Sell the Bull, Buy the Bear, Hold the Range

Regardless of market conditions, the paradoxes of gluttony, anxiety, and uncertainty establish pricing mechanisms for quality-driven value investors

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In any market—bull, bear, or range-bound—sell greed, buy fear, and hold sideways movements, provided the share price is above your cost basis (greed), appealing (fear), or somewhere in between (range-bound).

Purchase or increase shares in reaction to unexpected socioeconomic events and market anxieties. Divest or decrease shares in response to unforeseen company events and market greed.

Rational, quality-driven value investors buy shares of stable companies with strong fundamentals when the market declines due to fear. They then divest or reduce their holdings when the market becomes greedy and overpurchases stocks, even when fundamentals are weaker and prices are inflated. In other words, a sell order becomes necessary only when microeconomic events permanently undermine the company’s financial strength or the demand for its products and services.

Buy on fear, presuming the share price is attractive, and sell on greed, assuming the stock price is above our cost basis. Unfortunately, during erratic corrections, the market favors purchasing fundamentally attractive stocks at high prices with narrow safety margins. Consequently, in the later stages of the post-Great Recession epic bull market, our family portfolio evolved into more of a watch list than a buy list.

Then, the 2022 bear market, characterized by inflation and no-profit tech companies, and the 2025 trade war each arrived with a bullet.

Market Predictions are Mostly Unreliable

Attempting to predict market movements is a fool’s game.

When market timers are wrong—the probable outcome—in predicting a surprise market, industry, or company event, substantial assets are lost because traders are too long or short.

On the other side of the trade, patient investors are ready to capitalize on the surprise by allocating their planned cash reserves to establish new or increase existing positions in the shares of companies with strong fundamentals and adequate safety margins.

Disciplined investors capitalize on depressed prices resulting from indiscriminate macro events. These unexpected incidents, any tragedies notwithstanding, present a contrarian’s opportunity for astute individual investors. For instance, those who held, added to, or initiated quality positions following the 1987 Market Crash, during the 2000-02 Dot-Com Bear Market, or after the 2007-08 Great Recession, benefited from the booming portfolios that followed.

The market meltdown caused by the coronavirus pandemic created similar opportunities for bargain hunters in March 2020. A few did foresee these events, and perhaps each benefited from a stroke of luck. Unfortunately, many investors responded by selling undervalued securities in the aftermath, and more than a few of these affected portfolios have yet to recover.

Nevertheless, investors anticipating a significant market, industry, or company event often become captivated by a fortunate prediction. They soon based their investment philosophy on this newfound ability to foresee future events. This intoxication of forecasting leads to proverbial gazing into the crystal ball, creating a false sense of certainty. Soon enough, their luck runs out with poetic justice, as does the principal on their investments.

Let’s explore why…

Buying is Exhilarating—Selling is Exacerbating