide the best returns to investors over time, in my view, are also the same ones that are out of favor with the market participants in the current period.
That’s just my opinion though, so let’s look at one of Warren Buffett’s recent deals to show that this strategy has merit.
During the Financial Crisis, Buffett became an unofficial lender of last resorts to major financial institutions and other Fortune 100 companies that no one else would touch even if they wore a HAZMAT suit.
So why would he be willing to lend money and invest in them?
He believed that the fundamentals of these companies were strong enough to overcome the obstacles they faced and wanted to keep them moving forward, despite heavy financial losses. In addition, he surmised that if these companies merely survived the Financial Crisis they would likely generate returns that would justify the risk being taken.
How did he make out?
Like a bandit with $11B in profits!
Now can this strategy be replicated even in today’s market?