Private Investor: When all others lose their heads, it's time to buy

Lots of people have made lots of money over the years by buying into "oversold" situations. Me included. Well, not lots of money but a little anyway. It's usually fairly easy to spot one of these.

Such episodes, or spasms, come about when the market as a whole, a sector or just one company endures some sort of scare and the market then panics, dumping the stock for whatever it can get. That is when it demonstrates a more than usual degree of irrationality, and that is the time to buy.

It may be less so than in the past, but terror attacks still presage a general firesale where bargains can be snapped up before the world returns to its senses and decides that, yes, commercial life does still go on, people will still fly even after atrocities such as 9/11 and not every airline is about to go belly-up.

So I've watched the recent collapse of the online gambling companies with interest. Was this another example of the markets over-reacting to what was, after all, pretty much unalloyed bad news? Did they go just a little bit too far? After all, these businesses (unlike so many of the dotcom companies for the1997-2000 period) actually made real profits.

Even after the United States government passed legislation that, in effect, shut out most of the gambling websites of by far their biggest market, they still had customers elsewhere around the world. Things were and are undoubtedly grim for the industry, but just how grim really? And as a variation on this bottom-fishing theme, is this the time to look to buy into the sector in the hope of "consolidation"?

Just as I've been mulling the options, I see one of the smaller players has given up the ghost. Betcorp is the first company to cease operations after the change in the American rules.

For once my prevarication has actually paid off, removing the risk that I was to surpass my previous personal best for putting money into a company just before it went belly-up (that, in case you're wondering, was Railtrack, where I bought in a few weeks before it went into special liquidation, although in that case I got most of my stake back).

So some of the sector is simply evaporating rather than consolidating. I also wonder whether these firms can indeed manage to prosper on just their non-American interests. In those markets they are competing in a highly competitive field with many more established names. The reason the likes of PartyGaming and Sportingbet were able to do so nicely for so long was because they were making money in entirely artificial conditions.

When existing American concerns and their major overseas rivals shied away from online betting that, of course, created a vacuum into which these new companies were sucked, chancing their arm and hoping for the best. That is how they made so much money.

Take those artificial market conditions away, as now, and the market collapses, as we have seen. In those circumstances, you might argue, falls of 80 per cent or 90 per cent in the share price are, if anything, underdone.

So I doubt the markets have actually got the price of these shares wrong and, as the demise of Betcorp illustrates, any punting that I might be tempted to indulge in is tempered by the thought that I might lose the whole of my investment that very same day - as I say, not an attractive record for me to want to break.

I just feel content that I got out of Sportingbet at something like 10 times the price it now commands (40p per share) with a reasonable profit. They were never shares for the fainthearted, but I wouldn't recommend them to even the bravest heart.

More encouragingly, the markets have taken the collapse of the once-burgeoning online gambling sector in their stride. Even though one made it into the FTSE 100, the rout has been but a minor glitch in a season of stock market advances. Sometimes - extending our military metaphor here - it has resembled the famously static trench-based battles of the Great War: an advance of a few points above the 6,000 mark, held for a day or two before we watched it all given up again.

Now, though, the momentum is there. Perhaps it is not too much to hope for an assault on the 7,000 barrier. I shouldn't think the struggle to see the FTSE at an all-time high will be over by Christmas though.

Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
world cup 2014
Popes current and former won't be watching the football together
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
Mick Jagger performing at Glastonbury
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Chocolat author Joanne Harris has spoken about the financial struggles most authors face
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

    £30000 per annum: Harrington Starr: A global leader in trading platforms and e...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
    Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

    Hollywood targets Asian audiences

    The world's second biggest movie market is fast becoming the Hollywood studios' most crucial