Throw the baby out with the bathwater
One thing I have realized over three decades of investing is that neither market nor individual investors are always rational. This is especially true in periods of increased volatility and steep declines in the market like we have had recently. I have realized that this is a good thing as their temporary irrationality presents buying opportunities to more nimble and rational investors who come and buy the bargains when they throw the baby out with the bathwater.
I noted an example of this temporary irrationality the this week on Investors Alley and Real Money Pro when I noted that the Dow Transports had their worst week since 2011 despite the huge recent decline in oil. I articulated that could make airlines a good buy as oil makes up a huge part of their operating expenses and the stocks have gotten very cheap due to the overreaction to Ebola and concerns around global growth. The two airlines I recommended and purchased in those articles, Delta Airlines (DAL) and American Airlines (AAL), both are up big in trading today as rationality comes back into the sector.
Some that same throw the baby out with the bathwater mentality can be seen in the recent indiscriminate carnage in the E&P sector on the ~20% decline in WTI (West Texas Intermediate) prices over the past three months.