The phrase “buy when there is blood on the streets” sounds intense, but it is one of the most powerful concepts in investing. Originating centuries ago, from the banking giant Baron Rothschild, it describes a market in total chaos. It means asset prices are crashing, headlines are apocalyptic, and everyday investors are panicking and selling everything they own out of pure fear.
It is during these exact moments, when the streets are “bloody” that the absolute best buying opportunities are born. As Warren Buffett famously put it: “Be fearful when others are greedy, and greedy when others are fearful”. When the market panics, stock prices separate from their actual, real-world value. For the disciplined investor, these moments of maximum panic aren’t a signal to run away but the ultimate time to buy.
There is, however, a rule to this strategy: you don’t just double down on any random investment. Buying a failing company just because it is cheap is a quick way to lose your capital. When there is blood on the streets, your goal is to buy only the highest quality investments; businesses with rock-solid fundamentals that are temporarily on sale due to market-wide fear.
The Math of the Margin of Safety
Margin Of Safety is the difference between what an investment is worth (value) and what an investor pays to own it (price), and every investment comes down to price versus value. When others are greedy, prices skyrocket far above what companies are intrinsically worth, which shrinks your future profits and your margin of safety.
In contrast, when panic sets in, frantic selling forces high-quality assets into deep discounts increasing your margin of safety in the process. Buying when everyone else is selling gives you a lower cost basis. Purchasing more shares at a lower price drops your average cost per share accelerating your path to profitability the moment the market (inevitably) bounces back.
Separating the Gems from the Junk
Leaning into a market crash does not mean gambling on speculative stocks or on struggling companies that might not survive. To win during a downturn, you must filter out the noise and focus strictly on quality. Before you deploy more cash into an asset during a crisis, it must check these boxes:
♦ A Strong Balance Sheet: The company must have plenty of cash and low debt so it can weather economic storms without going bankrupt.
♦ Resilient Cash Flow: Look out for businesses providing products or services that people will demand irrespective of the state of the economy.
♦ A Lasting Competitive Advantage: The business should have a strong brand, unique technology, or high barriers to entry that protect it from competitors.
When a market-wide crash happens, excellent companies get dragged down right alongside failing ones. Your job is to identify the elite businesses that are being unfairly punished by the crowd’s panic.
Distinguishing Volatility from Permanent Loss
To successfully buy when others are afraid, you must understand a crucial distinction: short-term price swings are not the same as permanent risk.
Volatility is the temporary, dramatic movement of stock prices driven by bad headlines, fear, or heavy trading. Permanent loss of capital happens when a business breaks completely, goes bankrupt, or when an investor panics and sells at the absolute bottom, locking in their losses forever.
If a top-tier company’s balance sheet is strong, its cash flows are intact, and its long-term business remains solid, a crashing stock price is simply a holiday sale.
Wealth isn’t made by following the crowd; it is transferred from the impatient and fearful to the patient and disciplined during times of crisis.
The Verdict: Fortune Favors the Uncomfortable
Buying when the future looks bleak is deeply uncomfortable. It goes against every natural human instinct to move away from the crowd. Your screen will be red, the news headlines will be terrifying, and everyone around you will tell you that you are making a mistake.
But historically, the absolute best times to build an investment portfolio are born during recessions and market crashes. To buy during bad times and recessions is to take advantage of times and seasons. There will always be good times after bad times and bad times after good times.
Finally, to buy in bad times is to bet on a positive and better future, but a note of caution to investors who plan to use this strategy: always bet that things will go well in the long run, but not so aggressively that you get wiped out in the short run
——————————————————————————————————————————————————————————————————————————-
The information contained in this blog is being provided for educational purposes only and does not constitute a recommendation from any Bora Capital Advisors entity to the recipient. Bora Capital Advisors is not providing any financial, economic, legal, investment, accounting, or tax advice through this blog to its recipient.
This report reflects the views and opinions of Bora Capital Advisors Ltd, and is provided for information purposes only. Although the information provided in the market review and outlook section is, to the best of our knowledge and belief correct, Bora Capital Advisors Ltd, its directors, employees and related parties accept no liability or responsibility for any loss, damage, claim or expense suffered or incurred by any party as a result of reliance on the information provided and opinions expressed in this report, except as required by law. The portfolio performance data represented in this report represents past performance and does not guarantee future performance or results.
