What is a Bottom Fisher
A bottom fisher is an investor who looks for bargains among stocks whose prices have recently dropped dramatically. A bottom fisher is optimistic about choosing these low-priced stocks because they believe that a price drop is temporary or is an overreaction to recent bad news and a recovery is soon to follow.
BREAKING DOWN Bottom Fisher
A bottom fishers may attempt to find stocks that the market has undervalued through fundamental analysis, or the evaluation of a stock’s value that is determined by reviewing the company’s financial records.
Bottom fishers may also be more active during a prolonged bear market where there may be stocks getting hammered through panic selling. When the market is dropping, or even plunging in a major way, many stockholders get nervous and impulsively rush to sell, wanting to unload their stocks so quickly that they are willing to accept virtually any price.
For the bargain-hunting investor, this is the chance for which they have been eagerly waiting. They are eager to pounce on this opportunity, and swoop in to buy at these incredibly low prices. Like scavengers scrambling to pick off remnants of a wreckage, they happily grab any good deals they can find.
Bottom Fishers Profit from Other Investors’ Panic
Bottom fishing is good news for investors hungry for deals, although it is bad news and misfortune for the sellers. Rushing to make a move in a panic is rarely a wise decision, and these sellers likely would have been able to get at least a somewhat better price if they had been patient and waited for the market to recover even just a moderate amount.
Unfortunately for the bottom fisher, it's difficult to tell the difference between a bargain and a stock that has fallen for a fundamental reason. It is smart for these deal-seeking investors to do some research and try to determine the factors that led to the price drop, so they can then in turn decide if the stock is likely to rebound in the near future.
For those bottom fishers who are not knowledgeable enough about the market or savvy enough to research the particular companies whose stocks they are considering, this type of investing strategy can be like rolling the dice. There is the potential for big returns, but there is also a good chance that the stock may continue to do poorly. On the plus side, since these investors focus on stocks they can get at bargain prices, their risk of major loss is relatively low.