Recently there was a great article in the Wall Street Journal saying that stocks that went down based on troubles in the company related to the #MeToo movement is not a reason to buy stocks.
The author about Nike and Wynn Group, and problems they both had with behavior by some executives, Steve Wynn for the Wynn Group and several executives at Nike.
Both stocks tanked when the problems were disclosed but then recovered nicely, and what the article points out, and which I think is great, is that it doesn’t mean it’s an opportunity to buy when the same thing happens to other companies.
Don’t look at it as buying on the dip because those companies have poor corporate governance if they allow those things to happen and fester. Without good corporate governance that means that they don’t have good policies and procedures in place and you should worry about how’d they be as a long-term investment.
I also agree with the author wholeheartedly that people generally don’t want to work in a toxic culture and it drives away talent. Places can no longer rely on a big mogul like Steve Wynn to lead them.
Buying on the dips means buying more when stocks get cheaper. If a company gets hit for not doing things well, that’s different and it’s not a good reason to buy them.