“Success in the stock market is based on the principle of buying low and selling high. Granted, one can make money by reversing the order – selling high and then buying low.” – Said Sir John Templeton.
Sir John, a bargain hunter as he was, found a bargain in the internet stocks – well, the bargain was not in buying, but in selling. However, since he did not own any stocks, he had to short-sell the stock by borrowing the same from the market and later reverse his trade, i.e. buy back the stock.
Sir John Templeton took out the list of DotCom (or Internet) companies that raised money through IPOs and then further filtered on when the lock-in period was getting over. He started short-selling the shares a few days ahead of expiry of the lock-in period anticipating large amount of stock being off-loaded once the lock-in was over. He was right on target and in a falling market reaped huge profits.
What did the other great investors do in that time? Read it in “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget”
@RidingTheRollerCoaster – 164