The best time to buy assets, Baron Rothschild said in the 1700s, was when there’s blood in the streets, even if it’s your own blood. Crudely interpreted that suggests investors should not be concerned when profiting from the misfortune of others. That’s not what Rothschild meant. Rather, he was urging us to become contrarians, to buy when others are panicked.
Over the past few weeks, that proverbial blood has been flowing freely in share prices of two major corporations – motor manufacturer Volkswagen and resources group Glencore. Their plunge from recent levels has started attracting smart money. Should you follow it?
At the risk of losing an opportunity for easy profit, it’s worth remembering the best contrarians add a rider to all “blood in the streets” advice. The company whose shares are targeted, they emphasise, must be high quality. And the drop in its share price undeserved.
Volkswagen consciously committed fraud on a massive scale. Glencore’s share price benefitted for years through “official” Chinese economic growth figures bearing no semblance of reality. So tread warily on these two, as even the most staunch contrarians will be.
