The hardest thing in investing is buying shares after they have fallen sharply. They feel risky. The reality may be the opposite.
There’s a lot of attention on the Iran crisis today. It has created a market dislocation that has hit some stocks harder than others. But markets overreact and often draw false conclusions that take some time to correct.
For example, markets currently see the oil price squeeze as driving inflation up, causing central banks to lift rates and damaging the economy. That has been particularly painful for housebuilders.
We owned two of these going into the crisis, in part on the expectation of falling rates boosting demand. Both were already cheap relative to history but Barratt Redrow has fallen 26% in a month; Crest Nicholson 28%. To our mind, that just makes them more attractive.
There’s a strong case that the Bank of England will eventually have to cut rates, not lift them, if the UK economy does falter badly. We don’t know which way it will go but a dramatic repricing like this can skew the risk-reward balance in the investor’s favour, with the upside potential now much greater than the downside.
Shocks come in different guises. Here are three stocks we’ve bought in the past year that also now look attractive to us, following what you might call a bout of market jitters.
Bear in mind that when we buy a ‘special situation’ stock we’re looking for a 50% total return over three years, through a combination of dividends, earnings growth and rerating. It’s a challenging threshold.
These aren’t tips, but they do illustrate how contrarian investors like us approach markets like today’s. They may help investors to go hunt other ‘shock stock’ opportunities.
RELX
We first owned RELX in 2010, when it was on 12x earnings. Back then the market was worrying about ‘open access’ and the requirement to give cheaper, or even free access, to some academic research.
We sold in 2015 after an initial recovery in sentiment, when the shares traded on 18x. In May 2025 the valuation stood at >30x earnings.
In February 2026 the shares de-rated to 15x earnings on fears that AI will eat into its professional services data subscription model. It’s seen as an AI loser, even though it’s using AI to enhance its offering and boost revenues.
We think the fears are overblown and have bought back in.
YouGov
Market research company YouGov is another perceived AI loser. Its share price is down 57% in the past nine months. A substantial source of its revenue comes from opinion panels.
The market believes that AI can replicate these much more cheaply, trawling the internet for views and simulating data cleverly. We think AI’s abilities are being overestimated in this regard. We recently asked an AI tool to draw a map. It moved Venice to Romania.
It also bases its data on historical attitudes. These patterns are already priced in. YouGov customers want precise insights, not rough estimations, and early notification of changing sentiment.
YouGov has 34 million people vetted and registered for its panels – not something easily replicated. It sees AI as a benefit rather than a threat, allowing it to collate, analyse and present survey results more efficiently and cost-effectively.
Flutter Entertainment
This is another business we’ve owned before, sold on strong growth and just rebought. Flutter has grown substantially since we last held it three years ago, yet its share price is down 67% since August 2025.
The market is worried that the company’s large US business faces pressure from the rise of ‘prediction markets’. These work like financial securities, but the future you’re buying isn’t commodity prices or a company’s performance – it’s the outcome of an event. You can buy a yes or no stake on which team will win the Super Bowl. You’re betting against other participants rather than the house.
The companies facilitating the contract take their fee from commission and transaction charges. Because of the way these contracts are regulated, they allow betting in states that might otherwise ban it. Flutter has substantially reduced profit forecasts for this year, but the share sell-off seems overdone to us.
Risk and reward
These sorts of crises and market dislocations can be a friend to the smart, long-term investor. We normally assume that the higher the risk, the higher the potential reward.
But if you’ve done your research well, when markets identify losers and sell off indiscriminately or excessively the door can open. It may go against your instincts, but at times like this, you often get a chance to buy companies in more attractive risk-reward terms.
Patience is required, but more often than not eventually fundamental value reasserts itself.
Henry Flockhart is co-manager of the Artemis UK Special Situations fund. The views expressed above should not be taken as investment advice.