Stocks take spills all the time as a result of market forces, industry outlook, earnings reports, and thousands of other reasons. Most of the time, this is no big deal. In fact, it is the very nature of stock that it do this. “Stock goes up, stock goes down,” is the one thing I know about stock trading with absolute certainty. Indeed, there are some days, when that’s about all there is to say. It is the sign of a true market noob to assume that everything that happens in the market happens for some specific, definable reason.
Today, we are looking at the other side of that coin, the times when there is a very real, specific danger to a company, and hence, its stock price. In such cases, it is axiomatic that the risk will already be priced into the stock, but a quick look at the very low VIX index, currently sitting at a nearly historic low of 10.59, even after Houston, Charlottesville, and North Korea, shows that this market has become cavalier, even foolhardy, in the face of risk. As a result, these stocks are overpriced, relative to the risks they face.
Remember to treat these ideas as just that, ideas, and do your own research before making any investment decision.