I'm wondering whether you think investing mostly in blue chips, that have significantly fallen in value (compared to their industry), would be a good investment strategy for me, and why you may think it's not a good idea.
To give some background to my position, I'm a recent graduate about to start a relatively well paying job with which I can easily cover my expenses and save some money. I'll probably invest about 50% of my saved money, perhaps as described below. I'm also lucky to have a money cushion from my grandparents and no debt.
I am thinking about a portfolio in which I would invest in companies that are large, reputable and historically usually successful, but have crashed in share price recently (Think VW, Transocean or Tesco at the moment). It seems that institutional investors often like to follow others and allow a stock to decrease in value much more than may be reflective of its true value. I want to take advantage of the fact that (I believe) this is often the case and the value of the stock will increase soon in the future. In addition, its much easier to choose stocks compared to looking at all the companies that are following the market trend reasonably closely.
Do people think that this is a strategy that would be able to beat the market? I know that finding the right time to enter is never easy, diversifying is always important etc. and haven't come up with formalised criteria of when I would invest (I'm thinking something like 30% loss in a year compared to industry average), but it's an idea that has been playing on my mind recently, and would like to hear whether people think it could be a good one.