I've seen over the years that history has a sneaky way of coming full circle, just like time scratches its marks into the sands of the present. It does put on new faces, but the old stories keep playing out underneath them. For example, let's look at this curiosity: a company in your portfolio fails, and a stream of scary news stories starts. That trickle of bad luck soon turns into a steady flow of it. This happens so often that it's like inviting trouble makes room for a flood of its kind. Have you ever stopped to think about this pattern?
Cockroach Theory
The cockroach theory in investing says that when a company shares bad news, it could be an early sign of bigger problems, like how finding one cockroach usually means there are more hidden. Investors may be wary because they think the bad news is just the start of bigger problems that haven't been revealed yet. This idea can have an impact on whole industries because bad news about one company can make people look more closely at and question other companies in the same industry. Bad news like Enron and the financial crisis in the past have shown that one piece of bad news can cause investors to lose faith in similar companies or the whole industry. The theory has been associated with some major companies in history and you might have lived with them.