Monday, February 22, 2016

Aim for a Catalyst Stock

I believe that one of the most important things to do when looking for stock to invest in is to specifically try to eye the market for a catalyst stock. By this I mean to say that I watch and listen to the news and whenever I hear or read that a company that was once known and loved has suddenly come under fire for some reason or another, that's enough reason to start looking into the company as a potential investment. The human brain wants to lead you to believe otherwise and the media just eats it up. After all, at the core of everyone is a little beast that loves to start or watch drama unfold.

"What? The head cheerleader got dumped by her boyfriend because he had a fetish for pillows?! There's no way! I thought he was such a good guy!"

The same thing happens in the market whenever a company comes under fire for seemingly any reason. It could be something as small as a disgruntled employee that (once checked into) appears to have just gone off the deep end. Although the employee has nothing but bad things to say about the company because they were just fired, the company itself may still be an incredible company and simply under a misunderstanding. Media companies however will take this story and blow it up to try to watch a company burn for a little coverage. Most of the time, this then translates over to the share price of the stock in question and people either load in or load out of the stock. If you're lucky, the stock price will crash for a few days while people try to figure out if they want to keep their eggs in the company basket.

This is where you come in. This kind of situation is called a catalyst. When a catalyst in the market occurs, you need to jump forwards and not backwards. Your brain may try to trick you into wanting to stay away from a company because you've been trained from a very young age to believe what a "trusted source" tells you is true. Lucky for investors with a good eye, this is simply an advantage that you can take advantage of.

When this occurs, pull up the company as soon as possible and see if they trade on one of the many exchanges. If they do, their price has very likely fallen due to the bad media coverage. Even if it's a solid company and they have only fallen a small amount, the leads to a discount to buy in to the company. Complete an analysis of the stock and see if their bottom line is truly affected by the news in the media. If none of what the media is saying appears to affect the stock itself, you may have a great buying advantage sitting right at your finger tips.

Keep in mind that this is only encountered in certain situations. Every company handles bad news differently than other companies. If the company in question is a huge and successful company, they may not see a very huge drop depending on what the news is. On the other hand, sometimes for larger companies that already have huge share prices, all you need is a drop of a few dollars and it will be considered at a discount. Anyways, that's all that I've got for today. Hopefully after reading this article, you'll gain a different view point when you start hearing about the next company that the media decides to have a field day with.

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