If you could make a relatively low-risk investment that generates a 10% to 15% gain in a year, you would do it.

However, if the opportunity played out in a month or two, many asset managers would balk. They are biased toward traditional longer-term investment strategies.

That's certainly a mantra of leading investment gurus, including Warren Buffett. The Oracle of Omaha searches for well-managed, understandable businesses that generate consistent attractive earnings and returns, with prudent debt management, and whose stock is selling at a reasonable price that offers downside safety.

So does this strategy. The key difference: This form of opportunism believes windows periodically open into sound, large, profitable companies at a sharp discount and then close.

These opportunities are created by a single event, such as a trading loss, a major accident, unfounded criticism, natural disasters-any individual event that can send investors scurrying because it sounds like bad news, but where the market response may be more destructive to the stock than the event itself. The key to this strategy is investing during the time the market realizes it has overreacted.

Because stocks caught in such turbulence move sharply, investors must quickly discern if the event is an outlier or reflective of greater systemic risk that the market hadn't recognized. When it's the former, a year's worth of returns can be generated in a short time.

"Investing in large, established companies whose shares have experienced a quick, aggressive, event-driven sell-off," says Cliff Hoover, CIO of the $5 billion Dreman Value Management, "but wherein its profit-making capacity has been not affected, are among the most compelling risk-reward traits of any value investment strategy. Near-term downside risk has likely been limited by the decline while substantial upside is provided by market recognition that it has overreacted."

To consistently profit from this strategy, it's essential to treat this investment as a trade. While it takes time for information to be flushed out about an event, the sell-off typically lasts only several weeks or less. The rebound may be just as brief. Holding on to shares past that point exposes the position to the traditional range of risks, changing the investment thesis.

The strategy should be avoided when the stock is also fighting broader market headwinds. Turbulence should only be confined the stock itself. And if the event morphs into something worse than expected, then it might be wise to get out of the position until there's greater clarity about what's going on.

On May 10, after the market closed, Jaime Dimon told the world his bank incurred a loss of at least $2 billion. JP Morgan shares had previously closed around $41. The following day, they were at $37, and 10 days later, $32.51.

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