One of the best ways to make money in the market is to spot excessive fear, as we often note. After all, it’s how some of the top investors made their fortunes.
Sir John Templeton would tell investors to buy excessive pessimism.
Warren Buffett still advises that a “climate of fear is your friend when investing; a euphoric world is your enemy.” And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”
Baron Rothschild would tell investors, “The time to buy is when there’s blood in the streets, even if the blood is your own.”
If you can spot fear, as they did, you stand to make a fortune.
Here are two of our favorite opportunities hitting our buy screen this week where investors are far too fearful.
Shake Shack (NYSE:SHAK) owns, operates, and licenses Shake Shack restaurants (Shacks) in the United States and internationally. Its Shacks offers hamburgers, hot dogs, chicken, crinkle cut fries, shakes, frozen custard, beer, wine, and other products.
With a good deal of patience, we expect to see a recovery in shares of SHAK. We believe the pullback was a severe overreaction that has now left the stock deep in oversold territory following the company’s earnings disaster, and on news that it will temporarily shut down locations in 2020 for store upgrades. Technically, the stock has become aggressively oversold, holding support dating back to May 2019. Not only is it oversold at its lower Bollinger Band (2,20), RSI, MACD, and Williams’ %R are also over-extended. Going forward, we’d like to see a bearish gap refill around $85.
Chesapeake Energy (NYSE:CHK) engages in the acquisition, exploration, and development of properties for the production of oil, natural gas, and natural gas liquids (NGL) from underground reservoirs in the United States. The company holds interests in natural gas resource plays, including the Marcellus in Northern Appalachian Basin in Pennsylvania; Haynesville located in Northwestern Louisiana; Eagle Ford in South Texas; Brazos Valley in Southeast Texas; Powder River Basin in Wyoming; and Mid-Continent in Anadarko Basin of northwestern Oklahoma.
CHK is wildly oversold at bottom of trend. However, there are two things to like here. One, while CHK looks like a slow-motion train wreck, CEO Robert Meyer just bought 50,000 shares after poor company earnings. That increases his holdings in the company by 1%. Director Brad Martin bought 250,000 shares. Two, as reported by MarketWatch, the company noted that another potential reason for the pullback was on the announcement that NGP Energy Capital Management LLC, distributed its 310.8 million shares to the partners of investment funds.
“Chesapeake continues to strongly believe our current capital and operating program, coupled with the planned 30% reduction in capital expenditures in 2020, will strengthen the financial position of the company for the long term,” CEO Doug Lawler noted.