"Be fearful when others are greedy and greedy when others are fearful". You may recognise those timeless words that were spoken by Warren Buffett.
It's a powerful quote that emphasises how important it is to be wary when markets are at all time highs and be prepared to buy when markets are down.
This philosophy doesn't have to apply to whole market prices, it can apply to individual businesses as well. When short term events hit a share price hard, it could be worth taking advantage of that price decline.
Some examples of recent big price fallers are:
Bellamy's Australia Ltd (ASX: BAL) is down 43.5% from $12.13 last Thursday.
TPG Telecom Ltd (ASX: TPM) is down 41% from $11.83 since 19 September.
Vocus Communications Limited (ASX: VOC) is down 27% from $5.76 since 28 November (and down 40% since 19 September).
iSentia Group Ltd (ASX: ISD) is down 22% from $3.25 since 16 November.
Healthscope Ltd (ASX: HSO) is down 24% from $2.93 since 20 October.
Vita Group Limited (ASX: VTG) is down 43% from $4.71 since 28 October.
REA Group Limited (ASX: REA) is down 21% from $65.27 since 29 July.
All of the above are quality companies, yet the market deems them to be worth 20% to 44% less than earlier in the year. In the long run, I think all of these companies have good futures.
It's at times like this where Foolish investors have to be brave to buy, but in three to five years these prices may appear to be bargains.
Warren Buffett was 'greedy' during the GFC and it paid off in spades for him, that's why he is the world's greatest investor.
As long as you think and hold long term, price declines in growing businesses should be seen as opportunities not dangers.
Foolish takeaway
Of the above companies, my favourite three ideas at these prices are Healthscope, REA Group and Bellamy's (in that order). All three have strong characteristics that should see their businesses do well for a long time to come.
I think it's time to prepare to be greedy, by Christmas the market could be offering up a lot of good value gifts.
