On the assumption that the stock market always overreacts to bad news, there is a strong argument for buying stocks when they have reacted unfavourably to trading events or are generally out of fashion. This, along with a rigorous approach to analysis of individual companies and markets, is largely behind the investment approach of Aurora Investment Trust.
Phoenix Asset Management, the fund manager, tracks 80 to 90 stocks at any one time, assigns a value to them and buys only when the shares have fallen to 50 per cent of that value. There are only 17 investments at present. This can work spectacularly well; the fund bought chunks of the quoted housebuilders after these fell off a cliff after the referendum, share price falls